The FCA will be introducing new guidance to help firms deal with instances of non-financial misconduct.

By Nicola Higgs, Andrea Monks, Rob Moulton, Nell Perks, Becky Critchley, Charlie Bowden, and Charlotte Collins

Link to Key Points: Key Points:

  • The FCA has confirmed new guidance that explains how non-financial misconduct can be a breach of the Conduct Rules, and how it forms part of the Fit and Proper test.
  • The guidance will take effect on 1 September 2026 and is designed to help firms make fair, consistent decisions and take decisive action against non-financial misconduct.

Link to Introduction Introduction

On 12 December 2025, the FCA published a Policy Statement (PS25/23) containing the final version of its new guidance on non-financial misconduct (NFM). The regulator reconsulted on its proposed guidance on NFM in the Code of Conduct sourcebook (COCON) and Fit and Proper test for Employees and Senior Personnel sourcebook (FIT) earlier this year, after respondents to the initial consultation raised concerns about the length and complexity of the guidance (see this Latham blog post).

Parts of the proposed guidance proved to be more divisive than the FCA had expected, as instances of NFM can be very subjective and fact-specific. The FCA’s reformulated guidance aimed to strike a better balance between providing helpful material firms can reference when making difficult decisions about NFM, whilst not including elements that could lead to further confusion. In addition, since feedback to the initial consultation also indicated that some of the proposed guidance could result in divergence from employment law, inconsistent application, and unfair outcomes, the FCA also aimed to address these concerns in its reformulated guidance. Acknowledging the difficulties in this area, the FCA stated in its second consultation that it would only seek to introduce the guidance if there was clear support for it.

Link to Final NFM Guidance Final NFM Guidance

The FCA reports that it received 79 responses to the second consultation, almost all of which agreed that this additional guidance would be helpful. Therefore, it is going ahead with introducing the guidance. While some feedback indicated that more detailed examples and additional case studies would be welcome, the FCA has declined to provide further detail in many areas, as it is keen that firms should make their own judgments in relation to NFM. The regulator reiterates that the primary responsibility for preventing and dealing with NFM rests with firms themselves.

The FCA has, however, made some minor amendments to the guidance in light of feedback from the consultation, including:

  • Adding some limited new examples to illustrate the scope of COCON, and flow charts to support the application of the new rule on scope. This includes some scenarios to illustrate the exclusion, stating that conduct is not within the scope of the new rule if it only relates to a business of the firm that does not involve SMCR financial activities.
  • Ensuring clearer alignment with provisions of employment and equality law. This includes an example to demonstrate that the purpose of the conduct is as important as its effect. However, the FCA notes that it cannot achieve full alignment as there is no parallel for certain regulatory concepts (such as acting with integrity) in employment law.
  • Clarifying that managers’ accountability is relative to their knowledge and authority, in response to concerns that the proposed expectations around managers’ responsibilities to protect staff from NFM went too far. The FCA has adjusted the guidance to emphasise that it would not expect a manager to be held responsible for failing to stop NFM if they could not reasonably have known about it.
  • Withdrawing or amending examples and factors that raised particular issues or risked imposing disproportionate burdens. For example, the FCA has removed guidance in COCON on factors to consider when assessing seriousness relating to specific characteristics or vulnerabilities, as both versions of the guidance that were consulted on in relation to this raised significant issues. It has also deleted guidance in FIT around needing to report unproven allegations to the FCA, and an example relating to minor motoring offences that respondents felt set excessively high standards for conduct in a person’s private life.
Examples of deleted guidance:  

COCON 4.1.8(6) G
COCON 1.1.7FR only covers conduct that is serious. The factors that the FCA will take into account when deciding whether misconduct in relation to a fellow member of the workforce is serious enough to amount to a breach of COCON include:
…
Whether the subject of the misconduct has specific characteristics or vulnerabilities, particularly if this is a factor in the conduct in question;
mitigating and aggravating factors even if they take place subsequently (the factors in FIT 1.3.10G(3) to (7) (Breaches of requirements of the regulatory system) are relevant here also);  

FIT 1.3.16(8) G
Even if a breach of a law or standards and requirements by a member of the staff being assessed under FIT would not otherwise be relevant to their fitness and propriety, repeated breaches may raise doubts as to whether they will follow the requirements of the regulatory system. Thus, for example, a minor driving offence will not normally be relevant to fitness and propriety but frequently repeated such offences may be.

