The New FCA Non-Financial Misconduct Rules: what are the duties and responsibilities of managers in the FCA’s NFM regime?

The FCA’s new non-financial misconduct (“NFM”) framework broadens the circumstances in which managers may face regulatory scrutiny where they fail adequately to identify, prevent or respond to workplace misconduct.

From 1 September 2026, the FCA has introduced new guidance (the “Guidance”) on Individual Conduct Rule 2 (the obligation to act with due skill, care and diligence as a manager), addressing when managers may breach the Conduct Rules because of a failure to address, prevent or respond appropriately to NFM (COCON 4.1.8-A - COCON 4.1.8-D).

This article addresses six important questions on the duties of managers in the new FCA NFM regime.

Who is a “manager” under the Guidance?

Importantly, the new Guidance is not limited in its application to FCA-approved Senior Managers (“Senior Managers”) or those with formal or documented management responsibilities.

The FCA has deliberately adopted a broad concept of “manager”. The Guidance is not limited to line managers (COCON 4.1.3A G), and whether an individual is acting as a manager will depend on the circumstances and the extent to which they exercise managerial responsibility or authority. As a result, project leaders, mid-level staff who oversee junior colleagues, and others exercising temporary or occasional managerial influence may fall within scope.

What duties do managers have to intervene to stop or address NFM?

The FCA states that a manager may breach Individual Conduct Rule 2 by failing to take “reasonable steps” to “protect staff from [NFM]”. An example of such a failing is given as:

“failing to intervene to stop [NFM] where appropriate if the manager knows or should reasonably have known of it”. (COCON 4.1.8-B G (1)(a))

The FCA's formulation is notable because it represents an objective standard. The question is not merely what the manager actually knew, but also what a reasonably diligent manager in the same position ought to have known. The adequacy of supervisory arrangements, reporting lines, escalation processes and engagement with staff may therefore become relevant considerations.

A manager who turns a blind eye to obvious warning signs, fails to follow up concerns, negligently ignores information indicating potential misconduct, or fails to adopt reasonable supervisory practices that would enable potential conduct concerns to come to light, may also risk breaching Individual Conduct Rule 2.

The Guidance indicates that managers are expected not only to respond to misconduct once identified, but also to foster an environment in which concerns can be raised safely. The FCA notes that a manager may breach Individual Conduct Rule 2 by “failing to take reasonable steps to provide a safe environment for people to raise concerns”.

Where allegations of NFM arise, managers should ensure that concerns are appropriately documented, escalated and investigated. Depending on the circumstances, a failure to handle allegations properly may itself become a regulatory issue, separate from the underlying misconduct. Internal investigations into misconduct may now need to look to the role played by managers who may have had knowledge, or ought to have had knowledge, of the misconduct under investigation.

What are the limits on managers’ responsibilities and liabilities?

Importantly, the Guidance does not require managers to prevent all instances of misconduct. The question is whether the manager took reasonable steps in all the circumstances.

Following consultation on its NFM regime, the FCA revised the Guidance to make it clearer that it would not expect a manager to be held responsible for failing to stop NFM if they could not reasonably have known about it, and that the FCA would not consider it reasonable to hold a manager responsible if they did not have authority to act in the particular case.

What is reasonable will depend on factors including the manager's role, seniority, authority, knowledge of the relevant issues and ability to intervene.

Are social events with colleagues in scope of the NFM rules?

Managers should also be aware that their conduct can influence whether an event falls within the scope of the Conduct Rules at all.

In consultation, the FCA explained:

“An occasion organised by a manager may be within the scope of COCON, taking into account that the manager’s direct reports may feel obliged to attend.”

This indicates that an event which might otherwise appear purely social may fall within the scope of COCON where managerial authority creates an actual or perceived expectation that staff will attend.

Managers should therefore exercise particular care when organising team dinners, celebrations, client entertaining events and work-related travel, as conduct occurring at such events may not fall outside the FCA's remit simply because the event takes place outside the office.

What disclosure obligations do Senior Managers have regarding their private or personal lives?

The FCA has also amended its guidance on Senior Conduct Rule 4 ("SC4"), which requires Senior Managers to disclose appropriately any information of which the FCA would reasonably expect notice.

The new guidance is intended to clarify that, “senior manager conduct rules staff may be required to disclose information about their private or personal life under SC4 if it would be material to an assessment of their fitness and propriety.” (PS25/23 and COCON 1.3.3 G (2)).

In practice, this is likely to increase the need for Senior Managers, firms and their advisers to consider carefully whether allegations, investigations or findings relating to non-financial misconduct trigger notification obligations.

The amended guidance on SC4 does not create a blanket obligation to disclose allegations concerning a Senior Manager's private life. Rather, the question remains whether the information would be material to an assessment of fitness and propriety. Nonetheless, the Guidance is likely to encourage a more cautious approach to disclosure decisions where allegations of harassment, bullying, discrimination or other serious misconduct arise.

Are overseas managers and overseas conduct in scope?

Being based or working overseas is not a safe harbour for Senior Managers or those performing the MRT Certification Function (“MRTs”).

Under COCON’s territorial provisions, the Conduct Rules apply to FCA Approved Senior Managers and MRTs wherever conduct occurs (COCON 1.1.9). Senior Managers and MRTs based overseas are therefore in scope of the NFM regime in the sense that the Conduct Rules and Guidance apply to them.

Misconduct committed overseas can also be relevant to fitness and propriety assessments. Behaviour taking place at overseas offices, international conferences, client events or business trips may therefore have regulatory consequences for individuals in the UK.

Concluding thoughts

The FCA's new NFM framework materially increases the importance of managerial judgement. The Guidance makes clear that managers are expected not only to avoid misconduct themselves, but also to identify warning signs, create an environment in which concerns can be raised safely, and take appropriate action where issues arise.

The FCA’s webpage on its new NFM rules states – under the heading “What firms should do” – that “Firms should ensure that staff and managers understand how the changes apply to them”. Firms should therefore ensure that manager training, reporting lines, investigation procedures and escalation frameworks are reviewed and updated as required.

Under the FCA’s NFM regime, preventing NFM is no longer solely an HR responsibility. Managers who fail to take reasonable steps to identify, address or escalate serious workplace misconduct may themselves face regulatory consequences.