In the ever-evolving landscape of financial regulation, the Financial Conduct Authority (FCA) continues to sharpen its focus on fostering ethical cultures within the sector. One area gaining...
In the ever-evolving landscape of financial regulation, the Financial Conduct Authority (FCA) continues to sharpen its focus on fostering ethical cultures within the sector. One area gaining significant attention is non-financial misconduct (NFM), behaviours that occur outside the direct scope of financial duties but can profoundly impact an individual's suitability for roles in financial services. As we move through 2025, with new rules set to take effect in 2026, it is crucial for firms to grasp this concept, align with FCA expectations, and ensure compliance.
What is Non-Financial Misconduct?
Non-financial misconduct refers to serious behaviours unrelated to an individual's professional financial responsibilities, yet they raise concerns about their overall fitness and propriety. Examples include bullying, harassment (including sexual harassment), violence, discrimination, or other actions that undermine trust and inclusivity. These incidents might happen off-duty, at a social event, online, or in personal life, but if they come to light they can signal deeper character issues that affect professional judgment.
The FCA views NFM as a regulatory red flag because it can erode workplace cultures and public confidence in financial services. Unlike traditional financial misconduct such as insider trading, NFM is about the whole-person assessment: does this behaviour indicate someone unfit to handle client funds or make high-stakes decisions?
FCA Expectations: A Call for Robust Action
The FCA's guidance, outlined in Consultation Paper CP25/18 published on 2 July 2025, emphasises that firms must take decisive steps against NFM to build healthy, inclusive environments. Key expectations include:
- Assessing fitness and propriety. Firms should evaluate NFM when determining if staff are suitable for Senior Management Functions (SMFs) or Certification Functions (CFs), integrating NFM into annual certification processes and ongoing monitoring.
- Breach of conduct rules. A new rule extends the Code of Conduct (COCON) to explicitly cover serious work-related NFM such as harassment or bullying. If an incident breaches these rules, firms must act, potentially through disciplinary measures, reporting to the FCA, or revoking approvals.
- Consistency across the sector. The FCA aims to harmonise rules between banks (dual-regulated firms) and non-banks (solo-regulated), ensuring uniform standards, promoting transparency, supporting victims and preventing retaliation.
- Cultural shift. Beyond compliance, the FCA urges firms to embed anti-NFM measures into diversity and inclusion strategies, including training and clear reporting pathways.
These expectations are not optional; failure to address NFM could lead to enforcement actions, fines, or reputational damage. Final rules are expected to be effective from September 2026, giving firms time to prepare, but no room for delay.
Which Firms Does This Apply To?
The expanded rules apply broadly to all FCA-regulated firms under the Financial Services and Markets Act 2000 with a Part 4A permission. This includes solo-regulated firms such as asset managers, brokers and fintechs (now explicitly covered under the updated COCON for the first time) and dual-regulated firms such as banks and insurers (already subject to similar scrutiny, but now aligned with the new conduct rule). In essence, if your firm has staff performing conduct rules, SMFs or CFs, NFM is on your radar.
Staying Compliant
Non-financial misconduct is not just a regulatory hurdle, it is an opportunity to strengthen your firm's ethical foundation and protect your people. By proactively addressing NFM, you will not only meet FCA standards but also cultivate a workplace where everyone thrives. Fundsure has added a comprehensive Non-Financial Misconduct Awareness and Compliance course to our training offerings, covering FCA guidance, real-world scenarios and practical tools, tailored for managers, HR teams and certified staff. Visit our training page to learn more.