At a Glance

As if the festive season wasn’t festive enough, the UK’s main financial services regulator, the FCA (Financial Conduct Authority) has finalised and published its guidance on non-financial misconduct (‘NFM’) and confirmed that, as expected, the guidance will come into force on 1 September 2026. 

For our clients in the financial services sector, we will be digesting the detail over the next few weeks so you can focus on more seasonally-appropriate activities.

But if you simply can’t wait until the new year, read on for the key details.

Background

As we previously wrote about here, over the summer, the FCA consulted on updating its Handbook to better address NFM, which closed on 10 September 2025. This followed increasing public and political concern regarding how allegations of inappropriate conduct in the financial services industry have been previously dealt with.

As a reminder, the FCA consulted on proposed updates to the FCA Handbook which introduced a new “anti-harassment” rule in COCON (the Code of Conduct) as well as detailed guidance on how the FCA expects allegations of NFM to be handled and responded to.

Following that consultation, the FCA has now published Policy Statement PS25/23, finalising its handbook guidance which, alongside the amendments to the Conduct Rules to cover NFM, will take effect on 1 September 2026. In that Policy Statement, the FCA has stated that the feedback to its consultation was overwhelmingly positive, with 95% of respondents asking for this additional guidance. The FCA has therefore proceeded to publish that guidance now, with ‘minor’ amendments to reflect consultation feedback, so firms can prepare for the 1 September implementation date. It has also stated that this brings its policy work on NFM to a close, and that it will now focus on how firms are tackling it in practice, which may mean this becomes a greater area of focus for its enforcement activities.

What Has Changed in the Finalised Guidance?

Noteworthy changes to the finalised version of the guidance from the earlier draft consulted on include:

  1. New examples and flow diagrams to help firms apply COCON (the Code of Conduct) consistently. The FCA has included new examples to illustrate the scope of COCON and provided further guidance to support the application of the new “anti-harassment” rule (rule COCON 1.1.7FR) to help firms in assessing when COCON is engaged.
  2. Changes to more clearly align the guidance with UK employment law. When the earlier draft guidance was published, we commented that the definition of harassment was very wide and went beyond UK discrimination law. Several consultation respondents also noted the divergence and fed back that increased alignment between employment law and the FCA’s rules would be welcomed. The FCA’s response has pointed out that there is no parallel for its Conduct Rules in employment law, which is why there is divergence. However, the FCA has made some revisions to further align with relevant employment and equality law provisions, including an example to demonstrate that the purpose of the conduct is as important as its effect, but has otherwise resisted calls to define NFM more narrowly and it therefore remains broader than discrimination law.
  3. Clarifying managers’ accountability. The final guidance clarifies 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 or did not have authority to act in the particular case.
  4. Investigating conduct in private/personal life. The FCA has added further guidance to its updates on FIT (Fitness and Propriety) to help firms assess whether they need to take steps to investigate allegations about an individual’s private life when considering their fitness and propriety – for example, making clear that firms are not expected to investigate trivial or implausible allegations or those it would be more appropriate for law enforcement/other authorities to investigate. It also clarifies that firms do not need to look into allegations that, even if true, would not be relevant to fitness and propriety and:
    • Private life conduct will not equate to a material risk that the individual will breach regulatory requirements (therefore becoming relevant to fitness and propriety) if it is remote or speculative.
    • It should not automatically be assumed that private life conduct will be repeated at work, but even if it is unlikely to be repeated at work, it may be relevant if it is so serious that there is a material risk of damaging confidence in the financial system.
    • It has also helpfully explained that the materiality threshold is the same for social media conduct as for other private life conduct.
  5. Dual-regulated firms and retrospectivity. The FCA has also set out that:
    • It will expect dual-regulated firms to consider this guidance when assessing their staff’s fitness and propriety, although the new COCON rule only applies to non-banks because the scope of the conduct rules at banks is wider than for non-banks (although it says that banks can use the guidance to help them determine whether bullying or harassment is a breach of their conduct rules 1 and 2). So, banks and other dual-regulated firms should still bear this guidance in mind.
    • The new Conduct Rule does not have retrospective effect – so NFM that occurs before that date should be handled in line with the version of the FCA Handbook in force at the time.

Next Steps and Impact

Now that the final version of the guidance and implementation date are known, HR professionals may want to timetable the following into their work planning, ahead of 1 September 2026:

  • Reviewing and potentially updating policies, template contracts and settlement agreements to ensure they appropriately cover off the new FCA Handbook provisions.
  • Ensuring HR and Compliance processes are aligned in terms of record-keeping and reporting requirements, and that those completing regulatory references on behalf of firms understand when NFM may need to be disclosed in them.
  • Training their HR teams, employees and managers so they understand the new guidance and the potential regulatory implications of breaching that guidance.
  • Ensuring they know how to undertake investigations as well as make decisions on COCON/FIT in ways which satisfy both their legal and regulatory obligations.

For tailored advice on how to prepare your business for these changes, please contact your usual Littler United Kingdom contact. For any training enquiries, please contact Natasha Adom, our client training partner.