The Financial Conduct Authority (FCA) said it has given financial services firms the final guidance on how to apply new rules governing non-financial misconduct, following changes introduced in July to set clearer and more consistent standards across the sector.
The updated rules were designed to more closely align expectations for banks and non-bank firms, removing uncertainty over when non-financial misconduct amounts to a regulatory breach.
The changes aim to give firms greater confidence to act on serious misconduct, promote consistency across the industry and clarify supervisory expectations.
When the rules were introduced, firms were asked whether additional guidance would be helpful. Of those that responded to the consultation, 95% supported the publication of further guidance, prompting the regulator to issue its final framework.
The guidance sets out how firms should apply minimum standards of behaviour for financial services employees, as well as the factors to consider when assessing whether an individual remains fit and proper for their role.
Several targeted changes have been made in response to industry feedback, including new examples and flow charts to support the application of the rules, clearer alignment with employment law, and confirmation that managers’ accountability should be assessed in light of their knowledge and authority.
The guidance also clarifies that firms are not expected to investigate trivial or implausible allegations, nor to act in ways that would breach privacy or other legal obligations.
Arabella Ramage (pictured above), legal and regulatory director at the Lloyd's Market Association, said the association supports the FCA's approach to tackling non-financial misconduct and its aim of fostering a safe and inclusive financial services sector.
Ramage said clear and consistent standards and guidance are important to protect employees, uphold market integrity and ensure the industry remains attractive to skilled professionals. She added that the LMA has encouraged the FCA to keep the guidance under regular review to ensure it delivers the intended outcomes.
While some firms asked for more detailed examples, the regulator said it is not possible to provide guidance for every scenario and reiterated that firms must continue to exercise judgement. Responsibility for preventing and addressing non-financial misconduct ultimately rests with firms themselves.
The regulator said the revised rules, supported by the final guidance, are intended to drive higher and clearer standards of behaviour across the financial services industry and will take effect from Sept. 1, 2026.
