In a previous alert, “FCA D&I Standards for Large Firms Abandoned (for now), Non-financial Misconduct Rules Delayed (but Still Important),” we discussed the proposals put forward by the UK Financial Conduct Authority (FCA) for all FCA-authorised firms, not only banks, to better integrate non-financial misconduct (NFM) considerations into their senior managers and certification regime (SM&CR), including rules for staff fitness and propriety assessments (FIT), the FCA Conduct Rules in the Code of Conduct (COCON), and threshold conditions for firms (COND).
The FCA has now published “Consultation Paper 25/18: Tackling non-financial misconduct in financial services,” which contains its final changes to the rules in COCON and a consultation on guidance in COCON and FIT.
New Rules
The FCA confirmed that NFM refers, broadly, to “bullying, harassment and violence.” NFM can amount to a breach of the rules in COCON for any FCA-authorised firm, but the FCA’s view is that, under the current rule set, NFM will more commonly breach COCON at a bank than at a non-bank.
The FCA confirmed, however, that it is widening the scope rules for non-banks to align the approach across all SM&CR firms and bring more instances of NFM into its regulatory authority. Private fund managers, fintechs, and other non-bank authorised firms are, therefore, caught within this authority.
The new rule comes into effect 1 September 2026 and will not apply retrospectively, although the FCA has noted that it is not proceeding with any of the changes to COND or the Senior Management Arrangements, Systems and Controls rules that it consulted on.
Proposed Guidance
To supplement rules both in COCON and FIT, the FCA set out proposed guidance to help determine whether specific types of a person’s behaviour amount to NFM. The guidance helps determine whether that behaviour amounts to breach of COCON and had a bearing on the person’s fitness and properness under FIT.
The guidance states that a person’s conduct is outside the scope of COCON when “it is part of their private or personal life and when it is not excluded for that reason.” The scope provisions also specify that conduct will “not be excluded from the scope of [COCON] just because the [firm] forbids it (for instance in a staff handbook) or it is calculated to harm the [firm].”
The consultation closes on 10 September 2025.
Comment
As we noted in our previous alert, NFM remains a key priority for the FCA in the context of its ongoing focus on firm culture. As we also noted, if the general law is to address NFM issues, then FCA rules should be limited to those necessary to supplement and enforce the general law and go no further (i.e., be proportionate). On balance, the new COCON rules satisfy that proportionality requirement, noting that the rules can be interpreted in a manner that is consistent with the general law. The proposed guidance, however, does import additional points of detail that, while helping legal certainty, might be considered too much detail. This may well result in the UK financial services industry, including private fund managers and fintechs, pushing back on the proposed guidance. We await this outcome.
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