Culture as Compliance: The FCA's new rules on non-financial misconduct

Okay, so James, perhaps you can talk us through what's going to change from September.

Yes, of course.

So we had the SCA's final policy statement back in December 2025, and it stated it doesn't intend to make further changes.

So what we have now from the SCA is what we're going to get.

Those rules are coming into force on the 1st of September.

They won't have retrospective effect, so there's no need to reinvestigate previous matters of misconduct.

Thinking first about which firms are in scope, a key change is to align the rules for non-financial misconduct between non-banks and banks so broadly speaking that's going to bring firms within the scope of SMCR into the scope of the new rules that's just under 40,000 firms.

So the effect of these changes is that instances of non-financial misconduct which take place in the performance of an individual's role for a firm will now be within the scope of the rules and for non-banks the Issues arising from breach of the conduct rules will no longer be restricted to purely regulated activities.

So the sorts of conduct which are going to fall within the scope of the new rules and guidance are conduct that has the purpose or effect of violating a colleague's dignity, conduct that has the purpose or effect of creating an intimidating, hostile, humiliating or offensive environment for a colleague, or conduct that's violent towards a colleague.

And when considering the effect of that conduct, firms need to consider subjective perception of the subject and also whether it's reasonable for the conduct to have that effect.

And even where the conduct does not have that effect, The new guidance applies to conduct which has the purpose of harassment.

And in fact, there's a good example in the guidance itself of an offensive email which is intercepted by the firm systems and so never reaches the recipient.

That's still conduct with a relevant purpose and therefore still within scope.

And I think these concepts will be familiar from employment law to many of your listeners, but you'll note that there is no need for the conduct to be because of a protected characteristic.

So the effect of that, I think, is simply to bring conduct, which is bullying,

within scope.

Yeah, and that is very interesting because it is often, on the individual side, it can be difficult to find a remedy for a client who's been on the receiving end of bullying where it's not linked to a protected characteristic.

And that example about the email is quite interesting.

When I think about conduct having the purpose or effect, I think of the purpose of, well, the person's done the harassment, but actually the recipient wasn't that offended by it.

So it didn't matter in that case, but it still had the purpose.

But actually the email that didn't reach someone is an interesting example and I suppose shows there's no scope for a sort of no harm, no foul get out from that kind of conduct.