FCA publishes final rules on non-financial misconduct

Following a policy statement and consultation in July 2025 (see more detail here), the FCA has published its final rules and guidance on non-financial misconduct (NFM) in financial services, setting out how firms should interpret and apply minimum standards of behaviour for employees, and how to assess fitness and propriety under the Senior Managers & Certification Regime (SM&CR).

As a reminder, the July 2025 policy statement confirmed a new rule to align the conduct rules in banks and non-banks for cases of serious NFM, aiming to drive greater consistency across financial services. That rule will come into force on 1 September 2026. The July 2025 consultation also set out amended guidance in relation to NFM for the purposes of the conduct rules and fitness and propriety (F&P) assessments. The FCA stated in its consultation that it would only take the guidance forward if there was clear support for it do so. 

In response to strong industry support – with 95 per cent of respondents requesting guidance on how serious misconduct should be treated under the FCA Code of Conduct (COCON) and Fit and Proper test (FIT) – the FCA’s guidance is now final, so firms have time to prepare for its introduction in September 2026. Only minor amendments have been made to the July 2025 guidance to reflect consultation feedback. We have summarised the key points below.

What are the key points in the COCON guidance? 

• New examples and flow diagrams. The final guidance includes new examples and flow diagrams to help firms apply COCON rules consistently. One example relates to staff in a shared function where certain individuals deal with the financial services business and others with the non-financial services business. The example shows that the conduct will be in scope of COCON if either the perpetrator or the subject deals with the financial services business of the firm, which appears to be a wide scope. Crucially, the FCA emphasises that each case of NFM is unique, and it is not possible to provide enough examples or case studies to address all scenarios.
• Alignment with employment law. The FCA has responded to concerns over divergence from employment law by making minor amendments to its guidance. For example, it has clarified that both purpose and effect are important in identifying misconduct, such that an individual can breach COCON even if (for example) their hostile and intimidatory communication is intercepted before it reaches the intended subject. However, the FCA has ultimately made clear that FCA standards do not duplicate or override employment law.
• Manager accountability. In response to some concern that the consultation guidance placed disproportionate liability on individual managers, the guidance now makes it clearer that the FCA would not expect a manager to be held responsible for failing to stop NFM if they could not reasonably have known about it. The FCA has also clarified that it would not consider it reasonable to hold a manager responsible if they did not have authority to act in the particular case. The term ‘manager’ remains broadly defined – it is not just limited to direct line managers.
• Boundary between work and private life. The table of examples aimed at illustrating the boundary between work and private life remains unchanged from July 2025. The guidance seeks to articulate scenarios where conduct outside the workplace may be within scope, such as misconduct at a training event, award ceremony, or workshop organised by a client. In each case, the question is whether the conduct relates to the performance of qualifying functions.
• ‘Serious’ misconduct. The FCA has confirmed that the threshold for ‘serious’ misconduct for the new rule in COCON is aligned with the threshold for harassment in the Equality Act. Guidance is provided on factors to take into account when deciding whether NFM is serious enough to amount to a breach of COCON and this has been slightly amended from July 2025, including the removal of ‘whether the subject of the misconduct has specific characteristics or vulnerabilities’. Remaining factors for seriousness include duration, repetition and impact of the conduct, seniority of the alleged perpetrator, past warnings or patterns, and whether the behaviour would justify dismissal.
• Historical NFM. The new rule and guidance will not be applied retrospectively. The FCA has clarified that incidents before 1 September 2026 should be handled in accordance with the version of the Handbook in force at the time.

What are the key points in the FIT guidance? 

• Boundary between work and private life. FIT guidance is broader than COCON – private life conduct is relevant to F&P if it poses a material risk to regulatory standards, public confidence, or could reasonably be repeated at work. The guidance now makes it clear that a ‘material risk’ is one that is not remote or speculative, aiming to ensure proportionality and avoid overreach into private matters.
• Firm investigation obligations. The FCA has added guidance to help firms assess whether they need to take steps to investigate allegations about an individual’s private life. For example, it has made it clear that firms are not expected to investigate trivial or implausible allegations or those it would be more appropriate for the relevant law enforcement or other authorities to investigate. In addition, firms do not need to look into any allegations that, even if true, would not be relevant to F&P.
• Social media. The FCA has clarified that the materiality threshold for social media conduct is consistent with other private life conduct as mentioned above. Examples of relevant social media activity could include threats of violence, clear involvement in criminal activities, or conduct that shows a material risk that the individual will carry out bullying or harassment at work. Lawful expression of personal views – even if controversial or upsetting to colleagues – does not in itself call F&P into question but may be relevant if a material risk to standards exists. This may be a difficult balance to strike in some circumstances.
• Repeated minor breaches. Repeated minor violations of law – even outside of work – might be relevant to F&P if they show disregard for compliance that could translate to regulated activities. The FCA has dropped the example of minor motoring offences after consultation feedback but retained guidance regarding repeated breaches. 

With the new rule and guidance coming into force in September 2026, all affected firms will need to review their policies and training to ensure that staff clearly understand the applicable standards (in terms of their own conduct and their response to conduct brought to their attention). As the FCA closes its policy work on NFM, the focus now shifts to how financial services firms put these points into practice. 

For advice on preparing for the new rules, or to discuss how these changes will affect your firm, please speak to the authors of this blog post or your usual Freshfields contact.