The FCA’s new non-financial misconduct (NFM) framework, formalised in Policy Statement PS25/23, takes effect on 1 September 2026. For boards and senior managers at FCA-regulated firms, this is a hard compliance deadline — and the window to act is closing fast.

The rules expand the FCA’s Code of Conduct (COCON) to explicitly capture serious bullying, harassment, and violence in the workplace, applying to investment firms, asset managers, insurers, and other non-bank SMCR firms that have not previously faced this level of regulatory scrutiny. INFORMD has been tracking this development closely as part of our financial services compliance intelligence for UK senior leaders.

What Has Actually Changed Under the FCA’s NFM Rules?

The FCA has added a new rule to COCON that captures serious non-financial misconduct — conduct that violates a colleague’s dignity, creates an intimidating or hostile working environment, or involves violence. Crucially, the scope is wider than the Equality Act 2010: the conduct does not need to relate to a protected characteristic such as race or sex. Any serious workplace misconduct targeting a colleague is potentially in scope.

The changes apply to all individuals subject to COCON and the Fit and Proper (FIT) test across FCA-authorised firms. This brings non-bank firms — including investment firms, asset and fund managers, and insurers — into close alignment with banks, where comparable NFM standards have already applied. Payments firms and appointed representatives are currently outside the reforms.

Serious NFM can breach either Conduct Rule 1 (integrity, where the conduct is intentional or reckless) or Conduct Rule 2 (skill, care and diligence, where a manager fails to intervene or allows misconduct to continue in their team). The impact is assessed both subjectively — from the perspective of the individual affected — and objectively, as a reasonable person would see it.

Executive Action

• Map every individual in your firm subject to COCON and FIT — ensure your HR, legal, and compliance teams have a shared view of scope.
• Review existing conduct policies to confirm they explicitly reference NFM and align with the FCA’s finalised COCON and FIT guidance published in December 2025.
• Confirm that your current misconduct escalation pathways require FCA notification where formal disciplinary action follows an NFM finding.

Why Does the Scope of Manager Accountability Catch Boards Off Guard?

One of the most significant — and underappreciated — aspects of the new rules is how broadly managerial accountability is cast. All managers, not only those designated as Senior Managers under SMCR, must take reasonable steps to protect staff under their responsibility from NFM. A manager who knew — or should have known — about misconduct in their team and failed to act risks an adverse finding under Conduct Rule 2.

This matters because it substantially widens the pool of individuals with direct regulatory exposure. Middle management, team leads, and line managers at FCA-regulated firms now carry obligations that previously felt remote. The FCA’s guidance makes clear that mishandling a complaint, failing to follow the firm’s policies, or neglecting to investigate an allegation properly can all constitute a breach.

Boards should also understand the financial dimension. Under the Employment Rights Act 2025, the statutory compensatory cap for unfair dismissal — currently £118,223 — is being removed, and the qualifying service period reduced to six months. An erroneous NFM determination, or a failure to follow due process, could expose regulated firms to uncapped compensation claims running in parallel with any FCA regulatory action.

Executive Action

• Provide targeted training for all managers — not just Senior Managers — on when workplace behaviour reaches the threshold for COCON implications, before 1 September 2026.
• Review management information flows: are line managers reporting NFM incidents through the right channels? Are conduct committees applying the new standard consistently?
• Brief your board on the interaction between the new NFM rules and the Employment Rights Act 2025 — the combined liability exposure is material and requires board-level visibility.

Where Does Private Life End and Regulatory Scope Begin?

A common source of anxiety for senior executives is where the FCA’s reach ends. The regulator has been clear: someone’s purely private and personal life is outside COCON, and firms are not expected to monitor private social media. However, several situations that might feel “private” fall firmly within scope.

Conduct at work-related social events — including client dinners, investor roadshows, and off-site team events outside working hours — is in scope. Private social media posts that are targeted at and offensive to colleagues are also covered. According to the FCA’s final guidance, 95% of consultation respondents requested greater clarity on precisely these boundaries, reflecting how much genuine uncertainty existed in the market.

