What happened?
The FCA has released guidance highlighting a shift in its expectations around non-financial misconduct. As firms work to align their culture and governance with these standards, understanding what the regulator expects is central to fostering a compliant, ethical workplace.
Why does it matter?
The FCA has set out several actions firms are expected to take to manage the risks associated with non-financial misconduct, spanning policy, culture, training, monitoring, stakeholder engagement and independent validation. Firms that cannot evidence progress against these areas risk being seen as non-compliant with the regulator’s revised expectations.
Who is affected?
Firms across financial services sectors, and in particular HR, risk and compliance functions responsible for policy, culture, training and governance of conduct.
Key risks
- Policies that do not clearly define unacceptable behaviours or a framework for reporting and responding to incidents.
- A culture where employees do not feel safe to speak up about misconduct.
- Training that is inconsistent or fails to reinforce the firm’s values and expectations.
- Senior management accountability under the Senior Managers and Certification Regime (SM&CR) that is not clearly documented.
Actions to take
- Establish clear policies and procedures that define unacceptable behaviours and set out a framework for reporting and responding to incidents.
- Cultivate a supportive culture in which leadership models appropriate behaviour and employees feel safe to speak up.
- Implement effective, regular training that reinforces the firm’s values and equips staff to identify and address issues.
- Monitor and review practices continuously, using metrics to assess the effectiveness of initiatives and adjust based on feedback and incidents.
- Engage transparently with stakeholders, including customers and the regulator, and use feedback to enhance policies and practices.
- Seek independent validation to design frameworks that bring structure and consistency to decision-making across HR, risk and compliance.
Wider implications
A key focus for firms is governance: clarifying senior management accountability under SM&CR, strengthening oversight and ensuring decisions are documented and escalated where applicable. There is also increasing demand for better insight into culture and conduct risk, with management information that moves beyond individual cases to show patterns, trends and outcomes.
Recommendations
The objective is not simply to meet regulatory expectations but to embed approaches that are sustainable and can be applied consistently, so that they stand up to scrutiny over time. TCC’s experts work with firms to support the design of frameworks that align approaches across HR, risk and compliance.
Supporting sources
Frequently asked questions
What does the FCA expect firms to do about non-financial misconduct?
The FCA expects firms to establish clear policies, cultivate a supportive culture, provide effective training, monitor and review practices, engage with stakeholders and seek independent validation of their approach.
Why is governance central to managing non-financial misconduct risk?
Governance is central because senior management accountability under SM&CR needs to be clear, with oversight strengthened and decisions documented and escalated where applicable.
What role does management information play?
Management information helps firms move beyond individual cases to show patterns, trends and outcomes in culture and conduct risk, supporting a clearer, firm-wide picture.
How can firms demonstrate their approach is sustainable?
Firms should aim to embed approaches consistently across HR, risk and compliance so they can be applied over time and withstand regulatory scrutiny.
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