Executive Summary
- What’s new: The UK Financial Conduct Authority (FCA) has published its final guidance on how serious non-financial misconduct will be assessed under the Code of Conduct and Fit and Proper regime starting in 1 September 2026, including extending aspects of the Code to non-bank firms and clarifying expectations for fitness and propriety.
- Why it matters: The guidance reinforces the FCA’s focus on culture and individual accountability and materially raises expectations around how firms identify, investigate and document serious workplace misconduct, with particular implications for non-banks and senior individuals.
- What to do next: Firms can prepare now by updating conduct and disciplinary frameworks, refreshing training, and stress-testing fitness and propriety processes, while ensuring HR, compliance and legal functions are aligned ahead of increased supervisory scrutiny.
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In December 2025, the FCA published its final Policy Statement and guidance (Final Guidance) on the treatment of non-financial misconduct (NFM) under the Code of Conduct (COCON) and the Fit and Proper (FIT) regime, with changes taking effect from 1 September 2026. The Final Guidance follows earlier consultations (CP23/20 and CP25/18) and confirms the FCA’s approach to embedding serious workplace misconduct (including bullying, harassment and violence) more firmly within the regulatory framework for both banks and non-banks.
Although the core direction of travel has been clear since the original consultations, the Final Guidance provides important clarity on how firms should assess NFM in practice, how individual conduct rules apply, and how firms should approach fitness and propriety determinations. For many firms, the focus now shifts from policy development to implementation.
Key Features of the Final Guidance
Scope of the New COCON Rules Regarding Serious NFM
From September 2026, serious NFM may fall within scope of COCON for non-bank firms where either the individual responsible for, or the subject of, the misconduct works within the firm’s financial services business. This brings non-banks closer to the position long applied to banks and reinforces the FCA’s expectation of consistent behavioural standards across the sector.
The FCA emphasises that COCON will generally be engaged where serious NFM also evidences a breach of individual conduct rules, most notably failures to act with integrity or with due skill, care and diligence.
As a reminder, the requirements in COCON only apply to conduct at work, and do not extend to an individual’s private life. The FCA has continued to attempt to clarify this boundary, but this will remain a key area of uncertainty given the range of scenarios which may emerge. Conduct in an individual’s private or personal life will, however, remain relevant for the assessment of an individual’s fitness and propriety
Finally, the FCA has also confirmed that the new rules regarding NFM in COCON will not have retrospective effect, and therefore will not be relevant to historic NFM. They will only be relevant from 1 September 2026.
Practical Framework for Assessing NFM
The Final Guidance sets out a non-exhaustive framework to help firms assess whether behaviour reaches the regulatory threshold. In particular, firms are expected to consider:
- Seriousness, including frequency, duration, seniority, impact on the subject and any aggravating or mitigating factors.
- Effect, focusing on the overall impact of the conduct and whether it was reasonable for the behaviour to have caused that effect.
- Purpose, including whether the conduct was intended to violate dignity or create an adverse environment (with attempted conduct also potentially in scope).
The FCA confirms that single incidents, physical violence and conduct not directed at a specific individual may all be relevant, depending on the circumstances.
Interaction With Employment Law
The FCA reiterates that COCON operates separately from employment and equality law, even though the Final Guidance has been refined to better align with those regimes. Regulatory assessments are not intended to replace criminal or employment processes, but to address conduct through a financial services lens, particularly where behaviour raises integrity or competence concerns. This will pose some difficulties for firms, which will continue to have to consider different regimes that may apply to any incident of NFM.
Clarifications on Individual Conduct
The FCA highlights that disadvantaging a colleague for engaging with regulators or using whistleblowing channels will generally amount to a breach of the duty to act with integrity. This applies regardless of whether the conduct comes from a manager or peer, reinforcing expectations around psychological safety and regulatory openness.
Fitness and Propriety
The Final Guidance also expands on how NFM should feed into FIT assessments, stressing a holistic, risk-based approach. Firms are expected to consider whether behaviour indicates a material risk of repetition or broader non-compliance.
Specific areas addressed include:
- When it may be appropriate to investigate issues arising in an individual’s private life. (It is worth noting that, whilst additional guidance has been provided here, large amounts of discretion are afforded to firms in determining what will be relevant, which will likely be time consuming and potentially still intrusive for the individuals concerned.)
- How social media activity may be taken into account (without imposing proactive monitoring obligations).
- The relevance of ethical lapses.
- How patterns of minor misconduct may cumulatively affect fitness and propriety.
Particular weight is placed on offences involving dishonesty, fraud, violence and sexual misconduct, wherever committed.
Why This Matters
While many firms have already strengthened their workplace conduct frameworks, the Final Guidance materially raises expectations around consistency, documentation and escalation.
In particular:
- Greater supervisory focus on culture and governance. The Final Guidance sits squarely within the FCA’s wider agenda on culture, diversity and inclusion, and operational resilience. The regulator is likely to use this framework to challenge firms on how behavioural risks are identified, investigated and addressed, particularly where senior individuals are involved.
- Increased complexity in investigations and disciplinary processes. Firms will need to navigate overlapping employment, regulatory and, in some cases, criminal considerations. The FCA’s emphasis on judgment-based assessments (rather than bright-line tests) increases the importance of robust decision-making frameworks and clear audit trails.
- Implications for regulatory references and disclosures. Findings of serious NFM may have lasting consequences for individuals through regulatory references and ongoing fitness assessments, heightening the stakes for both firms and employees.
What Firms Can Do Now Before the Changes Take Effect
With a matter of months until implementation, firms should consider moving beyond high-level policy alignment and focusing on operational readiness. In practice, this may include:
- Reviewing and updating conduct, disciplinary and escalation policies to reflect the FCA’s framework for serious NFM.
- Ensuring clear interfaces between HR, compliance and legal teams in investigation processes.
- Refreshing training for conduct rules staff, with tailored guidance for managers and senior leaders.
- Stress-testing fitness and propriety procedures against NFM scenarios.
- Preparing for enhanced supervisory scrutiny, including by documenting decision-making and maintaining consistent records.
Firms should also ensure that they are discharging their obligation to notify conduct rules staff of the applicable standards and take reasonable steps to ensure those standards are understood across the organisation. Dual-regulated firms should note that the Prudential Regulation Authority does not intend to issue separate guidance, so the FCA’s framework will be central to group-wide approaches.
Looking Ahead
The Final Guidance confirms that serious NFM is now firmly embedded within the regulatory conduct regime. For firms, this marks a continued shift toward viewing culture and behaviour as core prudential and conduct risks, rather than peripheral employment matters.
As supervisory expectations mature, firms that can demonstrate clear governance, consistent application of standards and well-evidenced judgment in difficult cases will be best placed to manage both regulatory and reputational risk.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.