The FCA sets out its expectations on non-financial misconduct within the broader context of forthcoming legislative change

On 25 October 2024, the Financial Conduct Authority (FCA) published statistics it had collated on the experience of non-financial misconduct (NFM) within its regulated entities. Examples of NFM include bullying, sexual harassment, discrimination, substance abuse and criminal behaviour. The original notice to firms requested information on the number of NFM incidents recorded by type/category, such as sexual harassment, bullying, and discrimination; the method by which these incidents were detected and the outcomes of those incidents, both internal and external. 

The survey identified that the number of reports of NFM had increased by 72% between 2021 and 2023, with bullying and harassment (26%) and discrimination (23%) being the most reported concerns. Many of the concerns were raised by internal grievance, but whistleblowing also played an important role in bringing issues to senior management’s attention. While the FCA has been keen to stress that this raw data should not be considered in isolation, it did accord with both legislative and cultural changes, which require all employers to take more proactive measures to combat sexual harassment in the workplace and employees who are increasingly more willing to challenge poor practice and a lack of transparency. This survey was also an important precursor to draft amendments on how regulated firms should consider NFM when assessing breaches of the FCA’s Code of Conduct, which was published on 2 July 2025 and is open for consultation until 10 September 2025. 

These amendments will apply to 37,000 companies outside the banking sector and will generate pressure on these businesses to proactively report employees to the FCA rather than risk later accusations of non-compliance. The FCA certainly expects the broader application of rules against bullying and sexual harassment will lead to more notifications. While the intention of the guidance is to root out “rolling bad apples”, there is no penalty for over-reporting such incidents and as such there is a risk of overly cautious or unsubstantiated accusations being made against individuals. There will be a new onus on senior managers to provide a safe environment where non-financial misconduct is not tolerated or otherwise be held personally accountable.

Concerns have already been expressed regarding the lack of clarity as to what constitutes non-financial misconduct (or at least the threshold for reportable incidents). Further, there is the ongoing and difficult issue of whether an allegation of misconduct, which takes place outside the workplace, is relevant to the assessment of an individual’s fitness and propriety to hold a regulated position.  Given the long-term consequences for an individual’s career of submitting such a report, it appears that this is an area ripe for future litigation and affected firms will need comprehensive, fair, consistent and documented procedures to deal with all forms of bullying and harassment. The FCA’s survey nevertheless provides important insights that other non-regulated businesses should take heed of. 

Breaking the silence

It can be incredibly daunting for any individual to come forward and report incidents of wrongdoing in the workplace. In addition to the fear of not being believed, there is the worry of retaliation or of wider career repercussions. The emotional stress and anxiety of having to recount traumatic experiences during the complaints process can also be overwhelming.

Employees should feel confident and supported in speaking up if they witness or experience anything concerning and know exactly how to go about reporting any incidents.

Employers’ internal policies and procedures should make clear what behaviours are expected in the workplace and what won’t be tolerated. Grievance and Whistleblowing policies should outline how to report any concerns as well as accessible channels for doing so.

A culture of trust and accountability is to be encouraged, leading by example and communicating the employer’s commitment to addressing harassment and protecting them from retaliation.

Employees too can play an essential role in providing emotional support to colleagues who may be hesitant in coming forward. 

If someone does come forward to share an incident, listening without judgment, validating their experience and encouraging them to report it is vital.

Organisations should be guided by the new preventative duty to prevent sexual harassment, which was introduced by the Worker Protection (Amendment of Equality Act 2010) Act 2023 on 26 October 2024 and be aware of further proposed changes to discrimination prevention as well as other changes aimed at strengthening protections in the workplace.

A duty on employers to prevent sexual harassment in place now and due to be strengthened

The new duty requires employers to take reasonable steps to prevent sexual harassment in the workplace by anticipating scenarios when its workers may be subject to sexual harassment taking place. Employers are now required to manage risks not just internally, but also from third parties, including attendees at work social events.

In line with guidance published by the Equality and Human Rights Commission (EHRC), employers should update risk assessments, review policies and procedures and ensure regular staff training.

These provisions will be further strengthened by provisions in the Employment Rights Bill that will (i) require employers to take “all reasonable steps” rather than just reasonable steps to prevent harassment, and will specify those steps; (ii) make employers liable for the acts of third parties; (iii) introduce a new category of protected disclosure relating to sexual harassment, highlighting the role that whistleblowing can play in uncovering cases of sexual harassment; and (iv) most controversially, a proposal by the House of Lords outlawing confidentiality provisions which prevent employees from disclosing or alleging “relevant harassment or discrimination”. 

While three of these provisions are not expected to become law until October 2026, with the extension of whistleblowing to cover sexual harassment currently slated to come into force in April 2006, they send a clear message to employers about creating a workplace free of harassment.

As a firm we have extensive experience of these types of claims and are sensitive to the concerns of both parties involved. If you would like to speak to us in confidence, you can contact us at 0203 582 6560. 

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