FCA Non-Financial Misconduct Is Now a Core Compliance Risk

Non-financial misconduct has moved decisively from a cultural concern to a core regulatory risk, and how firms respond is increasingly seen as a visible measure of governance maturity.

Training is becoming the primary mechanism for firms to demonstrate capability, ensure consistent judgement, and evidence regulatory readiness. Expectations are rising across the market, with regulators placing greater scrutiny on how behaviours are identified, assessed, and escalated in practice.

Policies alone do not prevent misconduct, and frameworks that look robust on paper can falter in real situations. The challenge for firms is translating standards into consistent, defensible decision-making across the business.

In this environment, effective training is not just about awareness. It is central to equipping individuals to apply judgement, navigate ambiguity, and act in line with regulatory expectations.

FCA Scrutiny of Non-Financial Misconduct Is Increasing

Recent regulatory developments have reinforced a clear message: serious non‑financial misconduct is firmly within the regulatory perimeter, and firms are expected to deal with it confidently, consistently, and proportionately.

The FCA’s finalised guidance clarifies that behaviours such as bullying, harassment, and violence can fall within the Conduct Rules when they are work-related and can also affect fitness and propriety assessments. It is intended to give firms confidence to act, while recognising that judgement will always be required.

Guidance, examples and flowcharts can support decision-making, but they are not a substitute for capability. Firms remain responsible for preventing misconduct, identifying issues early, and evidencing how conclusions are reached.

Senior Managers Face Direct Accountability for Misconduct

For financial services firms, this matters because non‑financial misconduct increasingly spans multiple risk domains. It affects individual accountability under the SM&CR, creates operational and reputational exposure, and tests whether governance frameworks work under pressure rather than in theory.

Misconduct Decisions Must Be Consistent and Defensible

A recurring theme is consistency. Supervisors are testing whether Senior Managers can stand behind decisions with evidence of a repeatable process, clear escalation, and defined accountability, rather than relying on confidence in the outcome. That includes clarity on seriousness thresholds, appropriate escalation, manager accountability, and documentation standards. Where different teams interpret expectations differently, or where senior managers lack confidence to intervene, firms expose themselves to avoidable risk.

Cross-Functional Coordination Is Critical

While Human Resources plays a critical role in investigations and employee processes, non-financial misconduct is not solely an HR matter. It requires coordinated ownership across senior management, compliance, and control functions to ensure decisions are consistent, well-evidenced, and governed effectively.

Effective management of non-financial misconduct depends on cross-functional collaboration. Senior management, compliance, HR, risk, and internal audit each bring a different perspective, and supervisors increasingly expect these functions to operate in a coordinated way. Where collaboration breaks down, firms risk inconsistent outcomes, delayed escalation, and weak evidencing, even where individual teams are acting in good faith.

Training Turns Expectations into Consistent Outcomes

Training is therefore no longer an adjunct to policy. It is the mechanism through which firms align understanding across the first, second, and third lines of defence. Well-designed training helps staff recognise potential misconduct early, supports managers in taking reasonable steps within their authority, and enables control functions to evidence decisions in a way that stands up to scrutiny.

The implementation timeline reinforces the point. With new expectations taking effect from September 2026, firms have a defined window to move beyond awareness and embed practical capability. Those that leave training until late in the process risk superficial compliance. Those that invest early can use training to test assumptions, refine processes, and strengthen governance before supervisory attention intensifies.

Firms Must Train Judgement Not Just Awareness

Firms looking to reduce execution risk should consider the following practical steps, with training positioned as a core control.

• Translate regulatory expectations into role specific learning: Senior managers, line managers, compliance teams, HR, and internal audit all interact with non-financial misconduct differently. Training should reflect those differences, clarifying individual responsibilities and how they fit together in practice.
• Focus training on judgement, not just awareness: Understanding definitions is necessary but insufficient. Staff and managers need to practise assessing seriousness, considering context, and deciding when escalation is required. Scenario-based learning is particularly effective in building confidence and consistency.
• Make the boundary between work-related and private conduct explicit: The guidance recognises limits around privacy and proportionality, but those limits are often where uncertainty arises. Training should help participants understand what should be investigated, what should be documented, and when to seek advice.
• Equip managers to take reasonable steps: Managers are expected to act within their knowledge and authority, but many remain unclear about what that looks like in real situations. Training should demystify intervention, escalation, and follow up, reducing hesitation and inconsistency.
• Embed documentation and evidence standards into training design: Firms should be able to show not only what decisions were made, but why. Training that links judgement to record‑keeping supports defensibility, particularly for fitness and propriety assessments and annual reassessments.

Culture Must Be Demonstrated in Practice

The direction of travel is clear. Non‑financial misconduct is no longer assessed through policies and statements of intent alone. Regulators are increasingly focused on how firms behave when standards are tested, and whether governance frameworks operate effectively in practice.

Training plays a critical role in that assessment. It is how firms convert expectations into action, align behaviour across the organisation, and demonstrate that culture is supported by capability. Working with an independent third-party compliance partner can help firms design training that is credible, practical, and informed by supervisory experience, providing both challenge and reassurance as regulatory expectations continue to evolve.

Practical FCA Training Aligned with Supervisory Expectations

Our non-financial misconduct training is designed to help firms move from policy to practice, equipping teams to make consistent, robust decisions in complex, real-world scenarios.

We focus on the areas where firms are under the greatest regulatory scrutiny, including how misconduct is identified, assessed, and escalated, and how it feeds into Conduct Rules and fitness and propriety decisions.

The training is relevant across the organisation, supporting senior managers in meeting their accountability obligations, enabling HR and compliance teams to apply frameworks consistently, and helping employees understand how expectations translate into day-to-day behaviour.

Delivered through practical scenarios and case studies, the programme builds confidence in applying judgement, handling ambiguity, and responding appropriately when issues arise.