Context
In stating that bullying and harassment in financial firms qualify as misconduct, the FCA has clarified its expectations in relation to bullying, harassment and violence in financial services firms by publishing a Consultation Paper on tackling non-financial misconduct in financial services. There is significant new guidance proposed for inclusion in the COCON Sourcebook (in a new COCON 1.3 and in COCON 4.1), and in the FIT Sourcebook in FIT 1.3.
The Paper includes:
- consultation on significant additional guidance in the Code of Conduct (COCON) and the Fit and Proper Test for Employees and Senior Personnel (FIT) sourcebooks; and
- a Policy Statement, in Chapter 2, on amendments to the Code of Conduct rules (COCON), which were consulted on in Consultation Paper CP23/20 (“Diversity and inclusion in the financial sector – working together to drive change”). A new rule amending the scope of COCON in non-banks and applies from 1st September 2026 (and not retrospectively), to line up with the conduct rule breach reporting period for most firms. By aligning the conduct rules in banks and non-banks for cases of serious non-financial misconduct, the FCA wants to give firms the ability and a structure within which to take robust action against serious misconduct, drive consistency across the financial sector, and make it clearer when non-financial misconduct can be a breach of the FCA’s rules.
This Consultation applies to all authorised firms with a Part 4A Permissions and to staff in those firms who are subject to the FCA’s Codes of Conduct (COCON).
Key points to note and next actions
- Previously, it was often unclear when these types of behaviours would amount to a conduct rules breach in a firm other than a bank. On 1st September 2026, the same rules will be extended to around 37,000 other regulated firms, increasing consistency across financial services.
- There is a useful diagram in paragraph 2.18 of the Paper outlining general considerations for identifying and reporting a conduct rule breach, and another diagram at paragraph 2.19 outlining additional factors for identifying whether non-financial misconduct falls within the new rule at COCON 1.1.7FR.
- Serious, substantiated cases of poor personal behaviour will 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- The draft guidance covers how firms should consider non-financial misconduct when assessing whether an individual is fit and proper to work in financial services. This includes how firms should consider use of social media and the relevance of behaviour in private and personal life.
- dWhile there is overlap, the proposed regime addresses wider forms of misconduct and is not limited to protected characteristics. It aims to make sure that firms address serious misconduct robustly and consistently and prevent perpetrators from causing further harm.
- The FCA is also asking whether further guidance would be helpful and proportionate for firms as they implement the rule change. It has taken on board feedback on its previous draft guidance. It is impossible to give an exhaustive list of the circumstances in which misconduct will breach the FCA’s rules, so firms will still need to exercise judgement.
- The FCA is making a clear distinction between COCON breaches and appropriate considerations in relation to fitness and propriety. Just because something might not fall within the reach of COCON does not mean that it should not be considered from a ‘fit and proper’ perspective.
- The guidance is open for consultation until 10th September 2025. The FCA will only proceed with the guidance if there is clear support for it.