From 1 September, non-financial misconduct (NFM) including serious harassment, bullying and violence will be treated as a regulatory breach under the FCA’s Code of Conduct (COCON). The rule change applies to all FCA-authorised organisations and individuals. Failure to prevent the misconduct, where a manager could have intervened, will be counted as a potential breach and could affect fitness and propriety assessments.
Priya Dave, Of Counsel at Corker Binning and a former contentious regulation lawyer at the FCA, said: ‘NFM now sits squarely within the conduct rules and, as such, will be a priority agenda item for boards.
‘To date, the FCA has shown limited appetite for pursuing enforcement action in relation to NFM. Firms and senior managers should not assume this stance will continue, however, as the extension of the NFM rules from banks to non-banks highlights the importance the FCA places on workplace culture and conduct.
‘It is not a question of if, but when the FCA will flex its enforcement muscle in respect of NFM.’
The FCA will take a range of factors into account when considering a potential breach, including repetition, duration, impact, seniority of the accused person, power balance and prior warnings. The rules apply to work-related behaviour, potentially covering after-work drinks or an individual’s social media posts.
Imogen Makin, counsel at WilmerHale, described the rule change as ‘a watershed moment’ for financial services.
Makin warned ‘There is every chance that the FCA will seek to make an example of firms and individuals who fall foul of the new rule and guidance. Given the regulator’s current preference for assertive supervision over enforcement, enforcement action is likely to be reserved only for the most egregious cases.
‘In its supervisory enquiries, the FCA will be looking for evidence that firms are implementing the spirit of the new rule and guidance, demonstrating that instances of non-financial misconduct will not be tolerated through how they are dealt with, the tone from the top—which has long been a regulatory focus—and broader internal messaging.’
