Revised Regulations by FCA on Improper Conduct Beyond Financial Matters

Revised Regulations by FCA on Improper Conduct Beyond Financial Matters

FCA Extends Non-Financial Misconduct Rules to Non-Banks

The Financial Conduct Authority (FCA) has published a policy statement on non-financial misconduct (NFM), aiming to combat workplace bullying, harassment, violence, and other behaviors undermining dignity and creating hostile or offensive environments in the UK financial services industry [1][3].

Key Changes and Guidelines

The FCA's policy statement introduces several significant changes:

1. Extension of rules to non-bank firms: The FCA will extend its Conduct Rules (COCON) from banks to include non-bank regulated firms with a Part 4A permission, bringing roughly 37,000 additional firms into scope [1][2][3].
2. Scope exclusions: Non-banks without a Part 4A permission—such as payments firms, e-money institutions, investment exchanges, and credit rating agencies—will remain outside the scope of these rules, as the Senior Managers and Certification Regime (SMCR) does not currently apply to them [2][3].
3. Types of misconduct covered: The Code now explicitly identifies certain types of unwanted conduct as breaches, including violations of a person's dignity, creating intimidating, hostile, degrading, humiliating, or offensive environments, and violent conduct [3].
4. Implementation timeline: These amendments will come into force on 1 September 2026, with ongoing consultation on detailed guidance until at least September 2025 and final guidance expected by year-end 2025 [1][2].
5. Objective: The FCA’s overall aim is to raise standards, foster healthy workplace cultures, increase accountability for all regulated firms, and build trust in the financial services industry by addressing prevalent issues such as harassment, bullying, and serious misconduct [1][3].

Impact on Non-Banks

1. Clarified expectations: Non-bank firms now have a clear regulatory expectation to prevent and address non-financial misconduct under FCA rules, reducing ambiguity around conduct breaches outside the banking sector [2].
2. Compliance requirements: Firms with Part 4A permissions must ensure compliance with the extended COCON rules by embedding policies to combat bullying, harassment, and violence effectively.
3. Reputational risks: Firms outside Part 4A will not be directly regulated under these new rules but might face reputational pressures or future regulatory attention.
4. Increased costs: The extension aligns non-bank regulation with banks, potentially leading to increased compliance costs and revised internal controls in non-bank firms [1][2][3].

The FCA's proposed guidance includes subjective and objective assessments of potential instances of non-financial misconduct to determine whether there is a breach of ICR1. Social media activity may also be relevant to fitness and propriety assessments [2]. However, an individual's lawful expression of views in their private life, even if controversial or upsetting to colleagues, does not necessarily call into question their fitness and propriety.

Conduct in an individual's private life may be relevant to fitness and propriety if it demonstrates a willingness to disregard ethical or legal obligations, abusing a position of trust, or exploiting vulnerabilities.

In summary, the FCA’s July 2025 Policy Statement significantly broadens the regulatory framework on non-financial misconduct by including non-banks with Part 4A permissions, explicitly defining misconduct types, and setting a clear timeline for compliance, thereby promoting healthier work environments across UK financial services [1][2][3].

[1] FCA (2025). FCA’s policy statement on non-financial misconduct. Available at: https://www.fca.org.uk/publications/policy-statements/ps25-25

[2] FCA (2025). FCA’s proposed guidance on non-financial misconduct. Available at: https://www.fca.org.uk/publications/consultation-papers/cp25-15

[3] FCA (2025). FCA’s handbook changes on non-financial misconduct. Available at: https://www.fca.org.uk/publications/policy-statements/ps25-25-handbook-changes-non-financial-misconduct

1. The FCA's policy-and-legislation changes in non-financial misconduct (NFM) will influence employment law within the financial industry, as the Conduct Rules (COCON) will now extend to non-bank regulated firms with a Part 4A permission.
2. In the economics and business landscape, the finance sector will be subject to stricter regulations regarding workplace culture, as policy-and-legislation developments in NFM aim at fostering healthy work environments and combating issues like harassment and bullying.
3. The political sphere may be impacted by these policy-and-legislation updates on NFM, given their potential role in shaping public perceptions of industry ethics and contributing to general-news discussions on workplace conduct and accountability.

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