In recent years, the Financial Conduct Authority (FCA) has made substantial efforts to enhance its diversity and inclusion strategy and significantly strengthen its expectations surrounding non-financial misconduct. A comprehensive culture survey conducted in October 2024 revealed a concerning 60% increase in reported incidents of bullying, harassment and discrimination among the regulated firms over a period of three years.

While these increased figures may suggest a growing willingness among victims to report non-financial misconduct, figures from Trade Union Congress highlight the existence of a worrying gap in reporting, with nearly 53% of employees choosing not to disclose such conduct. Consequently, the increased figures should serve as a vital reminder of the persistent issues that initially prompted the FCA’s regulatory reforms, and act as a catalyst for the implementation of urgent, meaningful change within the financial services sector.

Barriers to change

In a powerful statement, FCA Deputy Chief Executive, Sarah Pritchard, stated, “one of the clearest warning signs of a failing culture is non-financial misconduct… going unchallenged”. Workplaces that allow perpetrators of non-financial misconduct to thrive and advance their careers without facing consequences foster environments where victims feel discouraged from speaking up. These so-called “cultures of silence” constitute major barriers to stamping out inappropriate behaviour.

Victims, alongside supportive bystanders, who raise concerns about non-financial misconduct play a vital role in enabling firms to identify risks early, before they escalate into more severe issues. It is important to recognise that the ramifications of widespread misconduct extend beyond the immediate psychological impact on victims; significant reputational and legal risks to the firm will also arise.

Therefore, it is imperative that both firms and regulators work together to combat toxic workplace cultures through the creation of a clear and consistent framework for addressing inappropriate conduct. Armed with regulatory safeguards, victims will be empowered to raise concerns in the workplace without fear of victimisation or reprisal.

Expanded guidance

In September 2023, the FCA released its consultation paper titled “Diversity and Inclusion in the Financial Sector – Working Together to Drive Change”. This key document presented proposals for a new regulatory framework, including landmark amendments to existing conduct rules aimed at integrating non-financial misconduct into the regulatory landscape.

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The amendments mandate that “serious, substantiated cases of poor personal behaviour” must now be reported through regulatory references, similar to the process for financial misconduct. Previously, these regulations applied only to a limited number of banks; however, as of 1 September 2026, they will extend to approximately 37,000 additional regulated firms.

The regulator has clarified their use of the term “serious”, implying that it will align closely with the provisions of the Equality Act 2010, which prohibits harassment and discrimination. As such, incidents of unwanted behaviour, which have the purpose or effect of violating an individual’s dignity, or create a hostile, degrading, humiliating or offensive environment, are likely to fall under the scope of the framework.

To aid the implementation of the updated framework, the FCA is drafting further guidance aimed at assisting firms in assessing the fitness and propriety of industry professionals, where incidents of non-financial misconduct have occurred. The updated guidance remains open for consultation until 10 September 2025 and will only proceed if it is clearly supported.

Practical implications

The expansion of the regulatory framework is highly welcomed and will undoubtedly enhance accountability throughout the financial services sector. By arming firms with a comprehensive set of regulations, the FCA is providing them an opportunity to strengthen their ability to consistently “take action and prevent harm”. Firms notorious for enabling volatile workplace cultures will face intensified pressure to initiate meaningful change. On an individual level, serial perpetrators will face challenges in avoiding consequences, as their personal conduct will have direct implications for their fitness to practice within the sector.

The regulator has also reiterated the necessity for firms to take appropriate action against lower-level misconduct, which may fall outside of the scope of the regulatory framework. By ensuring that their internal policies and procedures are robust and fit for purpose, firms can significantly mitigate the risk of more serious breaches emerging. In line with best practice, firms are encouraged to have in place clear, comprehensive zero-tolerance policies, accountable reporting mechanisms and transparent investigative procedures, with consistent disciplinary measures. By taking proactive steps within the workplace, firms can safeguard employees from harm whilst simultaneously protecting their reputation and reinforcing trust in the financial services sector.

Importantly, it should be noted that the FCA is not seeking to duplicate existing legal obligations under the Equality Act 2010, or the Worker Protection Act 2023. Instead, its objective is to provide a supplementary framework to promote structure and consistency across the regulated firms. While the FCA continues to refine its guidance on non-financial misconduct, the recent reforms suggest a determined effort to positively transform workplace cultures within the sector.