Non-Financial Misconduct: Emerging questions from Compliance & HR teams

The 1^st September implementation date for the FCA’s new rules and guidance relating to non-financial misconduct (NFM) is fast-approaching.

By this stage, firms should

• have a clear understanding of the FCA’s expectations and
• be working to implement the necessary changes to their internal policies and processes.

Following our interactions with a wide range of regulated firms, it’s clear that many still have questions regarding the impact of the new rules.

In this article, Nigel Sydenham, Director of Compliance Training, identifies some of the most frequently asked questions relating to NFM.

The short answer to this question is ‘no’. Of course, the new rules on NFM interact with employment law and, indeed, the FCA made some changes to the final version of the rules to align them more closely with the relevant legislation.

However, it’s important to recognise that, for the FCA, NFM is ultimately about a firm’s culture. Indeed, in a speech in 2025, Emily Shepherd, the FCA’s COO, described NFM as “one of the clearest warning signs of a failing culture”.

Hence, it can be helpful to see employment law as a final backstop – setting minimum requirements for all employers and employees.

The FCA’s rules impose additional obligations on those employed within regulated firms, particularly those who are subject to the ‘fit and proper’ test.

However, the ultimate goal is for firms to ensure they have positive working cultures, in which all employees, across all roles and levels of seniority, feel empowered to ‘speak up’ about misconduct.

It is certainly true that while some cases of NFM are clear-cut, many are, by their nature, complex, with factors including the seriousness of the misconduct, the underlying intention, and the impact it had. Hence the question of whether or not there are disciplinary and/or regulatory consequences for the misconduct will ultimately come down to a question of judgement.

Of course, this issue is not specific to the FCA rules – firms have always had to apply judgement when dealing with disciplinary issues. But it highlights the need for firms to apply a robust, consistent and clearly-documented procedure when handling such cases.

In all but the smallest firms, this will also mean collaboration between HR, Compliance and senior management to ensure decisions are taken in a way that minimises the risk of legal challenge.

In its guidance, the FCA has made clear that an individual’s personal or private life (i.e. where there is no connection to their work) is outside the scope of the Conduct Rules.

While an individual’s personal social media use could, theoretically, be relevant to the fit and proper test, the FCA guidance makes clear that, generally speaking, individuals have the right to post content on their personal social media accounts, even if others find it offensive, assuming they do not breach the law in doing so.

Furthermore, the FCA has stated, “we do not expect firms to monitor their employees’ private lives to identify anything that is relevant to fitness.”

While firms will need to have robust procedures in place to investigate complaints of misconduct, there is no expectation that this will involve pro-active monitoring of an individual’s private life.

Whenever this question is asked (or a variation of it, such as ‘What if the culprit is the Head of Compliance?’) I hope that it’s a hypothetical question, rather than a real-life scenario. However, it obviously raises a serious issue.

While most CEOs, and other senior managers, act professionally and ethically in the workplace, there have been too many high-profile cases of misconduct by senior executives to ignore the risk, or simply assume it would never happen. In answering the first question above, we highlighted the FCA’s expectations regarding positive cultures – a key indicator of a positive culture is that employees feel able to speak-up.

Yet the FCA has made clear that a speak-up culture is not sufficient – firms also need to ensure that those in senior positions ‘listen-up’, taking concerns seriously and responding to them appropriately. This is particularly important in the context of allegations against senior executives, since it could be easy for a junior employee to assume that their complaint will be ignored or sidelined. A true listen-up culture gives all employees confidence that issues and concerns will be heard, and dealt with fairly, regardless of the seniority of the (alleged) culprit.

“Where non-financial misconduct is allowed to persist, it can undermine trust and confidence, and create a culture where wrongdoing goes unchallenged.” – FCA

Our range of non-financial misconduct training offerings are designed to help firms embed an understanding of NFM.

Courses are designed to support firm-wide training and include training for front and back office staff, compliance teams, and senior management. Our NFM training can also be delivered via eLearning, live instructor-led training and high level briefings.

To discover how we can support your firm’s non-financial misconduct training, get in touch.

Nigel specialises in training boards, senior executives and other staff on the impact of regulation and regulatory change.

He is a CFA Charterholder and Chartered Fellow of the CISI, with over 20 years' of industry experience.

With a background in compliance in private banking and wealth management, Nigel has a particular interest in effective corporate governance and the management of compliance and regulatory risk. His interests also include issues relating to ESG and climate risk, conduct and culture (including non-financial misconduct), and all aspects of financial crime prevention, as well as the impact of fintech on compliance and regulation.

Recent assignments have included briefing multiple boards and executive teams on the Consumer Duty, delivering compliance and ethics training for senior managers and front-office staff and creating a user-friendly risk and compliance handbook for a major bank.