The FCA’s consultation paper CP25/18 marks a significant shift in regulatory expectations around non-financial misconduct (NFM).
From 1 September 2026, firms across the financial services sector, including solo-regulated entities, will need to embed stronger processes and cultural frameworks to address behaviour such as bullying, harassment, and discrimination, aligning with the FCA’s broader push to foster healthier, more inclusive working environments.
So,, what does this mean in practice? And how should compliance teams start preparing?
What does it mean in practice?
Until now, explicit regulatory action on non-financial misconduct has largely focused on the banking sector. But CP25/18 extends Conduct Rules obligations (COCON) and clarifies that certain forms of serious personal misconduct, even outside the office, can trigger regulatory consequences.
The FCA has made it clear: a firm’s culture is not just a matter for Human Resources; it’s a regulatory priority.
What Firms Must Have in Place
Ahead of the September 2026 implementation date, firms should focus on the following practical steps:
1. Policy Enhancements
· Update codes of conduct, disciplinary policies, and grievance procedures to explicitly reference non-financial misconduct and its regulatory implications.
· Ensure policies reflect the FCA’s new Handbook guidance, particularly regarding how misconduct is assessed (e.g. seriousness, impact on trust).
2. Culture Assessment
· Conduct culture diagnostics to assess tone from the top, reporting channels, and staff perceptions of psychological safety.
· Identify pressure points where misconduct could be underreported or minimised.
3. SMF Oversight & Reasonable Steps
· Ensure Senior Managers have clear responsibilities for culture and conduct, and document reasonable steps they take to prevent and respond to misconduct.
· Record oversight activities, training attended, reporting mechanisms strengthened, issues escalated, in Steps Logs.
4. Training & Awareness
· Run mandatory training on expected behaviours, how to report concerns, and what counts as serious misconduct.
· Incorporate case studies that reinforce the link between poor culture and regulatory risk.
5. Incident Monitoring & Reporting
· Expand existing incident logs to capture NFM-related complaints or concerns.
· Establish escalation thresholds and decision-making documentation processes for internal responses.
Judgement (not just checklists)
Importantly, CP25/18 does not attempt to define every scenario that qualifies as misconduct. The FCA encourages firms to use professional judgement to assess whether conduct is serious enough to breach Conduct Rules , even if the behaviour takes place outside of work.
This grey area highlights the need for:
· Clear guidance for managers on how to escalate concerns
· A strong internal reporting culture
· Consistent and fair handling of complaints
Timeline and Next Steps
· Feedback deadline: 10 September 2025
· New rules come into effect: 1 September 2026
Firms should use this time to review their frameworks, identify cultural weaknesses, and prepare for a world in which poor behaviour is no longer “just” an HR issue, it’s a compliance issue too.
Final Thought
The extension of conduct expectations into the realm of non-financial misconduct signals a major evolution in how the FCA views culture, risk, and responsibility. For firms, this is an opportunity to get ahead, not only to remain compliant but to genuinely build healthier, more inclusive workplaces.
Get in touch with the team at Leaman Crellin to discuss how this affects you and your business.
