Non-Financial Misconduct in Focus: FCA Expands Expectations on Culture and Conduct
On 23 March 2026, the Financial Conduct Authority published a major update to its guidance on its website on non-financial misconduct to reflect significant new rules and expectations.
Non-financial misconduct includes behaviours such as bullying, harassment, and violence. The FCA’s position is clear. When left unchecked, these behaviours can harm individuals, damage firm culture, and undermine trust in financial services.
The updated framework reinforces that such conduct is not separate from regulation. It sits firmly within it.
With the new rules coming into force on 1 September 2026, firms are now expected to treat non-financial misconduct as a core component of conduct risk and governance.
Key Messages
The FCA’s update introduces important changes to how non-financial misconduct is captured within the regulatory framework.
Extended Conduct Rule: A new Conduct Rule will apply across all FCA-regulated firms so that serious workplace misconduct can constitute a breach. This includes bullying, harassment, and violence where there is a sufficient connection to work. The rule is not retrospective, but it is deliberately broad. It is not limited to behaviour linked to protected characteristics and instead focuses on whether conduct violates dignity or creates an offensive environment.
Fit and Proper Clarifications: The FCA has reinforced that the existing Fit and Proper framework already allows firms to consider a wide range of misconduct. New guidance clarifies that non-financial misconduct, including behaviour outside the workplace, may be relevant if it raises concerns about an individual’s integrity or reputation.
Guidance on Complex Judgements: Updated Handbook guidance provides direction on more difficult areas. This includes:
- how to assess conduct that occurs outside work,
- how to approach social media activity, and
- how to handle unproven allegations.
It also clarifies expectations around what reasonable steps look like for managers in preventing and addressing misconduct.
These changes represent a significant shift. The FCA is making clear that serious non-financial misconduct is a regulatory issue, not simply an internal matter.
FCA Expectations
The FCA expects firms to approach non-financial misconduct with the same level of seriousness as any other conduct risk.
Leadership and governance: Boards and senior management are expected to take ownership of culture. Non-financial misconduct should be actively discussed and reflected in governance forums, with leadership setting a clear tone on acceptable behaviour.
Proactive management: Managers are expected to take reasonable steps to prevent and address misconduct. Failing to act where issues are known could itself represent a breach of Conduct Rules. This creates a clear expectation of proactive oversight rather than reactive response.
Encouraging speaking up: Firms must create an environment where employees feel able to raise concerns. This includes having clear reporting channels and ensuring staff understand how to use them without fear of negative consequences.
Effective investigation and response: Firms should have robust processes to identify, investigate, and address misconduct. Allegations must be handled fairly and promptly, with clear accountability across HR and compliance functions.
Focus on outcomes: The FCA has emphasised that culture cannot be addressed through policies alone. A formal approach is not sufficient if behaviour does not change in practice. The regulator will focus on whether firms are delivering real improvements.
Balanced approach to personal conduct: While the FCA expects firms to take misconduct seriously, it also recognises limits. Firms are not expected to monitor employees’ private lives in detail. The focus should remain on conduct that is relevant to the individual’s role or the firm’s reputation.
Overall, the FCA’s expectations centre on accountability, consistency, and a clear link between culture and conduct risk.
What Firms Should Do Next
With implementation set for September 2026, firms should begin preparing now.
Review and update policies: Firms should assess existing conduct, disciplinary, and grievance policies to ensure they reflect the expanded scope of non-financial misconduct. Internal codes of conduct should clearly reference these expectations.
Enhance training and communication: Training should be tailored to different roles. Staff need to understand expected behaviours and reporting mechanisms, while managers require more detailed guidance on their responsibilities.
Strengthen breach identification and reporting: Firms should review how conduct rule breaches are identified, recorded, and escalated. Non-financial misconduct must be captured within these processes where relevant.
Integrate into fit and proper assessments: Fitness and propriety frameworks should be updated to reflect the broader scope of misconduct. This includes reviewing certification processes and ensuring relevant issues are considered consistently.
Update regulatory reference processes: Firms should ensure that regulatory references capture relevant findings of misconduct where required under existing rules.
Review whistleblowing and investigation frameworks: Firms should test whether current arrangements are effective. This includes clarity on ownership, escalation, and independence of investigations.
Engage senior management: Senior Managers should be actively involved in understanding the changes and their implications. Cultural accountability sits at the leadership level.
Monitor culture and outcomes: Firms should develop appropriate indicators to assess culture and conduct. This may include employee feedback, incident trends, and reporting activity, while maintaining a proportionate approach.
Taking these steps will help firms move beyond compliance and towards a more robust and consistent approach to conduct risk.
What This Means for Firms
The FCA’s direction is clear. Non-financial misconduct is no longer separate from regulatory expectations. It is part of how firms are assessed.
The shift is not simply about new rules. It reflects a broader focus on how firms operate in practice. Behaviour, culture, and decision-making are now central to regulatory scrutiny.
Firms that treat this as a policy exercise risk missing the point. The challenge lies in embedding consistent standards across the organisation and ensuring that issues are addressed openly and fairly.
This requires alignment across HR, compliance, and leadership, alongside a willingness to challenge behaviours that may previously have been overlooked.
As supervision in this area develops, firms will need to demonstrate not only that frameworks exist, but that they are effective in identifying and addressing misconduct.
