FCA advances next steps on non-financial misconduct

Consultation Paper 25/18: Tackling non-financial misconduct in financial services (CP25/18) includes, at Chapter 2, the Policy Statement to proposals consulted on in CP23/20 Diversity and inclusion in the financial sector – working together to drive change and further consultation on possible guidance.

The Policy Statement

With regard to the Policy Statement, this confirms that the FCA has amended the scope of the Code of Conduct (COCON) to ensure that the rule on non-financial misconduct (NFM) in non-banks aligns with the rule in banks. Additionally, the FCA has revised the proposed rule to ensure alignment with employment law and has framed it to cover a wider range of workplace misconduct than 'relevant protected characteristics'.

The new COCON rule comes into effect on 1 September 2026. The FCA notes that the new COCON rule does not apply retrospectively and that it does not expect firms to do retrospective analysis. However, if a firm identified that it has incorrectly determined a conduct rule breach under the rules that applied at the time, then it should rectify its past notification in accordance with the rules in the Supervision Manual (SUP 15).

Further Consultation

With regard to the proposals for consultation, the FCA seeks views on whether any additional Handbook guidance is needed to COCON and the Fit and Proper Test for Employees and Senior Personnel (FIT) sourcebooks to help firms meet their obligations under the FCA's rules.  Draft Handbook text is set out at Appendix 2 to the paper; it covers, among other things, restrictions on the scope of COCON, specific guidance on individual and senior manager conduct rules, and assessing fitness and propriety.

Responses are requested by 10 September 2025.

Observation

It has taken the regulator some time to reach this phase in the development of its NFM policy, and there has been significant change from the proposals in CP23/30 which we covered previously (see 'Diversity and inclusion in the UK financial sector – driving change').

We are considering the new publication and will publish a more detailed briefing shortly. In the interim, please do reach out to your usual Herbert Smith Freehills Kramer contact(s) and our key contacts listed below if you would like to discuss the consultation or new rule.