Your Guide to September's Non-Financial Misconduct Rules: Practical FAQs for Small Firms

What small FCA-regulated firms need to know

From September 2026, FCA guidance makes it clear that non-financial misconduct (NFM) is relevant to conduct rule compliance, fitness and propriety assessments, and regulatory references across all FCA-regulated firms, including smaller firms. Serious conduct such as bullying, harassment, discrimination, violence, or dishonesty may have regulatory consequences, even when it occurs outside core financial activities and, in some circumstances, outside the workplace.

To comply with FCA expectations, firms should establish clear behavioural standards, provide training, maintain effective reporting channels, investigate concerns fairly, and ensure relevant findings are reflected in fit-and-proper assessments and regulatory references.

Key Takeaways

• Non-financial misconduct (NFM) includes serious behaviour such as bullying, harassment, discrimination, violence, and dishonesty.
• FCA expectations apply to all FCA-regulated firms, including smaller firms.
• Conduct outside the workplace can be relevant where it raises questions about integrity.
• Managers are expected to take reasonable steps to identify, escalate, and address concerns.
• Firms should maintain evidence of training, investigations, decisions, and outcomes.
• Serious NFM findings may affect fitness and propriety assessments and regulatory references.

FCA Non-Financial Misconduct Requirements at a Glance

Frequently Asked Questions

What is non-financial misconduct (NFM)?

Non-financial misconduct (NFM) refers to serious behaviour that may call into question an individual's integrity, honesty, judgment, or suitability to perform a regulated role. Examples include bullying, harassment, discrimination, violence, fraud, and other serious misconduct.

Under FCA guidance, NFM can affect Conduct Rule compliance, fitness and propriety assessments, and regulatory references.

Why does NFM matter for smaller FCA-regulated firms?

NFM is no longer viewed solely as an HR issue. The FCA considers serious misconduct capable of undermining trust, workplace culture, and confidence in regulated firms.

Smaller firms are expected to identify conduct risks, investigate concerns appropriately, and demonstrate that they have taken reasonable steps to maintain appropriate behavioural standards.

Which employees are in scope?

Any individual within your firm who is subject to the FCA Conduct Rules may be affected, including:

• Senior Managers (SMFs)
• Certified staff
• Other employees covered by the Conduct Rules

Firms should ensure all affected staff understand the standards expected of them and receive appropriate training.

Does conduct outside work count as non-financial misconduct?

Yes. Conduct outside work can be relevant where it raises concerns about integrity, honesty, or fitness to hold a regulated position.

The FCA has cited examples including repeated fare evasion and serious violent behaviour. Private social events involving colleagues may also fall within scope where conduct is sufficiently serious.

Does bullying or harassment qualify as non-financial misconduct?

Yes. Serious or repeated bullying, harassment, discrimination, and similar behaviour may constitute non-financial misconduct.

When assessing concerns, firms should consider the frequency, severity, impact on recipients, and broader effect on workplace culture.

What types of behaviour are most likely to breach Conduct Rules?

Behaviour most likely to trigger regulatory concerns includes:

• Sustained bullying or harassment
• Discrimination
• Physical violence or threats
• Fraud or deliberate dishonesty
• Repeated misconduct demonstrating poor integrity
• Retaliation against whistleblowers

The FCA is generally more concerned with serious, repeated, or intentional misconduct than isolated minor incidents.

How should firms assess whether behaviour crosses the line?

Assessment should consider:

• Seriousness
• Frequency
• Intent
• Impact on individuals
• Wider cultural implications
• Whether the behaviour raises integrity concerns

Many firms benefit from developing scenario-based guidance that illustrates where acceptable behaviour ends and misconduct begins.

Does seniority affect the assessment?

Yes. Senior leaders and managers are typically held to higher standards because they influence culture and set behavioural expectations.

Where senior individuals engage in misconduct, firms may conclude that more serious disciplinary or regulatory consequences are appropriate.

What are managers expected to do when concerns arise?

Managers should:

• Take reports seriously
• Escalate concerns promptly
• Protect confidentiality where appropriate
• Cooperate with investigations
• Take reasonable steps to address misconduct

Managers who fail to act appropriately may themselves create conduct and governance risks.

