Understanding Non-Financial Misconduct: Navigating FCA Expectations in 2025
In the ever-evolving landscape of financial regulation, the Financial Conduct Authority (FCA) continues to sharpen its focus on fostering ethical cultures within the sector. One area gaining significant attention is non-financial misconduct (NFM)—behaviours that occur outside the direct scope of financial duties but can profoundly impact an individual's suitability for roles in financial services. As we move through 2025, with new rules set to take effect in 2026, it's crucial for firms to grasp this concept, align with FCA expectations, and ensure compliance. At Fundsure, we're committed to helping you stay ahead of these changes.
What is Non-Financial Misconduct?
Non-financial misconduct refers to serious behaviours unrelated to an individual's professional financial responsibilities, yet they raise concerns about their overall fitness and propriety. Examples include bullying, harassment (including sexual harassment), violence, discrimination, or other actions that undermine trust and inclusivity. These incidents might happen off-duty—at a social event, online, or in personal life—but if they come to light, they can signal deeper character issues that affect professional judgment.
The FCA views NFM as a regulatory red flag because it can erode workplace cultures and public confidence in financial services. Unlike traditional financial misconduct (e.g., insider trading), NFM is about the "whole person" assessment: Does this behavior indicate someone unfit to handle client funds or make high-stakes decisions?
FCA Expectations: A Call for Robust Action
The FCA's latest guidance, outlined in Consultation Paper CP25/18 published on July 2, 2025, emphasizes that firms must take decisive steps against NFM to build healthy, inclusive environments. Key expectations include:
Assessing Fitness and Propriety: Firms should evaluate NFM when determining if staff are suitable for Senior Management Functions (SMFs) or Certification Functions (CFs). This means integrating NFM into annual certification processes and ongoing monitoring.
Breach of Conduct Rules: A new rule extends the Code of Conduct (COCON) to explicitly cover serious work-related NFM, such as harassment or bullying. If an incident breaches these rules, firms must act—potentially through disciplinary measures, reporting to the FCA, or even revoking approvals.
Consistency Across the Sector: The FCA aims to harmonize rules between banks (dual-regulated firms) and non-banks (solo-regulated), ensuring uniform standards. Firms are expected to promote transparency, support victims, and prevent retaliation.
Cultural Shift: Beyond compliance, the FCA urges firms to embed anti-NFM measures into diversity and inclusion (D&I) strategies, including training and clear reporting pathways.
These expectations aren't optional; failure to address NFM could lead to enforcement actions, fines, or reputational damage. The consultation on supporting guidance closes on September 10, 2025, with final rules effective from September 1, 2026—giving firms time to prepare, but no room for delay.
Which Firms Does This Apply To?
The expanded rules apply broadly to all FCA-regulated firms under the Financial Services and Markets Act 2000 (FSMA) with a Part 4A permission. This includes:
Solo-regulated firms (non-banks like asset managers, brokers, and fintechs): Now explicitly covered under the updated COCON for the first time.
Dual-regulated firms (banks and insurers): Already subject to similar scrutiny under the Fitness and Propriety (FIT) threshold conditions, but now aligned with the new conduct rule for consistency.
In essence, if your firm has staff performing conduct rules, SMFs, or CFs, NFM is on your radar. Even unregulated entities in the financial ecosystem should take note, as the FCA's influence extends through partnerships and supply chains.
Staying Compliant: Fundsure's Commitment to Your Success
Non-financial misconduct isn't just a regulatory hurdle—it's an opportunity to strengthen your firm's ethical foundation and protect your people. By proactively addressing NFM, you'll not only meet FCA standards but also cultivate a workplace where everyone thrives.
To support you on this journey, we're excited to announce that Fundsure has added a comprehensive Non-Financial Misconduct Awareness and Compliance course to our training offerings. This interactive module covers FCA guidance, real-world scenarios, and practical tools for implementation—tailored for managers, HR teams, and certified staff. Head to our training page to learn more and enrol today.
Stay tuned to the Fundsure blog for more insights on regulatory updates. Together, let's build a more accountable financial services sector.
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