Boards should note that the FCA can take its own enforcement action entirely independently of any employment outcome. A settlement agreement with an employee does not foreclose FCA regulatory proceedings against that individual or the firm. This decoupling has significant implications for how regulated firms manage sensitive NFM cases — and for how executives facing allegations structure any resolution.

Executive Action

• Update your social media and IT use policies to reflect the FCA’s in-scope/out-of-scope distinction — particularly covering work-related events and colleague-directed content.
• Ensure your legal and compliance teams understand that employment settlement agreements do not automatically resolve FCA regulatory exposure arising from the same conduct.
• Review your regulatory reference processes: the expanded NFM framework will affect how references are drafted for individuals departing after 1 September 2026.

How Should Boards Structure the September 2026 Implementation Plan?

The FCA has signalled it will give firms some latitude in the early stages of implementation, but has also been clear these are flagship reforms it intends to supervise actively — particularly at firms with historic conduct issues or those making repeated regulatory notifications. Boards should treat the September deadline as the start of an ongoing supervisory relationship around NFM, not a one-time compliance exercise.

A structured implementation plan should address five areas before 1 September: policy and procedure updates; training for HR, compliance, and all management tiers; annual certification process amendments; FIT assessment processes for new and existing certified staff; and a review of speak-up arrangements to ensure reporting pathways are clearly understood across the firm. The rules do not apply retrospectively — there is no requirement to revisit past conduct determinations or fitness and propriety assessments.

For firms with historic conduct concerns, the calculus is different. The FCA has tools at its disposal — including skilled person reviews — and has indicated it may deploy them at firms that demonstrate poor NFM governance. Acting early, and documenting the steps taken, is the most credible protection available. Explore our full library of executive briefings covering financial regulation, governance, and compliance, or speak to our team about how INFORMD can support your organisation’s intelligence needs.

Executive Action

• Assign a named senior owner for the September 2026 NFM implementation programme — accountability should sit with the Chief Compliance Officer or General Counsel, with board-level oversight.
• Schedule a board-level briefing on the new rules before July 2026, leaving adequate time to revise policies and complete training before the implementation date.
• Consider an independent review of your current investigation and disciplinary processes against the FCA’s finalised guidance — firms with any historic conduct concerns should act immediately.

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Frequently Asked Questions

Does the FCA’s non-financial misconduct framework apply to all regulated firms?

The new COCON and FIT provisions apply to all FCA-authorised firms subject to the Senior Managers and Certification Regime (SMCR), including investment firms, asset managers, and insurers. Payments firms and appointed representatives are currently outside the scope of these specific reforms. If your firm is FCA-authorised and subject to SMCR, you should assume the rules apply and plan accordingly.

What counts as “serious” non-financial misconduct under the new rules?

The FCA assesses seriousness by looking at factors including the repetition and duration of the conduct, its impact on the individual affected, the seniority of the accused, any power imbalance between the parties, prior warnings, and whether the conduct would justify dismissal. A single incident can be sufficient if it is serious enough. The standard is both subjective — how it felt to the recipient — and objective, based on how a reasonable person would assess it.

Can the FCA take action even after an employment settlement has been reached?

Yes. The FCA’s regulatory framework operates independently of employment law outcomes. A settlement agreement between an employer and an employee does not preclude the FCA from investigating the same conduct and making its own regulatory determination — including enforcement action against the individual and/or the firm. Senior executives and their advisers must factor this decoupling into how any NFM-related dispute is resolved.

Are there retrospective obligations under the new non-financial misconduct rules?

No. The rules take effect on 1 September 2026 and do not apply retrospectively. Firms are not required to revisit past conduct rule determinations or past fitness and propriety assessments. However, any ongoing investigations involving conduct that straddles the implementation date should be reviewed to ensure post-September elements are handled under the new framework.