How do NFM findings affect fit and proper assessments?

Substantiated findings may be relevant when assessing:

• Honesty
• Integrity
• Reputation
• Suitability for regulated functions

Firms should ensure fit-and-proper assessments include consideration of relevant misconduct findings and supporting evidence.

Can NFM findings appear in regulatory references?

Potentially, yes.

Where FCA rules require disclosure, serious or repeated misconduct findings relating to certified staff or Senior Managers may need to be considered when preparing regulatory references.

Firms should apply a clear and documented approach when making these decisions.

Policies, Investigations and Consequence Management

What policies should small firms have in place?

Firms should maintain:

• Conduct Rules policies
• Non-financial misconduct guidance
• Grievance procedures
• Investigation procedures
• Whistleblowing arrangements
• Disciplinary and consequence management frameworks

Documentation should be reviewed regularly and communicated clearly to staff.

How should a small firm investigate NFM without an HR department?

Where internal independence is difficult, firms should consider using an external HR, legal, or compliance specialist.

A fair investigation typically includes:

1. Interviewing the complainant.
2. Interviewing the subject of the allegation.
3. Speaking with relevant witnesses.
4. Reviewing available evidence.
5. Recording findings and rationale.
6. Applying proportionate outcomes.

Maintaining an audit trail is critical.

What does proportionate consequence management look like?

A documented framework should provide a range of responses depending on severity.

Possible outcomes include:

• Coaching
• Formal warnings
• Additional training
• Bonus adjustments
• Temporary restrictions on responsibilities
• De-certification
• Removal from SMF responsibilities
• Dismissal in serious cases

Consistency is essential to maintaining credibility and fairness.

Whistleblowing and Speak-Up Culture

What should a speak-up framework include?

An effective framework should provide:

• Accessible reporting channels
• Confidential handling of concerns
• Protection from retaliation
• Independent escalation options
• Investigation procedures
• Monitoring and record keeping

Firms should periodically test reporting mechanisms to ensure they remain effective.

How do firms balance culture and regulation?

The strongest approach combines fair treatment of individuals with consistent enforcement of standards.

This means gathering evidence carefully, avoiding premature conclusions, supporting those involved, and ensuring outcomes align with both regulatory requirements and employment law obligations.

Training and Compliance

What training should firms provide?

Training should cover:

• FCA Conduct Rules
• Non-financial misconduct expectations
• Bullying and harassment prevention
• Whistleblowing and speak-up processes
• Manager responsibilities
• Investigation and escalation procedures

Training records, completion data, and assessment results should be retained for audit and assurance purposes.

How can compliance technology support NFM implementation?

Compliance platforms can help firms:

• Assign mandatory training
• Automate reminders
• Maintain training records
• Produce audit trails
• Track policy attestations
• Support regulatory reporting and assurance

One example is Skillcast's Core Compliance platform, which provides a compliance training portal, FCA-focused learning content, reporting capabilities, and record-keeping tools designed to support firms meeting regulatory expectations.

Seven-Step NFM Implementation Checklist

Before the new expectations take effect, firms should:

1. Define Behavioural Boundaries

Provide practical examples of acceptable and unacceptable conduct.

2. Update Policies

Review Conduct Rules, grievance, disciplinary, and investigation procedures.

3. Review Speak-Up Arrangements

Ensure employees have safe and effective reporting channels.

4. Train Staff and Managers

Deliver role-specific training and maintain records.

5. Establish Consequence Frameworks

Create documented and proportionate disciplinary responses.

6. Prepare Investigation Processes

Identify internal or external investigators and establish protocols.

7. Align Governance Processes

Ensure NFM findings feed into fit-and-proper assessments and regulatory reference decisions.

Sources and Further Reading

• FCA Conduct Rules guidance
• FCA Fit and Proper (FIT) requirements
• Senior Managers & Certification Regime (SMCR)
• Equality Act 2010
• Employment Rights legislation
• FCA guidance on non-financial misconduct and workplace culture