FCA Conduct rules extend to non-financial misconduct from September 2026

The changes affect different firms in different ways.

The rule has a defined scope. It applies where:

• there is a sufficient work-related connection; and
• either the individual accused of the misconduct or the individual affected works in a part of the firm’s business dealing with financial services.

It is not a blanket rule covering all misconduct across a business, nor does it require firms to monitor employees’ private lives. However, conduct at work-related social events, conferences, client functions, offsites or during business travel may still be sufficiently connected to work, depending on the facts.

The rule also has no retrospective effect. It applies only to conduct occurring on or after 1 September 2026, even if earlier conduct only comes to light later.

The simplest way to understand the reforms is to separate who the Conduct Rules apply to from what behaviour can now breach them.

Serious workplace bullying, harassment, violence and similar misconduct may now result in personal regulatory consequences where there is a sufficient connection to work.

All Conduct Rules staff will face an additional layer of regulatory scrutiny. A substantiated finding of serious non-financial misconduct may constitute a Conduct Rules breach, affect fitness and propriety assessments, influence annual certification decisions and be reflected in future regulatory references.

Managers and senior leaders face a distinct form of personal regulatory exposure. Their position is not determined solely by whether they personally engaged in the underlying misconduct. The FCA will also consider how they responded once concerns arose. In particular, regulators may examine whether a manager knew, or ought reasonably to have known, about serious non-financial misconduct and whether they took reasonable steps to prevent, escalate, investigate or otherwise address it. What amounts to reasonable steps will depend on the manager’s role, responsibilities, authority and the information reasonably available to them. The FCA has made clear that this is a test of reasonableness, not strict liability.

Employees entirely outside the firm’s financial services business may fall outside the scope of COCON 1.1.7FR where neither the alleged wrongdoer nor the affected individual works in that part of the business.

The reforms have particular significance for managers handling complaints and whistleblowing disclosures.

The Conduct Rules do not create a new whistleblowing regime. Existing protections under the Public Interest Disclosure Act 1998 (PIDA) and firms’ SYSC whistleblowing obligations remain unchanged.

What is new is that a manager’s response to a disclosure may itself become a Conduct Rules issue.

A manager who receives information suggesting serious workplace misconduct but fails to escalate concerns appropriately, investigate proportionately or protect the individual raising them may face scrutiny under Individual Conduct Rule 2, which requires due skill, care and diligence.

In more serious cases, Individual Conduct Rule 1, requiring integrity, may also be engaged, for example where a manager deliberately suppresses a disclosure, discourages an individual from pursuing concerns or permits retaliation against a whistleblower.

The route by which concerns are raised, whether through a formal whistleblowing channel, a grievance or an informal conversation, is less important than how they are handled.

One of the most challenging aspects of the new regime is that serious workplace misconduct rarely begins with a formal complaint.

Concerns often emerge through one-to-one meetings, informal (or overheard) conversations, exit interviews, sickness absence, staff surveys or repeated issues involving the same individual or team.

Managers are not expected to investigate every rumour or monitor employees’ private lives. However, where concerns are repeatedly raised or warning signs become apparent, the FCA may ask whether the manager ought reasonably to have recognised the issue and whether appropriate steps were taken.

The focus is therefore not simply on what a manager actually knew, but also on whether they responded reasonably to the information available to them.

Individuals should:

• Understand the standards: familiarise yourself with how serious non-financial misconduct may engage the FCA Conduct Rules and, where applicable, fitness and propriety assessments.
• Know how to raise concerns: understand your firm’s reporting, grievance and whistleblowing procedures and when concerns should be escalated.
• Managers should be prepared to act: if concerns come to your attention, whether formally or informally, consider whether they require escalation or further investigation. Keep appropriate records of decisions and the steps taken.
• Complete training: take advantage of any updated Conduct Rules, workplace behaviour or whistleblowing training provided by your firm and ensure you understand your own regulatory responsibilities.

Firms should:

• Review policies and procedures: update Conduct Rules, disciplinary, grievance and whistleblowing policies to reflect the expanded scope of serious non-financial misconduct.
• Review investigation processes: ensure investigations into potential non-financial misconduct are proportionate, well documented and capable of supporting regulatory decisions where required.
• Test governance: ensure HR, Compliance, Legal and senior management have clearly defined responsibilities for ownership, escalation, decision-making and reporting.
• Strengthen record-keeping: document concerns, escalation decisions, investigation outcomes and the reasons underpinning key decisions.
• Update training programmes: ensure employees, line managers and senior leaders understand the revised regulatory framework and their respective responsibilities.
• Monitor culture and management information: use complaints, grievances, whistleblowing reports, exit interviews, sickness absence and staff survey data to identify recurring issues and potential cultural risks before they develop into more significant problems.

The FCA’s reforms do not make every workplace dispute a regulatory matter, nor do they require firms to police employees’ private lives. Instead, they recognise that serious workplace misconduct can undermine the standards of integrity and professionalism expected within regulated financial services.

For most non-bank SM&CR firms, this represents a significant change. Serious workplace bullying, harassment, violence and similar non-financial misconduct may now be both an employment issue and a regulatory issue, carrying potential consequences not only for the individual concerned but also, in some cases, for managers responsible for responding to it.

As firms adapt to the new regime, effective governance, clear reporting lines, well-documented investigations and appropriately trained managers will be central to demonstrating compliance.

Whether you are an employer reviewing your policies and governance arrangements, a manager concerned about your own regulatory responsibilities, an employee considering how to raise a concern, or an individual facing an allegation or investigation, obtaining advice at an early stage can make a significant difference.

Our employment team advises regulated firms, senior executives and employees on the interaction between employment law and the FCA Conduct Rules. If you would like to discuss how the new regime may affect you or your organisation, please get in touch for a confidential conversation.