A significant expansion of conduct risk expectations

The Financial Conduct Authority (FCA) will implement new rules on Non-Financial Misconduct (NFM) for non-bank SMCR firms from 1 September 2026, representing one of the most significant conduct and culture developments for UK regulated firms operating under the Senior Managers & Certification Regime (SMCR), including asset managers, investment firms, fund managers, brokers, wealth managers and other FCA-authorised businesses.

Historically, FCA Conduct Rules primarily focused on conduct connected to regulated financial activities. The new framework extends regulatory scrutiny to serious workplace misconduct where there is sufficient connection to an individual’s role within the firm.

For FCA-authorised firms operating under SMCR, the changes reinforce a growing regulatory expectation that healthy culture, effective governance and individual accountability are fundamental components of a robust control environment.

What’s changing?

The FCA has introduced a new rule, COCON 1.1.7FR, extending the application of Conduct Rules to certain forms of work-related non-financial misconduct.

The rule captures unwanted conduct that:

• Violates an individual’s dignity
• Creates an intimidating, hostile, degrading, humiliating or offensive environment
• Involves violence

Examples may include bullying, harassment, sexual harassment, intimidation and workplace violence.

The FCA has confirmed the rules are not retrospective and firms are not expected to revisit previous Conduct Rule determinations or historical Fitness & Propriety assessments.

Private conduct still matters

Although purely private conduct generally remains outside the scope of the Conduct Rules, firms cannot ignore serious misconduct occurring outside the workplace.

The FCA’s revised Fitness & Propriety guidance makes clear that behaviour in an individual’s private life may still be relevant where it raises concerns regarding honesty, integrity, reputation or the risk of future regulatory breaches.

Consequently, firms must assess not only whether conduct falls within COCON, but also whether it affects an individual’s continuing suitability to perform a Senior Manager Function or Certified Function.

Increased expectations for managers

Senior Managers and line managers should pay particular attention to the FCA’s expectations regarding “reasonable steps”. The regulator has clearly stated that managers who fail to act when they know, or reasonably should know, about misconduct could themselves face scrutiny under Conduct Rule 2.

This includes failures to:

• Escalate concerns
• Follow internal procedures
• Maintain effective controls
• Provide safe channels for staff to raise concerns

The FCA's message is clear: culture forms part of a firm's control environment. Regulators increasingly view healthy workplace culture as a contributing factor to sound decision-making, investor confidence and effective risk management.

What should firms do now?

Ahead of 1 September 2026, firms should focus on five key areas:

1. ‍Policy Review: Update Conduct Rules, disciplinary, whistleblowing, grievance and anti-harassment policies to reflect the new FCA requirements.‍
2. Training: Provide targeted training to Conduct Rules staff, Certified Persons, Senior Managers and Boards on the regulatory consequences of NFM.‍
3. Fitness & Propriety: Review annual FIT assessment processes to ensure NFM considerations are appropriately incorporated.‍
4. Investigations: Ensure investigation and disciplinary frameworks distinguish between employment law considerations and regulatory obligations.‍
5. Regulatory References and Notifications: Review procedures for FCA notifications and regulatory references to ensure NFM findings are captured appropriately.

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Beyond HR: The Regulatory Impact of Non-Financial Misconduct

For some time now the FCA has regarded serious private life mis-conduct as relevant to the integrity and reputation of an individual’s fitness and propriety. Searches of the regulatory archives will reveal a range of cases where non-financial misconduct has led to action being taken to prohibit individuals from working in the industry. The FCA’s extension of Non-Financial Misconduct requirements marks an important evolution in regulatory expectations around culture, governance and individual accountability. From September 2026, serious workplace misconduct is no longer solely an HR matter. It becomes a regulatory issue that firms must consider through the lens of Conduct Rules, Fitness & Propriety assessments and governance oversight.

For UK SMCR firms, including investment firms, brokers, fund managers, wealth managers and other regulated businesses, compliance should extend beyond updating policies and procedures. Firms should take this opportunity to assess whether their governance frameworks, escalation channels and management oversight arrangements are capable of identifying, investigating and addressing misconduct effectively

The FCA's message is clear: culture forms part of a firm's control environment. Regulators increasingly view healthy workplace culture as a contributing factor to sound decision-making, investor confidence and effective risk management.

ONE perspective

The FCA’s Non-Financial Misconduct requirements are about more than regulatory compliance. They challenge firms to consider whether their governance arrangements, management oversight and employee awareness programmes are capable of identifying and addressing misconduct before it becomes a regulatory issue. For many firms, the gap is not in the policy itself, but in ensuring that staff and manager understand how the rules apply in practice.

At ONE group solutions, we help firms translate regulatory expectations into practical governance solutions. Our proprietary technology, R-ONE, enables robust day to day oversight of the SM&CR framework through features including a dedicated FCA Non-Financial Misconduct training programme, updated fit and proper affirmations and assessments, compliance monitoring augmented by our experience consultants who can provide governance reviews and implementation support. We help firms strengthen conduct culture, enhance accountability and to prepare confidently for the 1 September 2026 requirements.

Ready for September 2026? Contact ONE group solutions to discuss how we can support your firm’s NFM readiness through tailored governance advisory services and targeted Conduct Rules training.

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