Non-Financial Misconduct (NFM) continues to be one of the most actively debated regulatory topics across the insurance market. It has featured prominently in our recent programme of seminars, webinars and speaking engagements, consistently generating debate and discussion among delegates, particularly around the boundaries between work and private life, cultural expectations and regulatory accountability. Against that backdrop, the FCA’s publication of its final guidance brings much-needed clarity, while also raising important practical considerations for UK insurance intermediaries.
The final guidance on NFM in Policy Statement PS25/23 represents a significant regulatory development. It provides welcome clarification of the FCA’s expectations in relation to the expanded scope of the Conduct Rules (COCON) (announced in July 2025 in a Policy Statement which was included in Chapter 2 of Consultation Paper CP25/18), and places increased emphasis on workplace culture, accountability, and good governance.
From 1 September 2026, serious “work-related” non-financial misconduct (including bullying, harassment and violence) will be explicitly capable of amounting to a breach of the Conduct Rules for employees and senior managers.
Background and regulatory context
The FCA has been clear that serious misconduct which undermines dignity or creates intimidating, hostile or offensive working environments is a matter of regulatory concern. The extension of NFM in COCON across all firms (not just banks) reflects the FCA’s broader strategy to promote healthy workplace cultures and strengthen trust in financial services.
Following CP25/18 published in July 2025, where the overwhelming majority of respondents supported the additional guidance and proposals, the FCA has introduced substantial new Handbook material across COCON and the FIT sourcebook. This guidance is intended to help firms make fair, proportionate and consistent decisions, while aligning regulatory expectations more closely with employment law principles.
Scope of Non-Financial Misconduct
NFM does not create a new standalone conduct rule. Instead, it expands the types of behaviour that may breach existing Conduct Rules, particularly Individual Conduct Rule 1 (integrity), Individual Conduct Rule 2 (due skill, care and diligence), and the Senior Manager Conduct Rules.
For insurance intermediaries, it is important to note that:
- NFM is within scope of COCON where it is “work related”.
- The definition of “employee” is broad and includes contractors, consultants and certain group staff, though it excludes ancillary roles such as cleaners or receptionists.
- Where firms carry on both regulated and non-regulated activities, COCON only applies to misconduct connected to their regulated insurance distribution activities.
The guidance sets out a non-exhaustive range of factors indicating when conduct is likely to be work related. This includes behaviour occurring on firm premises, during working hours, at work-related social events, training courses or industry events, or where an individual’s role or seniority enabled the misconduct to take place.
Social media activity can also fall within scope where there is a sufficient connection to work, for example where posts target colleagues, relate to work, or form part of a wider pattern of misconduct.
Investigation, reporting and senior accountability
Firms are expected to assess allegations of NFM on a case-by-case basis, considering seriousness, impact, intent, repetition, seniority and any mitigating or aggravating factors. Importantly, misconduct can still amount to a breach even where no formal complaint is made, or where the intended effect did not ultimately occur.
Where NFM results in disciplinary action for a Conduct Rules breach (including formal warnings, suspension, dismissal or remuneration adjustments) firms must notify the FCA via the annual REP008 return, FCA Connect for Senior Manager breaches. In more serious, systemic, cases immediate notification obligations under SUP 15 may arise.
Senior managers, and mangers of people, have particular responsibilities; failing to take reasonable steps to protect staff and to prevent, address or escalate serious misconduct, or to operate effective policies and controls, may itself constitute a breach of Senior Manager Conduct Rule SC2. Accountability will be assessed considering the manager’s knowledge, authority and the reasonableness of their actions in the circumstances.
Interaction with fitness and propriety
COCON is about how staff behave at work, which limits its remit to work-related conduct, assessments under the FIT sourcebook however are broader as this is all about individuals as persons of integrity, and whether they are suitable to hold a regulated role. So, for senior managers and certified staff, serious misconduct in private or personal life circumstances may well be relevant where it indicates a material risk of future regulatory breaches. Firms are not expected to monitor private lives continuously, but Fitness and Propriety must be assessed on an ongoing basis, and firms must act with appropriate steps where credible, material information, comes to light.
Recommended actions for firms
With implementation approaching, insurance intermediaries should now:
- Review and update conduct rules training to explicitly cover NFM.
- Assess HR, disciplinary and whistleblowing frameworks for alignment with the new guidance.
- Ensure HR and Compliance operate “shoulder to shoulder” on matters of conduct of any kind.
- Embed a speak up culture at all levels.
- Clarify investigation and escalation processes, including FCA notification triggers.
- Ensure senior managers understand their personal accountability for workplace culture and controls.
- Document decision-making clearly, particularly where allegations are deemed outside scope.
Taken as a whole, a lot of this makes sense. Establishing a culture with no tolerance for serious misconduct helps deter wrongdoing and supports healthy, inclusive workplaces, which in turn improves employee engagement, retention and productivity. It reduces the risk of toxic cultures developing that can lead to further misconduct, consumer harm and wider market damage, while also addressing the long-standing regulatory concern around “rolling bad apples” through clearer expectations on regulatory references.
More broadly, the focus on NFM supports diversity and talent retention, encourages environments where constructive challenge and innovation can flourish, and strengthens governance and decision-making. Ultimately, reinforcing standards of behaviour and accountability will help maintain public trust in the financial sector and enhance the long-term competitiveness and reputation of UK insurance markets.
The FCA’s focus is now firmly on how firms embed these expectations in practice. Early preparation will be critical to managing regulatory risk and demonstrating a robust approach to culture and governance ahead of September 2026.
Please get in touch if you have any queries on this topic. As always, UKGI is available to provide guidance and support on this or any other compliance or training matters.