Non-financial misconduct is now firmly a regulatory issue here’s what PS25/23 means for firms

The FCA has now published its final position on tackling non-financial misconduct (NFM) through Policy Statement PS25/23 a major milestone in the regulator’s culture and conduct agenda.

This follows the FCA’s consultation CP25/18, which closed on 10 September 2025, and confirms what has been increasingly clear in supervisory conversations for some time: misconduct that is not “financial” can still be misconduct that matters to the regulator.

From 1 September 2026, a new rule will take effect extending the scope of COCON to non-banks, making explicit that NFM is a regulatory concern and can amount to a breach of the Conduct Rules regardless of firm type. The FCA noted this expansion applies to around 37,000 firms in addition to banks.

Alongside this, the FCA has issued final guidance intended to help firms apply the Conduct Rules and fitness and propriety expectations fairly and consistently when handling NFM cases.

The FCA’s view in PS25/23 is clear: it considers the policy work complete and its focus will now turn to addressing NFM in practice.

What has changed since the consultation?

PS25/23 includes a number of adjustments to the draft guidance following consultation feedback. Notably, the FCA has:

• added flow diagrams and decision tools to support consistent application of COCON,
• clarified points of alignment with employment law principles where possible,
• refined how manager accountability should be assessed, and
• confirmed firms are not expected to investigate trivial or implausible allegations when assessing fitness and propriety.

These changes are designed to make the guidance more practical without diluting the FCA’s core position: firms must still exercise judgement in each case, and every matter must be assessed on its own facts.

COCON: the FCA’s expectation is consistent judgement, not case-study compliance

One of the strongest themes in consultation feedback was a request for clearer examples and more case studies. PS25/23 acknowledges this but emphasises the limits of prescriptive guidance: the range of NFM scenarios is too wide, and each case will be unique.

Instead, the FCA has strengthened decision-support tools including flow diagrams to help firms structure their thinking and reach defensible outcomes.

Aligning with employment law but recognising the limits

PS25/23 confirms the FCA’s view that there is no direct equivalent in employment law for deciding whether NFM breaches an individual Conduct Rule (for example, whether someone has acted without integrity).

However, the FCA has sought closer alignment where possible. One example included is intended to demonstrate that the purpose of misconduct is as relevant as its effect, and that a breach can still occur even where hostile or intimidatory communication is intercepted before reaching the intended recipient.

Managers’ responsibility – accountability depends on knowledge and authority

PS25/23 retains the principle that managers have a responsibility to protect staff from NFM, but clarifies that accountability will be assessed in a proportionate way.

The FCA makes clear it would not expect a manager to be held responsible for failing to stop NFM where they:

• could not reasonably have known about it, or
• did not have authority to act in that case.

This clarification matters for firms designing governance models: manager responsibilities need to be clear, documented and supported but also realistic.

Definitions and scope NFM remains broadly defined

PS25/23 confirms that NFM is defined very widely as “essentially any misconduct not of a clearly financial nature”, including bullying and harassment.

While the new rule covers sexual harassment, the FCA confirms it does not expand the scope of COCON in non-banks to cover other forms of conduct prohibited under the Equality Act, such as discrimination and victimisation. However, firms are encouraged to consider whether such misconduct could nevertheless amount to a COCON breach.

Determining whether conduct is in scope

To address requests for clarity on scope, PS25/23 notes the final guidance includes:

• a table of scenarios, and
• flow diagrams and a decision tree

to help firms assess whether conduct is in scope of COCON.

The FCA outlines that conduct is likely to be out of scope where both the perpetrator and the subject work in a function that does not deal with the financial services business of the firm.

The work/private boundary – out of scope under COCON, but not always irrelevant

PS25/23 emphasises that conduct in private or personal life is entirely out of scope of the Conduct Rules. The final guidance nevertheless includes scenarios where there may be a sufficient connection between work and misconduct outside work to bring it within scope including misconduct occurring at training events or award ceremonies.

The guidance also clarifies that senior managers may be required to disclose conduct in private life under SC4, where it is material to fitness and propriety.

Seriousness and historic misconduct

PS25/23 confirms that whether misconduct is “serious enough” to amount to a breach is a matter for firms to judge reasonably, drawing on:

• the wording of the new rule,
• factors in the guidance, and
• existing guidance on the terms “serious” and “significant” in SYSC and SUP.

The FCA states it will treat a firm’s judgement as compliant with COCON where it is reasonable.

Finally, PS25/23 confirms the new rule has no retrospective effect, and NFM occurring before 1 September 2026 should be addressed using the Handbook in force at the time.

FIT: updated guidance to support fitness and propriety decisions

PS25/23 confirms the FCA has published an updated version of FIT to add clarity on its expectations in relation to NFM.

Key points include:

Allegations about private life – proportionality is expected

The FCA confirms it would not expect firms to investigate:

• trivial allegations,
• implausible allegations, or
• allegations that would not be relevant to fitness and propriety.

It also clarifies that unproven allegations may still be notifiable to the FCA (via Form D), and that the FCA will treat such information with caution and update it once the outcome is known.

Social media – relevance depends on risk to regulatory standards

PS25/23 clarifies that social media activity in private life may be relevant to fitness and propriety where it indicates a material risk that the individual will breach regulatory standards (including threats of violence).

The FCA also states firms are not expected to investigate allegations relating to social media activity in private life where they are trivial, implausible, non-material, irrelevant to fitness and propriety, or unlikely to be repeated at work in a way that engages the NFM rules.

Where social media activity involves lawful expression of views that are controversial or offensive, PS25/23 clarifies such conduct may still be relevant where it could be repeated at work in a way that breaches the Conduct Rules.

Integrity and repeated behaviour

PS25/23 reiterates that repeated misconduct in private life (objectively assessed) may demonstrate a lack of regard for ethical considerations, which is a key component of acting with integrity.

It also confirms that while one example regarding repeated minor driving offences has been removed, firms are still expected to exercise reasonable judgement about what patterns of behaviour might raise fitness and propriety concerns.

What firms should be doing now

The new rule and final guidance take effect on 1 September 2026, giving firms time to prepare but preparation will require more than simply updating a policy document.

Firms should be using this lead-in time to ensure:

• workplace policies and procedures are clear, well implemented and aligned to the FCA’s guidance,
• training and reporting channels support fair and consistent handling of NFM,
• governance is clear on accountability and decision-making,
• fitness and propriety assessments are robust and proportionate, and
• conduct rules staff are properly notified and supported in understanding the rules, as required under section 64B FSMA.

PS25/23 is the FCA’s final word on the policy framework but it is also a signal that firms will now be expected to demonstrate how they tackle NFM in practice.

If you would like to discuss any aspect of the guidance, or your firm’s approach to NFM governance, investigations and fitness and propriety assessments, please get in touch.