The Financial Conduct Authority (FCA) has confirmed that serious cases of bullying and harassment will be treated as misconduct under its conduct rules, applying to financial services firms beyond the banking sector.
The regulator said the change addresses previous uncertainty about how non-financial personal conduct breaches applied to firms other than banks. Starting September 1, 2026, these rules will extend to approximately 37,000 additional regulated firms, with the FCA aiming to align standards across the wider financial industry.
Following a prior consultation, the regulator said it received broad support for the rule extension. Once in effect, firms will be required to include substantiated cases of serious personal misconduct in regulatory references – information used when individuals move between firms – similar to current requirements for financial misconduct.
Sarah Pritchard, deputy chief executive of the FCA, said unaddressed behaviour such as bullying and harassment often signals wider cultural issues within firms.
“Our new rules will help drive consistency across industry and support the vast majority of firms that want to do the right thing to deepen trust in financial services,” she said.
The rule change follows a significant increase in non-financial misconduct reports received by the FCA. In 2023, the regulator reported a 72% rise in such allegations, with bullying and harassment comprising approximately 25% of those cases.
The FCA has also published draft guidance outlining how firms should evaluate non-financial misconduct when assessing whether individuals are fit and proper to work in the industry. The guidance covers areas such as the relevance of personal conduct, including social media activity and behaviour in private life.
The regulator noted that it would not duplicate existing legal obligations under the Equality Act or the new legal duty on employers to prevent sexual harassment. It has already removed sections of its original draft guidance that were deemed unnecessary to meet regulatory goals.
Shaun Hurst (pictured above), EMEA principal regulatory advisor at Smarsh, said the FCA's update addresses a long-standing gap in regulation.
“It's not surprising given the scale of the problem, as Smarsh’s research revealed that 59% of financial services employees have witnessed or experienced workplace misconduct,” Hurst said. “However, employees lack confidence that current systems can effectively detect these issues, with 63% expressing concerns about their organization's monitoring capabilities.”
Hurst also referenced FCA data showing that misconduct reports rose by 41% in 2023 and noted that, under the new rules, verified incidents must be disclosed through regulatory references starting September 2026.
“This creates both regulatory and business imperatives. Employees signal that how firms identify and respond to misconduct directly impacts their decision to stay. In a competitive talent market, that's significant. Sarah Pritchard was right to call unchallenged harassment 'one of the reddest flags' that raises questions about decision making and risk management,” he said.
Hurst added that firms can use existing compliance-archived communications data and AI tools to detect misconduct patterns.
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