UK finance firms strengthen manager accountability ahead of FCA’s misconduct reforms

From 1 September 2026, serious behavioural misconduct such as bullying and harassment will fall within the FCA’s Conduct Rules, and the scope of those rules is expanding to around 37,000 additional solo-regulated firms across the financial services sector. That has direct implications for managers and HR teams, particularly in how they spot and act on misconduct in practice. We’ll hear more on that from our Head of Client Training.

With implementation now approaching, firms are focusing on what this means in practice. This isn’t just a technical change. It represents a shift in how misconduct is expected to be handled. What might once have been treated as an internal HR issue and, in some cases, managed quietly will now carry clear regulatory consequences.

Under the new regime, serious non-financial misconduct may need to be formally recorded and, in some cases, reported to the regulator or reflected in regulatory references. In some situations, behaviour outside the workplace may also be relevant where there is a clear link to an individual’s role. That raises the stakes significantly, not just for individuals, but for firms and their management teams.

Historically, some firms have managed these situations through settlement agreements, sometimes using non-disclosure clauses to draw a line under the issue. But that approach is now under increasing scrutiny. Regulatory expectations have shifted, and the idea that serious misconduct can move quietly through the sector is no longer viable.

For HR, that changes the dynamic. Managers are now expected to treat serious misconduct as a regulatory risk in much the same way as they would poor financial controls or a breakdown in due diligence. That means identifying issues early, not waiting for complaints, and taking action before risks escalate. 

So what does that shift mean in practice, particularly where managers are expected to act earlier and treat misconduct as a regulatory risk, and where there may be resistance from staff? It’s a question I put to our Head of Client Training, Trish Embley: 

Trish Embley: “Well, I mean, obviously the key thing is for all of those covered by the conduct rules, what are the expectations of the organisation? Now, this is always a bit of a battle for hearts and minds. Some people really engage naturally, others are a little ‘oh, this all a bit of political correctness.’ I think historically with these sorts of topics, bullying and harassment, the main risk is that the individual brings a claim and there's a tribunal but I think, unfortunately, there can sometimes be a culture of well we'll ‘settlement agreement out’ the victim and maybe the perpetrator will move on. Now for a number of reasons that's not going to carry on any longer. For one thing, we've got new rules about non-disclosure agreements in settlement agreements being prohibited but also this requirement that that would go in the regulatory reference. So this idea that these incidents of bullying and harassment can just move around the sector, going from job to job, or it never really comes out, that's going to completely go. So I think that's the point. Why should the audience be listening in this training? Why does this affect me? I'll just carry on. I make loads of money in this business; I'll just carry on behaving the way I want to behave because I'm kind of Teflon coated because of all the money I bring in. I think that's a key point that's got to come across, certainly with all staff who are subject to conduct rules. For the managers, it's got to be really promoting this idea that you can't just respond anymore, this is such a significant risk, and now it's a regulatory issue you've got to look out for this and address it as you would anything to do with skill, care, due diligence. If you think somebody was doing something risky, you wouldn't just wait until there was a complaint. You would take action very, very early on.”

Joe Glavina: ““For HR teams listening to this, the natural next step is to think about training but this isn’t something HR should be doing on their own is it?” 

Trish Embley: “Oh, absolutely, and more and more, we're finding that in a number of sectors we're speaking to different experts. It's a multidisciplinary team that approach this and sometimes multi-disciplinary panels as well, where you might have somebody from Legal, somebody from HR, someone from Risk and Compliance. I know we've got a little while before this comes in on 1 September 2026 but it takes time to get that sort of system network going and to decide on what the approach is going to be, so that the first time you do have an issue you are ready to go, and the process is in place.”

Joe Glavina: “There so seem to be quite a lot of grey areas around this. So, whether conduct falls within work, outside of work. It’s a tricky one for HR, isn't it?"

Trish Embey: “Yes it is and I think you've pinpointed there one of the key issues that should be covered in this very much scenario-based training because there's a couple of judgment calls that have to be made here that aren't easy, like, what is serious bullying and harassment? So bullying and harassment can often be on a spectrum. We see grievances where a manager has perhaps not communicated in the right way and there’s an area of development there in their communication skills to the downright, abusive behaviour. So again, who is going to make that judgment call? What are the factors it is going to be based on, and how are we going to make sure that all these different parties, HR, Compliance, Legal, take the same view? The other one is, of course, that although everybody who's covered by the conduct rules must make sure that they don't conduct themselves in a way that could be bullying or harassment in the workplace, for the more senior managers this leads into their fitness and proper test and what's clear from the FCA is that can include conduct and behaviours outside work, but associated with the workplace. Now that's always a bit of a tricky area because if you take the, oh, we all spill out into the pub after work on Friday -  and I know in the FS sector it's very, very sociable - at what point does that move from being a sort of work related event as the hours go by, to the purely social and nothing at all to do with work? So a lot of nuances, a lot of grey, a lot of guidance needed in the training that would be delivered on this topic.”

With the 1 September 2026 deadline approaching, firms are reviewing how they identify and escalate misconduct as a regulatory risk, particularly at manager level. If that’s something you’re working through, Trish and her team can help. Her details are on the screen. Alternatively, you can contact your usual Pinsent Masons adviser.

- Link to FCA policy statement: Tackling non-financial misconduct in financial services