Non-Financial Misconduct: FCA Deadline of 1 September 2026 is Fast Approaching

Key Changes

The FCA has said that tackling NFM in firms helps to foster healthy and inclusive workplace cultures and explains that its “finalised guidance helps to raise standards, increase accountability and build trust in financial services”. As a reminder, changes in its updated guidance are set out below.

COCON

The changes will introduce a new ‘anti-harassment’ rule in COCON. This will extend the scope of the conduct rules in non-banking firms to cover bullying, harassment or violence against colleagues, where it relates to the performance of an individual’s role.

Notably, although similar to the definition of harassment in discrimination law, it is much broader in scope and does not relate to a protected characteristic.

This will apply where there is a sufficient work-related link and the conduct is ‘serious’. The guidance published alongside the new COCON rule sets out factors that may point to conduct being within scope of COCON and examples of when a person’s conduct is outside of scope because it is part of their personal or private life.

This rule will not have retrospective effect, so NFM that occurs before 1 September 2026 should be handled in line with the version of the FCA Handbook in force at the time.

Fitness and Propriety

The FCA’s fit and proper test (‘FIT’) already allows firms to consider any relevant misconduct, wherever it occurs, when assessing fitness and propriety. The new guidance explains that conduct that takes place in private or personal life, in addition to other activities outside of the regulatory system, may be relevant to an assessment of fitness and propriety if there is a material risk they will breach the standards and requirements of the regulatory system.

The new FIT guidance also aims 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 that would be more appropriate for law enforcement or 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.

Managers

The final guidance highlights the important role managers play in preventing harassment and other kinds of NFM. Rather than simply reacting to incidents, managers will be expected to take reasonable steps to protect staff from harassment and other types of NFM, and if they fail to do so, may find themselves in breach of Conduct Rule 2 (the duty to act with due skill, care and diligence). This is in line with the new duty to take reasonable steps to prevent sexual harassment, effective from October 2025.

However, the FCA clarified that it 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.

Steps for Employers

The new rule and guidance come into force on 1 September 2026 and so firms should already be preparing.

Key actions include:

• 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
• Reviewing fit and proper assessment processes, including certification procedures and governance arrangements for Senior Managers and Certification Regime populations
• Evaluate workplace culture and speak-up arrangements to ensure concerns can be raised and addressed appropriately before they become regulatory issues

Looking Ahead

The FCA has stated that its policy work on NFM is now complete and that its focus will shift to how firms address these issues in practice. As a result, firms should expect increased supervisory scrutiny of workplace culture, conduct investigations and fitness and propriety assessments after the new regime takes effect.

With the impending 1 September 2026 deadline, now is the time for FCA-regulated firms to ensure their policies, processes and training programmes are ready for the new rules and guidance.

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.