FCA non-financial misconduct rules: what HR teams need to know

Bullying and harassment have always been issues HR teams need to take seriously. But for thousands of financial services firms, the consequences of getting these cases wrong have just become more significant.

On 1st September 2026, new FCA rules and guidance on non-financial misconduct came into force. The changes make it clearer when serious behaviour such as bullying, harassment or violence can become a regulatory issue, rather than simply an internal HR matter. For HR and Employee Relations teams, the key change is that some issues they already manage may now also need to be considered from a regulatory perspective.

A complaint might still start in the usual way: an employee raises a grievance, speaks to their manager or reports a concern through a whistleblowing channel. But depending on what the investigation finds, the outcome may now have wider consequences.

That means firms need to be confident not only that they’re handling these cases fairly, but that they can clearly show what happened, what process was followed and how the final decision was reached.

So, what has actually changed, and what should HR teams be thinking about now?

What is non-financial misconduct?

Non-financial misconduct, or NFM, is the FCA's term for workplace behaviour like bullying, harassment and violence - as opposed to misconduct that's financial in nature, like fraud or mis-selling.

The FCA cares about this beyond whether it breaches internal HR policy. Serious misconduct that firms fail to address doesn't just harm the people involved; it can be a sign of deeper problems with a firm's culture and how it manages risk.

And this isn't just a hypothetical concern. When the FCA surveyed more than 1,000 wholesale financial services firms, bullying and harassment was the most commonly reported named type of non-financial misconduct, accounting for 26% of incidents across all sectors.

That's the relevant detail for HR teams: even though these rules come from a financial regulator, most of the cases they'll apply to will start life as something HR and ER teams are already handling.

What has changed under the FCA’s new rules?

The changes span several parts of the FCA framework, but for HR teams, three areas matter most:

1. Serious workplace misconduct can now fall under the Conduct Rules in more firms

Until now, banks have faced tougher rules on bullying and harassment than other parts of financial services.

On the 1st September 2026, that changed. The rules have been extended to around 37,000 other regulated firms - asset managers, insurers, brokers and wealth managers - bringing non-banks closer into line with how banks are already expected to handle serious workplace misconduct.

In practice, this means bullying, harassment or violence towards a colleague can now count as a Conduct Rule breach in a non-banking firm, as long as it's sufficiently connected to the person's work - what the FCA calls a "sufficient work-related link."

Importantly, the behaviour doesn’t have to relate to a protected characteristic such as sex, race or disability. So serious bullying could potentially fall within the FCA rules even where it wouldn’t meet the Equality Act definition of harassment.

But that doesn’t automatically mean every difficult conversation, disagreement or complaint suddenly becomes a regulatory matter. Firms still need to look at the circumstances of each case and decide whether the behaviour is serious enough to fall within the rules. Things like how long it went on, whether it was repeated, the impact on the person affected and the relative seniority of those involved may all be relevant.

There are implications for managers too. The FCA expects managers to take reasonable steps to prevent and deal with serious misconduct where it falls within their responsibilities. That could include taking complaints seriously, making sure appropriate processes are in place and acting when concerns are raised.

For HR teams, the key point is that an issue that starts out as an internal misconduct case may now also need to be considered from a regulatory perspective.

2. The FCA has clarified how non-financial misconduct should feed into fit and proper assessments

The Conduct Rules are only one part of the picture. The FCA has also clarified how non-financial misconduct should be considered when deciding whether someone is fit and proper to carry out certain regulated roles.

The FCA’s fit and proper (F&P) test isn’t new. Firms already use it to decide whether certain people remain suitable to carry out regulated roles. What has changed though, is the guidance around non-financial misconduct. From 1st September, the FCA has made it much clearer that serious misconduct can be relevant to that assessment - and what firms should consider when deciding whether it is.

For HR teams, the practical implication is that findings from an HR investigation may now need to feed into a separate regulatory decision. If serious misconduct is substantiated involving someone who is subject to a F&P assessment, those findings may need to be considered when deciding whether they are still suitable for their role.

This is separate from the Conduct Rules, and it can look more widely. While the new Conduct Rule focuses on misconduct that is connected to work, serious behaviour outside the workplace can also be relevant to fitness and propriety.

For example, the FCA says personal conduct may matter where it suggests someone is willing to disregard legal or ethical obligations, abuse a position of trust or exploit the vulnerability of others. That doesn’t mean firms need to start monitoring employees’ private lives or trawling through their social media accounts, though. The FCA has been clear that they’re not expected to investigate allegations that are trivial, implausible or irrelevant.

The practical issue is what happens when credible information does come to light. Firms need a clear process for deciding:

• When an HR finding should be escalated
• Who needs to see it
• What evidence should be shared
• How the final decision is recorded

HR won’t necessarily be the team making the regulatory judgement, but it may hold much of the evidence that judgement depends on. That makes accurate case records particularly important. If serious misconduct is going to affect whether someone is considered fit and proper for their role, the organisation needs to be able to show what happened, how the investigation was carried out and why the conclusion was reached.

