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FCA raises the stakes for UK managers on non-financial misconduct


Anne Sammon tells HRNews about the increased level of scrutiny of managers under the FCA’s new conduct rules from 1 September 2026

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  • Transcript

    From 1 September 2026, serious behavioural misconduct, such as bullying and harassment, will fall within the FCA’s Conduct Rules. The scope of those rules is also widening significantly, extending to an additional 37,000 solo-regulated firms. That marks a major shift, not just in regulation, but in accountability. While the rules themselves aren’t retrospective, the FCA’s guidance around manager responsibilities under Rule 2 is already raising questions for firms. What’s becoming clear is that line managers and senior staff may now face regulatory consequences, not only for their own conduct, but for failing to act when misconduct takes place on their watch. We’ll consider that.

    For HR, this means rethinking how managerial performance is assessed when it comes to culture, behaviour, and team oversight. The FCA expects managers to spot misconduct and act early, not simply respond once a formal complaint lands. Failures here could lead to disciplinary action or breaches of the Conduct Rules, with all the regulatory reference implications that brings.

    As set out in the consultation - COCON 4.1.8 - “A manager will not be in breach of Individual Conduct Rule 2 if they have acted reasonably.” Conversely, if a manager “knows or should know” about misconduct and does nothing, that could itself be a breach of Rule 2. That puts new personal accountability squarely on anyone managing people.

    So let’s about that. Anne Sammon works closely with clients in the FS sector and earlier she joined me by video link to discuss it. So how should firms interpret this heightened expectation around managerial oversight?

    Anne Sammon: “It’s really interesting, because the new rules come into force on 1 September 2026 and the FCA is saying that they won't take retrospective effect, so therefore they only apply from 1 September 2026 but in relation to some of the guidance that's being given around managers and the conduct that might breach Rule 2, there's no change to Rule 2 and, therefore, it is not really clear how that fits with the current regime. The examples that they give are managers who condone, or allow, discriminatory behaviour to happen within their teams as being something that could be a breach of Rule 2 which is the rule that you have to discharge your responsibilities with due skill, care and diligence, but it's not very clear at the moment why that is covered by the new framework and not by the previous framework because, arguably, if a manager is managing a team, and they're managing those in relation to regulated activities, and they're not managing the team appropriately and are allowing bullying or harassment, that is already a breach of Rule 2. So I suppose the short answer is it doesn't feel like there is a huge change here and therefore the new guidance around what amounts to a breach of Rule 2 for managers probably takes effect now and firms should be looking at those examples and considering them when they are looking at cases of bullying and harassment.”

    Joe Glavina: “As I understand it, it’s not just about the behaviour of individual managers and whether they themselves have been behaving badly, it’s also about whether they report what they see, or learn about. Is that what the FCA expects?”

    Anne Sammon: “Yes, that is definitely what the FCA expects. A lot of these changes that are captured in the non-financial misconduct rules that come into force on 1 September next year are around looking at changing culture and having a safe culture in the workplace so that people can raise concerns, and they're not subject to bullying or harassment. For managers, that means that if they fail to manage their teams appropriately, or they're not observant enough and they don't notice that somebody in their team is being bullied, they can now be subject to both disciplinary sanctions but also, potentially, conduct rule breaches and conduct rule breaches are obviously of concern because of the regulatory reference implications that they have.”

    Joe Glavina: “The FCA is saying that from 1 September next year under this new regime HR should link up with Legal and with Compliance when handling these issues, not working alone in a silo. Can you explain what they mean by that?” 

    Anne Sammon: “So, because this is part of the regulatory regime rather than something that's purely employment law, or HR related, there can be various scenarios that might trigger additional regulatory reporting responsibilities, for example. So these are the kind of scenarios where it's really important that HR and Compliance in particular are in discussion, are talking about what the wider ramifications for the firm are of any kind of misconduct issues. Firms also need to be mindful that where there are more systemic issues of harassment and bullying that can come under the FCA purview of systems and controls. So do you have the systems and controls in place to allow your firm to run effectively? If there was widespread bullying or harassment within a firm, it's likely that the regulator would take the view that your systems and controls to prevent that were inadequate and that has much wider regulatory consequences. Potentially in very severe cases, the regulator could become involved and do its own investigation through what we call a section 166.”

    Joe Glavina: “Is this the first time that HR has been in a position where they could be criticised by the regulator?”

    Anne Sammon: “Arguably, it's not the first time. Arguably, when SMCR was introduced this was all about culture and accountability and, therefore, if HR hadn't set up the right systems to ensure accountability and people were behaving in an appropriate way, they were subject to criticism. There seems to be a greater shift, though, in this guidance around the role of HR. One of the examples that the FCA gives of the kinds of behaviours that might be of concern is an HR team that fails to implement the right policies and procedures and controls around some of these behavioural issues. So HR is definitely coming to the fore from a regulatory perspective.”
    The consultation paper ‘Tackling non-financial misconduct in financial services’ was released by the FCA on 2 July and is available now on their website. It sets out the final rule changes, along with draft guidance, and confirms that from September next year, serious behavioural misconduct will fall within the FCA’s Conduct Rules for all authorised firms.

    The FCA is inviting responses to the consultation by 10 September 2025. That gives HR, Compliance and Legal teams a short window to consider how the proposals may affect their organisation, particularly the practicalities of implementation, and to share any concerns or suggestions. You can respond online through the FCA’s website. We’ve added a link to the consultation paper in the transcript of this programme if you’d like to take a closer look.

    LINKS
    - Link to FCA consultation paper CP25/18: Tackling non-financial misconduct in financial services

     

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