UK: FCA issues final guidance on non-financial misconduct

Why should I read this?

Tackling non-financial misconduct (NFM) in financial services is a priority for the FCA as it supports the FCA's efforts to improve culture and conduct in the sector. As part of this work, in July 2025, the FCA published a policy statement introducing a new rule to more closely align the rules on NFM between banks and non-banks.

Currently, the scope of the FCA’s Code of Conduct (COCON) is wider for banks than for non-banks, where it applies primarily to conduct that forms part of, or is for the purpose of, the financial services activities of the firm. The new rule will expand the scope of COCON in non-banks, bringing NFM within scope of the Conduct Rules when it occurs in relation to the performance of an individual’s role. NFM that only relates to a part of a non-bank’s business that does not involve SMCR financial activities (for example the pure retail part of a retail group that holds regulatory permissions) will remain out of scope of COCON.

Alongside the rule change, the FCA consulted on draft guidance to support firms in assessing:

when work-related NFM will breach COCON; and
how NFM which occurs outside of work may be relevant to assessing fitness and propriety.

Feedback from the consultation was overwhelmingly supportive of additional guidance. The FCA has now published a further policy statement setting out final guidance, which includes minor amendments to reflect consultation feedback. The new rule and guidance are relevant to all firms with a Part 4A permission and will come into effect on 1 September 2026.

This is a welcome development as the guidance should help to clarify the FCA’s expectations and bring greater consistency to how firms address NFM. However, it is clear that the FCA expects firms to police themselves: as the policy statement makes clear,

"The primary responsibility for preventing NFM, and dealing with it when it occurs, rests with firms themselves."

What do I need to know?

What behaviour is covered?

The new rule extending the scope of COCON (COCON 1.1.7FR) defines NFM as unwanted conduct of the following kinds:

conduct by A that has the purpose or effect of (i) violating B’s dignity or (ii) creating an intimidating, hostile, degrading, humiliating, or offensive environment for B; or
conduct by A that is violent to B.

In the July 2025 policy statement, it was not clear how this definition would apply to banks, given that COCON 1.1.7FR would apply only to non-banks. The FCA has clarified this point by applying the relevant part of the new rule to banks as guidance.

The definition of NFM broadly covers serious work-related bullying, harassment and violence. The rule only covers conduct that is serious: minor incidents of poor workplace behaviour that do not have the effect described above will not breach the rule.

Although the definition aligns with the requirements for harassment within the Equality Act 2010, it is not confined to conduct linked to a protected characteristic (e.g. sex, race, disability etc.). This is because the FCA’s NFM regime is intended to address wider forms of misconduct.

Importantly, conduct in an individual’s private or personal life is not within scope of COCON. However, such conduct may be relevant to the assessment of fitness and propriety.

What are the key points in the guidance?

The guidance is intended to help firms apply the FCA’s rules on NFM. In particular, it covers:

COCON – including the boundary between work and private life; when conduct is outside of scope; factors to consider when determining if the misconduct was serious; examples of reasonable steps for managers to take to protect staff against NFM; and more.
Fit and proper test for Employees and Senior Personnel (FIT) – that NFM has a broader meaning under FIT; how NFM forms part of the Fit and Proper test; when to investigate allegations; relevant private life misconduct; social media activity; and more.

In response to consultation feedback, a number of minor amendments have been made to the earlier draft guidance. The table below sets out the main changes.

Additional examples and flow charts to support the application of the new rule	The FCA has added flow charts and realistic examples to the guidance to help firms understand the rule's scope. Although these provide some further clarity, given the rule's broad scope and the guidance’s non-exhaustive nature, it is highly likely that employers will encounter further practical questions and potential grey areas when implementing the rule/guidance.
Clearer alignment with employment law	This includes clarifying, through an example, that the purpose of any conduct is as important as the effect.
Clarification that managers’ accountability is relative to their knowledge and authority	Managers must take reasonable steps to prevent or address NFM. However, they should not be held responsible where they could not reasonably have known about the NFM or lacked the authority to intervene. The policy statement also confirms that the term “manager” is not limited to line managers.
Clarification that firms are not expected to investigate trivial or implausible allegations or breach of privacy law	In relation to FIT, the FCA has confirmed that conduct in private life is relevant to fitness and propriety if it shows there is a material risk that the individual will breach regulatory standards and requirements. A ‘material’ risk is one that is not remote or speculative.
Social media	The FCA has clarified that the materiality threshold for social media conduct is consistent with other private life conduct. Firms are not expected to proactively monitor employees' social media accounts, nor are they required to investigate allegations about an individual’s private life or private social media activity that are trivial or implausible.
Repeated minor breaches	The previous draft guidance included frequently repeated minor driving offences as an example of how incidents of minor misconduct in private life can become relevant to fitness and propriety if repeated. In response to feedback that this example was unclear and might impose unintended burdens on firms, the FCA has removed it from the final guidance. However, it remains the case that repeated minor breaches may be relevant to fitness and propriety as they can show a disregard for complying with the law that could be reflected in the individual’s attitude to regulatory compliance. The FCA expects firms to make reasonable judgements about what kinds of offences, or how often they are repeated, might indicate that a person is dishonest or lacks integrity, and whether or not they are fit and proper.

Whilst the updated guidance goes some way to providing further clarity and support for firms, this remains a broad duty and introduces a new test that many firms will need time to understand and comply with, particularly given the potential for subjective judgement in several areas.

What should I do?

Firms have until 1 September 2026 to understand and implement the new rule and guidance. Given that there are only eight full months left to prepare, employers should take action now, including:

Reviewing and updating key policies, internal codes of conduct and procedures to reflect the new COCON scope and FIT considerations
Training staff, in particular managers and HR, to recognise serious NFM and handle allegations
Reviewing or implementing investigation and dispute-handling protocols
Training staff assessing fitness and propriety to ensure consistency and good judgement
Preparing for scenarios where private life misconduct becomes relevant

The guidance is not exhaustive and does not seek to set out every type of misconduct that might amount to a breach of COCON or the fitness standards in FIT. This means that when dealing with allegations of NFM, firms will need to exercise judgement on a case-by-case basis.

Publication of the final guidance marks the end of the FCA’s policy making activity in this area. The FCA will now focus on how firms are tackling NFM in practice. As with any major regulatory change, firms and their senior management need to be ready to explain to their FCA supervisors what steps they are taking to implement the new rules and guidance. Firms that are unable to do this may find themselves subject to unwelcome scrutiny and possible regulatory intervention.

Webinar: New non-financial misconduct guidance | Thursday 15 January 2026

To support you in understanding what the new rule and guidance means for your firm and practical steps for compliance, please join our live webinar where our specialist will cover all this and more.