FCA Publishes Final Guidance on Non-financial Misconduct Rule

In December 2025, the FCA issued policy statement PS25/23 which finalises its Handbook guidance ahead of a new rule on non-financial misconduct (NFM) in the Code of Conduct sourcebook (COCON) coming into force in September of this year.

Background

The FCA originally proposed rule changes in relation to non-financial misconduct as far back as September 2023. It then published a policy statement and further consultation CP25/18, in July 2025, which addressed feedback on the FCA’s prior proposals to amend COCON by introducing a new rule extending COCON to cover serious NFM.

The change aims to create a consistent approach to NFM across banks and non‑bank firms. In short, the new rule in COCON clarifies that serious NFM (e.g. bullying, harassment and violence) amounts to a breach of the conduct rules in COCON.

CP25/18 also opened a consultation on the introduction of new guidance in COCON and in the Fit and Proper test for Employees and Senior Personnel sourcebook (FIT) designed to support firms in applying the new COCON rule. PS25/23 responds to the feedback received on the proposed guidance.

Reception

The FCA reports that there was an overall positive response to CP25/18 and the proposed Handbook guidance.

PS25/23 sets out a revised and final version of the COCON and FIT guidance and addresses feedback received in response to CP25/18.

The final guidance will come into force in September 2026 at the same time as the new rule in COCON.

Changes in response to consultation feedback

Given the positive response to CP25/18, it is unsurprising that PS25/23 does not materially alter the proposed guidance and instead focusses on targeted amendments. This may be good news for firms that have already begun preparing for the changes to the COCON rules.

In response to feedback on proposed guidance for COCON, the FCA has:

1. added new examples, tables and flow diagrams to illustrate the scope of COCON and has withdrawn examples that risked imposing disproportionate burden;
2. aligned the guidance more closely with employment and equality law to avoid divergence, for example by including the factor of whether conduct would ‘justify dismissal’ when assessing seriousness, which points towards the need to consider whether the conduct amounts to serious or gross misconduct from an employment law perspective;
3. clarified that managers are not accountable for failing to prevent NFM, if they could not have reasonably known about it, to address concerns that managers would be exposed to disproportionate personal liability; and
4. confirmed that the changes to the COCON rules will not be applied retrospectively.

In respect of FIT, the FCA has:

1. added guidance regarding the investigation of private-life conduct and clarified that firms are not expected to investigate trivial, implausible or irrelevant allegations about an individual’s private life;
2. clarified that social media activity is only relevant to an individual’s fitness and propriety if it indicates a material risk that they will breach regulatory standards and requirements; and
3. reassured firms that it does not expect them to apply its statutory objectives as a self-standing criterion when assessing fitness and propriety. 

However, the FCA has stopped short of requests to define NFM, stating that NFM includes a wide range of behaviour and it is not possible to list all types of misconduct that might amount to a breach of COCON (or of fitness standards in FIT). The FCA reminds firms that its guidance cannot cover every scenario and that primary responsibility for preventing NFM, and dealing with it when it occurs, rests with firms themselves.

The FCA has acknowledged that some feedback to CP25/18 concerns the Senior Managers and Certification Regime (SM&CR) but has clarified that this is outside the scope of its policy work on NFM – the FCA intends to consider this feedback as part of its work on streamlining the SM&CR.

The FCA has taken steps to further align with employment law given that a key concern of firms is the increased burden of both regulatory and employment law requirements, but it made clear that its scope is different and is focused on identifying whether NFM is in scope of its rules and if it is a breach of one of the individual conduct rules. One key area of divergence which remains is the FCA’s understanding of “harassment”, which it defines as “unwanted conduct that has the purpose or effect of violating an individual’s dignity, or creating an intimidating, hostile, degrading, humiliating or offensive environment for them.” Crucially, the FCA does not require such conduct to be related to a Protected Characteristic under the Equality Act 2010 (such as disability, age, race, gender reassignment, pregnancy and maternity, religion or belief, sex or sexual orientation) to amount to a breach of COCON.

Next steps

PS25/23 signifies the end of the FCA’s current policy work on NFM and marks a transition towards a focus on implementation by firms. The new rule has been a long time coming and has seen different iterations, but firms will be reassured that the FCA’s approach has not materially changed since the consultation in July 2025.

Firms now have until September 2026 to assess the final guidance and ensure they are operationally ready to comply with the new rule in COCON.