UK FCA's New Measures to Combat Non-Financial Misconduct in Finance Sector

The UK Financial Conduct Authority (FCA) has announced significant changes aimed at addressing non-financial misconduct within the financial services sector. As outlined in Consultation Paper CP25/18, published on July 4, 2025, the FCA's latest initiative underscores its commitment to tackling severe forms of non-financial misconduct, including bullying, harassment, and violent behavior.

This move comes amid growing concerns over workplace culture in the financial services industry, particularly in light of numerous reports highlighting unacceptable conduct. The FCA's proposed changes will take effect on September 1, 2026, marking a pivotal shift in regulatory oversight.

**Context and Significance** The FCA's consultation introduces two primary developments. First, it expands the scope of the FCA’s Code of Conduct (COCON) to encompass non-bank entities, a significant change from the previous narrower application. Historically, COCON primarily addressed conduct related to the financial system's integrity. However, the new guidelines will explicitly include any conduct deemed to undermine an individual's dignity or create an intimidating, hostile, degrading, humiliating, or offensive environment. This change reflects a growing recognition of the importance of mental health and workplace safety in financial settings.

According to Sarah Hitchins, a partner at Allen & Overy, “This expansion is crucial as it recognizes that the financial services sector must not only focus on financial integrity but also on the well-being of its employees.” Hitchins emphasizes that such a comprehensive approach helps foster a healthier work environment and underscores the FCA's proactive stance in ensuring ethical practices.

**Proposed Guidance on Non-Financial Misconduct** The FCA has also proposed draft guidance to clarify scenarios where non-financial misconduct may breach COCON, inviting feedback until September 10, 2025. This guidance aims to help firms navigate the complexities of determining whether specific behaviors fall under the regulatory framework. Factors such as the context of the misconduct, the location where it occurred, and the involvement of colleagues or clients will be pivotal in these evaluations.

The FCA has acknowledged the challenges of delineating private and professional conduct, offering case studies to assist firms in understanding the boundaries. For instance, misconduct occurring during a work-related event is likely to fall under COCON, while actions toward family members during remote work may not.

“Employers need to be vigilant and responsive to any misconduct that could impact the workplace environment, even if it occurs outside of work hours,” states Dr. Emily Carter, an expert in workplace ethics at the University of London. “This shift in regulatory focus could lead to more accountability within firms.”

**Alignment with Employment Law** In its proposed guidelines, the FCA has sought to align its approaches with existing employment laws, particularly the Equality Act. The FCA stipulates that the perception of the affected individual is critical in assessing whether conduct breaches COCON. This aligns with the Employment Tribunal's understanding of harassment, which emphasizes the importance of the victim's experience.

However, the FCA has made it clear that its definition of misconduct is intentionally broader than that outlined in the Equality Act, allowing for disciplinary actions for behaviors that may not fit legal definitions of harassment. This distinction is significant as it allows financial institutions to maintain higher standards of conduct.

**Implications and Future Outlook** The FCA's proposed changes could have far-reaching implications for both regulatory practices and workplace cultures in the financial services industry. The emphasis on integrity and due diligence may lead to stricter oversight and potentially higher compliance costs for firms. According to a report by the Financial Services Authority (FSA), the cost of implementing these guidelines could be substantial, but the long-term benefits in terms of employee well-being and public trust may outweigh these initial expenses.

As the consultation period progresses, industry leaders and regulatory bodies will be watching closely to assess the effectiveness of the proposed changes. The FCA’s proactive stance on non-financial misconduct represents a critical step towards a more ethical and responsible financial services sector, aligning industry practices with broader societal expectations regarding workplace behavior.

In conclusion, the FCA’s initiatives could significantly enhance the regulatory landscape, fostering a culture of respect and integrity within financial institutions. As these measures come into effect, the industry may witness a transformation in how misconduct is addressed, setting a precedent for other sectors to follow.