FIT 1.3.20(7) G
Firms are reminded of their obligations under SUP 10C.14.18R (Notifications about fitness, disciplinary action and breaches of COCON). The fact that a firm has not been able to establish the truth of an allegation of the kind in (1) does not mean that the firm should not report it to the FCA if, were it established to be true, it would reasonably be material to an assessment of fitness and propriety.
  • Clarifying that firms are not expected to investigate trivial or implausible allegations, or breach privacy law. In addition, firms are not expected to investigate allegations that would not be relevant to fitness and propriety, and should not automatically assume that NFM in someone’s private life is at risk of being repeated in their professional life. This comes in response to concerns raised about when a firm would be expected to investigate events in an individual’s private life under FIT (which, unlike COCON, can extend to conduct purely in an individual’s private life). The FCA has also confirmed that the same expectations apply in relation to when a firm should investigate allegations about an individual’s social media activity.

Other feedback asked for clearer definitions, particularly of terms such as bullying and harassment. However, the FCA stresses that it is not possible to list all types of misconduct that might amount to a breach of COCON or FIT, as each case requires individual judgement based on its specific circumstances. Further, respondents asked for more guidance on deciding whether NFM is serious enough to amount to a breach of COCON. However, the FCA has not provided additional guidance as it believes that firms are best-placed to assess the unique circumstances of each case. It also emphasises that it would defer to a firm’s judgement about whether misconduct is serious enough to amount to a breach, if the firm’s judgement is reasonable.

Notably, the final guidance maintains the suggestion that a custodial sentence (even if suspended) will likely indicate that misconduct in a person’s private life is sufficiently serious to influence fitness and propriety. It is clear that the FCA still wishes to promote a different line on NFM than that taken on occasion by the Upper Tribunal.

Despite the refinements made, the final guidance remains lengthy and complex. Whilst in many respects it is more helpful to have additional guidance than not, some of the content raises more questions than it answers. Firms will need to spend some time familiarising themselves with the content and ensuring they understand the FCA’s expectations.

Link to Wider NFM Work Wider NFM Work

The new guidance will no doubt bring NFM back into the spotlight. The FCA recently indicated in a letter to the Treasury Select Committee it has 76 open supervisory cases and one enforcement case relating to NFM.

However, the FCA also stated that it has been cautious about taking action following analysis of firms’ responses to its culture and NFM survey sent to investment banks, brokers, and wholesale insurance firms, on the basis that a high number of NFM complaints could be an indicator of a healthy speak-up culture, rather than indicating that there are serious problems. Nevertheless, it has since followed up with a number of firms that appeared to be outliers compared to their peers, and it is currently taking forward supervisory work across the whole of the wholesale brokers portfolio to test for effective detective and preventative controls. In addition, the FCA stated that it has no immediate plans to conduct similar surveys in other sectors. However, this position might change once the new guidance has had time to bed in.

Link to Next Steps Next Steps

The new guidance will apply from 1 September 2026. This aligns with the implementation date for amendments to the scope of COCON as it applies to firms other than banks, to clarify that serious misconduct, such as bullying, harassment, and violence between staff, is of regulatory concern. This change, which was confirmed in July 2025, will ensure equivalent expectations apply to all firms, as presently the scope is broader for banks.

The FCA has clarified that the guidance will not apply retrospectively, so NFM occurring before 1 September 2026 should be handled in accordance with the current Handbook provisions. In preparation for the new guidance, firms should note their obligation to train staff on the Conduct Rules and should consider whether staff require additional training on how the Conduct Rules apply in light of the new guidance.