The new rules are expected to come into force from September 2026 and will extend existing rules that sought to address cases of bullying and harassment at banks to another 37,000 firms regulated by the FCA.

Specifically the rules will apply to all Financial Services and Markets Act 2000 (FSMA) firms with Part 4A permission as well as staff in those firms who are subject to the regulator’s Code of Conduct or CONCON.

At those firms “[s]erious, substantiated cases of poor personal behaviour will also need to be shared through regulatory references, in the same way financial misconduct currently is, making it harder for individuals to avoid consequences by moving from firm to firm,” the FCA has said in a press release announcing the rules changes.

The regulator indicated that, by aligning conduct rules as applicable to banks and non-bank regulated firms, it wants to:

• give firms confidence to take robust action against serious misconduct;
• drive consistency across the financial sector; and
• make it clearer when NFM can be a breach of FCA rules.

The FCA has repeatedly pointed out that non-financial misconduct and broader issues of firm culture are often very closely correlated with poor market conduct as well as consumer harm. And this position is explicitly repeated in the foreword to the newly released consultation paper: “[o]ne of the clearest warning signs of a failing culture is non-financial misconduct” including behaviors such as bullying and sexual harassment “going unchallenged.”

According to the FCA many firms “including the overwhelming majority of those who responded” to the consultation have asked for the strengthening of the existing rules in order to help them act decisively when non-financial misconduct is identified.

Wider misconduct

The FCA has also clarified that the new rules address “wider forms of misconduct” not only “limited to protected characteristics” and so are not a duplication of “existing legal obligations on firms under the Equality Act and the recent preventative duty to protect workers from sexual harassment.”

Sarah Pritchard, the FCA’s deputy chief executive, said: “Behavior like bullying or harassment going unchallenged is one of the reddest flags – a culture where this occurs can raise questions about a firm’s decision making and risk management.”

She added that the new rules “will help drive consistency across industry and support the vast majority of firms that want to do the right thing to deepen trust in financial services.”

Rob Mason, Global Relay’s director of regulatory intelligence suggested that the number of firms being pulled into the regulatory net is “significant” and could include “insurers and insurance brokers, consumer credit firms, non-bank mortgage lenders, payment service providers, and some investment firms” some of which “have never previously required a system or methodology to identify and report this type of risk.”

Claire Cross, a partner at law firm Corker Binning and former FCA official, was quoted by the FT saying: “Firms newly subject to the rules are unlikely to risk criticism for failing to report and so will err on the side of caution in borderline cases. Individuals will need to be prepared to fight their corner on what does, and does not, need to be reported.”

“Behavior like bullying or harassment going unchallenged is one of the reddest flags.”

Sarah Pritchard, deputy chief executive, FCA

Along with the rule changes, the FCA is also consulting on whether firms will need additional guidance in its Handbook on how to comply with the new rules. That consultation process is open until 10 September 2025.

Pragmatic move by regulator

In September 2023, the FCA proposed a new regulatory framework on Diversity and Inclusion (D&I) in the financial sector. It was these proposals that included a section on how to capture and deal with non-financial misconduct.

And in October 2024, the regulator published the results of a survey of approximately 1,000 firms, which found that the number of allegations of NFM reported increased substantially between 2021 and 2023.

Those results showed that bullying and harassment (26%) and discrimination (23%), as well as a group of issues labelled as ‘other’ (41%)’ were those most frequently recorded by firms. The last gave a clear indication of how difficult firms found categorizing misconduct and suggested that, at the least, some guidance from the FCA was required in this area.

Then, in March this year, the FCA decided to shelve its plans for new rules centering on data collection and D&I claiming that it was seeking to “avoid duplication and unnecessary costs”, while at the same time confirming that the proposals for extending the NFM regime would go ahead.

In extending the misconduct regime to a wider array of firms while descoping its D&I efforts the FCA appears to be making a distinction between issues that it can demonstrate are often linked to other serious problems, including some that eventually necessitate regulatory intervention, and those, like diversity, where a link between workforce make-up and resultant benefits or regulatory consequences, are much more difficult to establish.

The regulator may also be trying to be more realistic about the extent of its remit and resources, focusing on an area it already has some experience policing and where it has widespread support from regulated firms who are generally keen to address issues of bullying and harassment themselves.