Our industry is very good at creating acronyms. The Financial Conduct Authority has given us a new one, Non-Financial Misconduct (NFM). With bullying and harassment in the workplace already attracting a high level of public and regulatory scrutiny, and with significant changes to legislation enacted under the Employment Rights Act 2025, the changes form part of wide-scale reforms to tackle NFM.
NFM refers to harmful workplace behaviours that are not financial in nature but threaten an organisation’s culture and regulatory standing. This includes bullying, harassment, sexual misconduct, and violence. The FCA has expanded its regulatory scope to treat serious non-financial misconduct as a direct breach of its Conduct Rules (COCON) and a critical factor in Fit and Proper (FIT) assessments.
From 1st September 2026, there will be a new rule in the COCON Sourcebook which will explain how NFM can be a breach of the conduct rules. This will make it easier for firms to interpret and consistently apply FCA rules. Regulatory guidance explains how firms can apply its rules on minimum standards of behaviour for financial services employees, and the factors they should take into account when assessing whether someone is fit and proper for their role.
On balance, the changes are a significant movement towards changing behaviour at FCA-regulated workplaces
The new rule captures NFM against a wide range of individuals including;
- employees of the firm;
- individuals providing services to a firm;
- an employee of a person who provides services to the firm; and
- an individual performing an activity that forms part of an activity of the firm.
This vast range goes beyond the scope of employment law protection and focuses on all those that may be affected by NFM in order to meet the FCA’s objectives to improve the UK financial sector’s reputation, strengthening its access to global talent and increasing market and consumer confidence.
Key aspects of the rules
- Scope of Behaviour: The regulations cover severe verbal or physical harassment, bullying, and violence. Unlike the Equality Act 2010, the misconduct does not need to relate to a legally protected characteristic to breach FCA Conduct Rules.
- Workplace Connection: The FCA’s conduct rules apply to work-connected environments. This includes office premises, client events, conferences, and work social occasions. Serious behaviours in private lives or on social media can also trigger “Fit and Proper” reviews if they pose a material risk to the firm or undermine public trust.
- Managerial Accountability: Managers face explicit “reasonable steps” duties to prevent and respond appropriately to harassment or bullying on their teams. Failing to intervene when aware of misconduct constitutes a breach of due skill, care, and diligence (Conduct Rule 2)
What is considered NFM?
The following would be considered NFM in the new regime:
- Bullying or harassment of colleagues (including behaviour that violates dignity, or creates an intimidating, hostile, or offensive environment).
- Sexual harassment or inappropriate conduct regardless of whether it relates to a protected characteristic
- Threatening, aggressive or violent behaviour towards colleagues, contractors or others connected to the workplace.
- Bullying or harassment of colleagues (including behaviour that violates dignity or creates an intimidating, hostile or offensive environment)
- Sexual harassment or inappropriate conduct regardless of whether it relates to a protected characteristic.
- Threatening, aggressive, or violent behaviour towards colleagues, contractors or others connected to the workplace.
These are unlikely to constitute NFM
- Minor workplace disagreements or personality clashes that do not involve bullying, harassment, or intimidation
- Robust or challenging management styles where feedback is constructive, proportionate, and performance-related
- One-off lapses in judgment that are minor, quickly addressed and not part of a wider pattern
These tie in well with definitions in employment law. However, there is no need for the conduct to relate to a protected characteristic which as age, disability, race, sex.
What is changing?
The FCA will publish a comprehensive new section (COCON 1.3) to cover the scope of COCON. Although it is stated that COCON does not apply to private or personal life, there are non-exhaustive factors provided to help define when such conduct can be strictly considered to be outside of COCON (private or personal) or would fall within. A table in COCON sets out examples. Whether private or not, COCON states that such conduct illustrated in the table would nevertheless require a senior conduct rules staff member to disclose such matters material to an assessment of fitness and propriety under FIT.
COCON goes further and states that misconduct in private or personal life may be relevant to fitness and propriety, even if there is little or no risk of it being repeated in their work, if it demonstrates a willingness to disregard ethical or legal obligations; abuse a position of trust; exploit the vulnerabilities of others and/or it was sufficiently serious that if the person was permitted to work at a firm, it would undermine public confidence or impact the FCA’s statutory objectives.
There is substantial guidance in relation to the use of social media although the FCA makes clear that firms are not expected to monitor their employees’ private lives.
Individual Conduct
Two examples of individual conduct that would be a breach of acting with integrity are added to COCON and include:
- subjecting a colleague to “significant detriment” for using the firm’s whistleblowing procedures; and
- harassment of a colleague.
In respect of due skill, care, and diligence, COCON now includes comprehensive new provisions relating to the positive duties of a manager and includes a duty to prevent harassment and a non-exhaustive list of examples of breaches.
The list includes a failure to take reasonable steps to protect staff from NFM and failing to take such complaints seriously. Managers will be able to argue that they have not acted without due skill, care, and diligence on the basis that they acted reasonably.
Two months of hard work
All firms affected by these changes should familiarise themselves with the NFM changes. The guidance will come into force on 1st September 2026 at the same time as the new rule at COCON 1.1.7FR.
The guidance does suggest that the FCA has listened carefully to feedback provided in the consultation, for example, alignment with employment law. There has been a significant effort to explain the new Conduct Rule and the use of flow diagrams is also useful as are the examples of conduct which fall outside private or personal life both in relation to COCON and FIT.
On balance, the changes are a significant movement towards changing behaviour at FCA-regulated workplaces. A trend introduced with the Consumer Duty. When read with the changes to employment law enacted under the Employment Rights Act 2025, there is a positive policy drive to change culture and to prevent harassment.
