Managing Non-financial Misconduct

A lack of public confidence and some damaging press stories have renewed the FCA's focus on conduct, including non-financial misconduct.

Key takeaways

• Non-financial misconduct is now central to FCA expectations. The FCA sees behaviours like bullying, harassment, and discrimination as core indicators of a firm's culture and requires firms to address these issues as part of their SMCR compliance.
• Senior accountability and cultural leadership are critical: Senior Managers are personally responsible for ensuring a healthy workplace culture. Firms must have clear processes for identifying, escalating, and addressing non-financial misconduct, with such behaviours factored into fitness and propriety assessments.
• Training and qualitative insights support a resilient culture: Scenario-based training on non-financial misconduct helps staff recognise and report inappropriate behaviour. Regular cultural assessments and feedback mechanisms are key to detecting issues and driving positive change.

How to manage non-financial misconduct

The FCA's Financial Lives Survey in 2024 found that only 39% of respondents have confidence in the financial services industry, with 28% disagreeing. These results illustrate why the regulator is strengthening rules and guidance around culture and conduct.

The FCA expects all firms to comply with the SMCR, Conduct Rules as well as the Consumer Duty and the fair treatment of vulnerable consumers. From September 2026, the FCA will classify serious bullying and harassment as misconduct across all regulated businesses.

• How does non-financial misconduct reflect on culture?
• What are the consequences of non-financial misconduct?
• How can you promote a healthy company culture?
• What is the impact of training on non-financial misconduct?

How does non-financial misconduct reflect on culture?

The FCA believes that how a firm handles non-financial misconduct is indicative of a firm’s culture. Non-financial misconduct, such as bullying, harassment, and discrimination, can seriously erode a company’s workplace culture by creating a toxic environment that undermines trust and collaboration.

It also damages psychological safety, making employees less likely to speak up or challenge inappropriate behaviour, which can allow deeper issues to go unaddressed. The FCA now treats these behaviours as indicative of broader conduct concerns, recognising that poor treatment of colleagues often reflects deeper failures in governance, leadership, and organisational culture. As such, non-financial misconduct is considered directly relevant to a person's fitness and propriety under the SMCR.

The FCA has repeatedly made it clear that it expects firms to be proactive in tackling misconduct of all types, including identifying what drives this behaviour and, where appropriate, modifying those drivers to shape proper conduct.

What are the consequences of non-financial misconduct?

We have seen the FCA and PRA take action when they find individuals in breach of the standards expected, fining and, in some cases, banning individuals from operating within approved roles in financial services.

In line with this focus on culture and individual responsibility and accountability at all levels of the financial services industry, the FCA has indicated its view on non-financial misconduct is evolving (i.e. serious personal misbehaviour, harassment, bullying, sexual discrimination or sexual misconduct in the workplace).

All this activity and focus is centred around encouraging and expecting firms to really focus on building and maintaining a healthy culture "…where people do the right thing and take responsibility for outcomes".

How can you promote a healthy company culture?

So, what we need to do is ensure that our people (at all levels of seniority) are behaving in a way that:

• Promotes a healthy conduct culture
• Meets business objectives
• Ensures great outcomes for customers

By doing this, we can be confident in satisfying the regulators.

This means not just capturing and reporting quantitative culture data but also considering supporting qualitative data. In other words, ensuring that we properly look at what’s going on under the bonnet!

Key questions to ask

• Why are misconduct incidents occurring?
• Are they systemic?
• What can be done to prevent them?
• What can be done to encourage positive change in employee's behaviour?
• Are temperature checks being taken, and is employee culture being measured regularly?
• Is it clear what good behaviour looks like?
• Do staff understand what is expected of them?

Read our SMCR Roadmap

Mechanisms to answer these questions

You should ensure that you have the appropriate mechanisms to help answer the key questions above. These include, at a minimum:

• Processes to identify, handle and escalate potential non-financial misconduct involving their employees
• Clear purposes and values that drive good conduct, and check whether in practice the business is consistent with these
• Considering non-financial misconduct when carrying out fitness and propriety assessments on Certified employees and Senior Managers
• Ensuring that Senior Managers take responsibility for tackling non-financial misconduct within their area

Non-financial misconduct and SMCR

The FCA considers the SMCR an additional tool to encourage cultural change in firms. The way Senior Managers tackle cases of non-financial misconduct may be relevant to the FCA's assessment of an individual’s fitness and propriety.

The FCA expectation is that Senior Managers should play a key part in encouraging healthy cultures and that there needs to be appropriate leadership to address non-financial misconduct.

A Senior Manager’s failure to take reasonable steps to address non-financial misconduct could lead the FCA to determine that a Senior Manager is not fit and proper.

If they are a Senior Manager, they need to understand not just what is expected of their own conduct but also what is expected in leading and taking responsibility for the conduct of their people.

All employees need to understand what is expected of them personally, what the Conduct Rules really mean for them and what is considered misconduct.

What is the impact of training on non-financial misconduct?

The SMCR and Conduct Rules training you provide is a key tool in helping you achieve this.

Providing appropriate training and clearly documented guidance for all employees is vital to help ensure that everyone has a clear understanding of their responsibilities and their obligation to inform their managers of relevant matters, including those that happen in their personal lives.

This training needs to include examples of non-financial misconduct to allow employees to learn using relevant and practical scenarios – considering both conducts within and outside the workplace.

For example, some might argue that everyone should know what it means to have integrity or act with due care, skill and diligence. However, as we said at the start, knowing something doesn't mean it's transferred into our behaviour and day to day practices and decisions.

So, it's important to be explicit and that this is translated into how an individual behaves within the workplace, their role and personal lives and how each may impact their work life.

We know that our regulators will continue to focus on good conduct and healthy cultures. We also know that this is good not just for customers but also for our people and business - a win-win.

Want to learn more about non-financial misconduct?

We have created an SMCR roadmap to help you navigate the compliance landscape, supported by comprehensive e-learning libraries of SMCR courses, FCA courses and a fully integrated SMCR 360 Compliance Toolkit. These courses are designed to help staff in the financial services industry understand compliance requirements. These courses include:

• SMCR & Non-financial Misconduct Training Course
• Conduct Risk Training Course
• Code of Conduct Training Course
• Conduct Rules for Senior Managers at Insurance Firms
• Conduct Rules for Senior Managers at FCA Solo Firms
• Introduction to the SMCR

Additionally, our Essentials Library contains e-learning content designed to help organisations meet fundamental compliance requirements. If you are looking for focused training, our FCA Handbook Training Package offers a complete solution for your compliance programme. 

If you would like to access leading insights and compliance tips, you can browse our free resources by topic to find guides, modules, compliance bites and more.