New FCA Rule and Guidance Now in Force

The UK Financial Conduct Authority’s new rule and guidance on serious work-related misconduct came into force on 1 September 2026, expanding how non-financial misconduct is addressed at non-banking firms. Affected firms should review their policies, reporting, fitness and propriety assessments, and regulatory references in light of the new framework.

The UK Financial Conduct Authority’s (FCA’s) rule was confirmed in July 2025 and brings serious work-related misconduct more clearly within the scope of the Code of Conduct (COCON) for non-banking firms. The final guidance, published in December 2025, explains how non-financial misconduct (NFM) should be assessed under COCON and the Fit and Proper Test for Employees and Senior Personnel (FIT). The FCA has indicated that its policy-development work on NFM is now complete and that its focus will turn to how firms address NFM in practice.

These measures arrive almost three years after the FCA previously consulted on NFM and proposed a new regulatory framework on diversity and inclusion (D&I) in the financial sector. Whilst it was announced in March 2025 that this D&I framework would not be carried forward, the FCA retained many of its NFM proposals, and this remains a topic of significant focus for regulators.

THE NEW RULE & SCOPE

Since 1 September 2026, COCON has been amended to include a new rule expanding its scope for non-banking firms in relation to serious work-related NFM. This new rule, COCON 1.1.7FR, more closely aligns the scope of COCON for non-banks with that previously applicable to banks, promoting consistency across firms subject to the Senior Managers and Certification Regime (SMCR).

The type of conduct to which this new rule applies is “unwanted conduct” towards an individual (B) that

• has the purpose or effect of violating the dignity of B;
• has the purpose or effect of creating an intimidating, hostile, degrading, humiliating or offensive environment for B; or
• is violent towards B.

This description is similar to the definition of harassment under the Equality Act 2010, but it need not relate to a protected characteristic. The rule applies only where the conduct is sufficiently serious, and the guidance sets out factors relevant to seriousness. Misconduct is within scope of this expanded regime if it occurs in the relevant part of the firm’s business and in a wide range of circumstances, including when directed towards a fellow employee of the same firm or member of the same group or an individual who provides services to the firm or a member of its group. Conduct would be out of scope if neither individual worked in the financial services part of the business at all.

The new rule took effect from 1 September 2026 and does not apply retrospectively. COCON does not cover conduct relating to an individual’s private or personal life. However, conduct occurring outside the…