Non-financial misconduct: FCA draws the line – are you ready to lead on tackling misconduct?
The FCA has spoken – and its message is crystal clear: self-policing is here to stay. On 12 December 2025, the regulator published its long-awaited final guidance on tackling non-financial misconduct (NFM) in financial services (PS25/23), following years of industry lobbying and two rounds of consultation.
Firms were hoping for clarity. What they got was flexibility – and a mandate to exercise judgement. The FCA’s stance?
“The primary responsibility for preventing and dealing with non-financial misconduct lies with firms.”
This is not the detailed guidance firms were pleading for. Instead, the FCA has delivered minor tweaks to its July 2025 draft guidance (CP25/18) and doubled down on its expectation that firms take ownership.
So, what does this mean for firms?
What’s changed – and what hasn’t
Still broad. The FCA resisted calls for a definitive list, describing NFM as “any misconduct not of a clearly financial nature”. Examples like bullying, harassment, sexual harassment, and discrimination remain illustrative, not exhaustive.
Firms asked for case studies; the FCA gave high-level flow diagrams. Helpful? Yes. Practical? Not quite – you’ll need to adapt them internally.
Some progress, but divergence remains. The FCA broadened its stance beyond employment law by confirming that intent alone can breach rules – even if the conduct never reaches its target.
Managers won’t be liable for misconduct they couldn’t reasonably know about or act on. But the FCA won’t define ‘manager’ – it’s up to firms to take ownership of that definition.
Still undefined. The FCA insists firms are “best placed” to judge seriousness yet reserves the right to assess reasonableness of decision making and outcomes. Risks inconsistency – document your decisions.
Disclosure obligations narrowed for senior managers. Social media guidance clarified: materiality matters and lawfully expressed views can still raise fitness concerns.
No retrospective effect – a rare win for firms.
The big picture
Years of lobbying haven’t moved the needle to any great extent. The FCA has prioritised flexibility over consistency, leaving firms to navigate ambiguity alone with the spectre of regulatory reasonableness assessments hanging over them. This isn’t just a compliance challenge – it’s a cultural one. How you respond will define trust, reputation, and resilience.
What firms should do now
With the September 2026 deadline looming, here’s your action plan:
• Update and align reward, disciplinary, and conduct policies.
• Run test scenarios to benchmark seriousness thresholds.
• Develop a sliding scale of seriousness and link it to practical flow charts.
• Map managerial roles beyond line managers.
• Train conduct rule staff and managers on new responsibilities.
• Audit your decision-making process and document everything.
Why this matters
The FCA’s approach means firms must be bold in making judgement calls – and ready to defend them. The regulator won’t hold your hand, but it will hold you accountable.
Interested in learning more? Join our Investigations Horizons webinar - Beyond the FCA guidance: Why firms must lead on tackling misconduct
Date: 3 February 2026
Time: 10:00 - 10:45
We’ll unpack the final guidance, explore the nuances that firms will need to navigate, discuss practical case scenarios and answer live questions on implementation.
This is your chance to hear from experts who’ve been at the heart of industry discussions - secure your spot now.
Authors: Chantal Peters, James Chadwick and Sarah Skeen
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2026. Specific advice should be sought for specific cases. For more information see our terms & conditions.
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