FCA Updates Treasury Select Committee On Non-Financial Misconduct: Now Is The Time To Take Action

On October 16, the Financial Conduct Authority (FCA) sent a letter to the Treasury Select Committee providing an update on its approach to non-financial misconduct (NFM) and a response to an earlier letter from the Committee to the FCA. Key points for asset managers include:

• NFM is a regulatory issue: The FCA is clear that NFM is a regulatory issue that engages its statutory objectives. It also stressed that behaviours like bullying, harassment, or violence are a matter of regulatory concern, and when reports of this are received, the FCA investigates and acts where necessary.
• FCA new rules on NFM: As mentioned in our recent post, the FCA has published its Policy Statement on NFM, which introduces new rules that effectively incorporate NFM into various aspects of the FCA 's regulatory regime (including the Conduct Rules, F&P assessments and breach notifications). The new rules come into force in September 2026.

The FCA made clear that the new rules mean that serious, substantiated cases of NFM should be reported as Conduct Rule breaches and mentioned in regulatory references. The FCA's expectation is that this will lead to more consistency of reporting on the topic across the industry.

• FCA guidance on NFM: Accompanying the Policy Statement was a consultation on draft guidance as to how firms should interpret the new rules. However, this letter makes it clear the FCA is still considering whether to issue any guidance and will make this decision by the end of the year.

Whilst not providing guidance may allow firms to approach the topic in a more firm-specific way, given the nature of the topic, the guidance would prove helpful in working out how to determine whether there is a nexus between the behaviour and the FCA rules.

• NFM survey results: The FCA's letter reiterated the importance of the results of the NFM survey it published earlier this year, and considered in detail in our post here. However, the letter makes clear that data needs to be examined carefully, and recognises the potential for misleading conclusions. By way of example, the FCA mentioned that a high number of complaints could be an indicator of a healthy speak up-culture. Equally, a low number of reported incidents could suggest the opposite.

Following the publication of the survey findings, the FCA has seen firms make improvements to their management information and reporting on NFM, with firms presenting the results of the survey to relevant governance committees, delivering additional training to their staff, and updating their employee handbooks. As such, if firms haven't taken steps to benchmark the survey results against their own data and begun making adjustments to how NFM is dealt with internally, now is the time to do so.

• NFM detection: One of the focus areas in the survey was how NFM is detected, and the letter highlighted that the FCA is undertaking supervisory work in the wholesale brokers portfolio to test the effectiveness of firms' NFM detection measures and preventative controls with a view to ensuring that issues are raised and dealt with at any earlier stage, and reducing the occurrence of NFM going forward. Consequently, firms should ensure that they review the ways in which NFM is detected.
• FCA enforcement action: The FCA noted that it currently has 76 open supervisory cases that have been tagged as relating to NFM (although one case could be investigating multiple reports of NFM), and one open enforcement case relating to NFM.

The letter highlights the fact that NFM and culture are key priorities for the FCA, and that firms should be taking action now to review and where necessary update their internal processes and governance.

We have recently launched a four-part podcast mini series on the topic of NFM - our first episode is available by searching for 'Ropes Talk' on all major podcast platforms, and can also be found on our website here.

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