3. A substantiated finding can follow someone to their next employer

One of the biggest practical changes is what happens after a case is closed.

Regulatory references already existed. When someone moves into certain roles at another regulated firm, their new employer asks their previous firm for information that could affect whether they’re considered fit and proper. But under the new guidelines, the FCA has made clear that serious, substantiated non-financial misconduct must be reflected in regulatory references where it falls within the reference rules. So, if an investigation establishes serious bullying, harassment or other relevant misconduct, that finding can follow the individual when they move to another regulated firm.

This is part of the FCA’s attempt to stop what’s sometimes called the “rolling bad apples” problem - where someone with a serious conduct history simply moves from one firm to another without the next employer knowing about it.

For HR teams, that makes the way a case is closed particularly important. There needs to be a clear record of what was alleged, what the investigation established, whether the allegation was upheld and why the final decision was reached. If that information is needed for a regulatory reference later, the organisation shouldn’t have to reconstruct the case from old emails, spreadsheets or somebody’s memory.

What do the new FCA rules mean for HR teams in practice?

Taken individually, none of these requirements completely changes the fundamentals of good HR practice. Firms still need to investigate concerns fairly, document what happened and make decisions based on the evidence. But looked at together, the changes raise the stakes.

A case that starts as a grievance or bullying complaint could go on to affect a Conduct Rule assessment, someone’s fitness and propriety, or information provided to a future employer. That means it becomes much more important to be able to follow the case from beginning to end.

For example, if an allegation is upheld, could someone looking at the record six months later clearly see:

• What was reported?
• What evidence was gathered?
• Who was involved in the investigation?
• What conclusions were reached?
• Why was that decision made?
• What action followed?
• Was there a point where Compliance needed to be involved?

For HR teams, that makes now a good time to look at the whole journey of a misconduct case, rather than treating the investigation, regulatory decision and record-keeping as separate pieces of work. Here are a few key areas worth reviewing.

Clarify when HR/ER should involve Compliance

A bullying or harassment complaint will often start with HR or Employee Relations. But if the investigation uncovers serious misconduct, there may come a point where the findings also have regulatory implications.

Make sure it’s clear when Compliance needs to be involved, what information they need and who is responsible for decisions around Conduct Rule breaches or fit and proper assessments. That doesn’t mean giving Compliance unrestricted access to sensitive HR information, but it does mean creating a clear route for relevant findings to move from HR/ER to the right regulatory decision-makers when needed.

Build documentation into the process

Don’t rely on someone filling in the gaps later. Record the allegation, evidence, conversations, decisions, actions and reasons behind the outcome as the case progresses. If someone needs to revisit it months or years later, the record should make sense without relying on the memory of whoever originally managed it.

Make sure cases are handled consistently

Every misconduct case is different, and the FCA rules still leave room for judgement. But there should be a consistent process around that judgement.

HR teams should know which steps need to happen, who owns them and when a case needs to be escalated. This becomes particularly important in larger organisations, where similar issues may be handled by different teams or managers. The goal isn’t to remove human judgement from the process, it’s to make sure it’s applied within a clear and consistent framework across every single case.

Make sure managers know what to do

The new guidance also puts a spotlight on managers. The FCA says managers should take reasonable steps to prevent and respond to serious misconduct, depending on what they know and what sits within their responsibilities.

For HR, that means giving managers practical support on the new rules - for example, updated training, clear guidance on when a concern could have regulatory implications, and drop-in sessions where they can ask questions about real scenarios.

How Workpro supports HR teams with non-financial misconduct casework

The FCA’s new rules don’t suddenly make fair investigations, good records or consistent processes important. They already were. What’s changed is the potential weight they carry.

A case that starts as an internal HR issue may now go on to inform a regulatory decision. That makes it even more important to have a clear record of what happened, how the case was handled and why a particular decision was reached.

Workpro’s HR case management software brings that information together in one secure place. HR and ER teams can manage cases through configurable workflows, keep documents and correspondence attached to the case, assign clear ownership and maintain a full audit trail from the initial concern through to the final outcome.

And the value doesn’t stop when a case closes. Reporting and dashboards give HR teams a wider view of case activity, helping them spot patterns such as repeated issues, increasing case volumes or areas where cases are taking longer to resolve. That insight can then inform changes to policies, training or processes.

In other words, teams can track what’s happening, learn from the cases they’re seeing and adapt where needed.

Because when a decision comes under scrutiny, saying you followed the right process is one thing. Being able to show it is another.

To see how Workpro can help your HR and ER teams manage complex casework with confidence, book a demo.