The FCA has published its final guidance for firms when considering non-financial misconduct as an FCA conduct rule breach and as part of fit and proper assessments: PS25/23: Tackling non‑financial misconduct in financial services. This will apply as from 1 September 2026.
FCA conduct rule breaches
Earlier this year, the FCA adopted a new rule, which will take effect on 1 September 2026, with the effect that misconduct will be an FCA conduct issue for SMCR firms (including asset managers and insurers) in a broader range of circumstances. This includes where a member of a firm's conduct rules staff bullies, harasses or is violent to another person in a work context. As this is drafted in broad terms, there was significant support for further guidance on the circumstances in which this should apply.
This guidance therefore provides more detail (including new flow charts) on when that misconduct becomes an FCA conduct issue and the rules that it could potentially breach. For example, the misconduct will need to be serious and not relate solely to the staff member's private or personal life. In particular, the guidance includes the (non-exhaustive) factors to consider when assessing whether there is a breach.
Although the guidance has been reworked and clarified in a number of places (including some revisions to align it more closely with employment and equality law), in substance it is largely the same as the draft version in the consultation which we discussed in our briefing: Behaviour under scrutiny: FCA's new rules on non-financial misconduct | Travers Smith
Fit and proper assessments
The guidance also provides that non-financial misconduct will need to be considered as part of the fit and proper assessment which firms are required to carry out in respect of senior managers and certified staff such as material risk takers and heads of significant business units. This applies more broadly than for breaches of the FCA conduct rules and would potentially include behaviour in the individual's private life wherever in the world it occurs.
Under the guidance relevant to the fit and proper assessment (which largely reflects the version consulted on), the key test will be whether the individual's previous misconduct would suggest that they are likely to breach regulatory requirements or standards in the workplace. This could be the case if, for example, they have a history of breaching other regulatory obligations or have engaged in serious misconduct in their private life.
Not all misconduct would result in the relevant individual being considered not to be fit and proper. Firms would need to assess this on a case-by-case basis and the guidance sets out factors to consider such as the seriousness of the breach; whether the breach involved dishonesty, breach of trust or violence; and whether the breach was repeated or part of a pattern.
Firms will need to consider their policies and processes for assessing conduct rule breaches and fitness and propriety, as well their training for staff, ahead of the new rules and guidance coming into force.
If you would like further information or assistance in understanding the new guidance, please speak to your usual Travers Smith contact or any of the individuals below.
