FCA announcements on non-financial misconduct and diversity and inclusion

The Financial Conduct Authority (FCA) has announced that the publication of the new rules and guidance on non-financial misconduct, which were originally expected last year, has been further delayed. The FCA will set out “next steps” in the summer.

The FCA and Prudential Regulatory Authority (PRA) have also confirmed that that they will not be taking forward their plans on improving diversity and inclusion in financial services.

We have seen a number of announcements on workplace culture issues in financial services over recent months, following the Treasury Committee’s Sexism in the City report last year which called for an end to what was referred to as the “era of impunity” of sexual harassment and bullying.  

Non-financial misconduct (NFM)

The FCA has announced that it is continuing to prioritise its work to tackle NFM in firms. New rules and guidance on NFM have however been further delayed. 

The FCA has said that it will set out “next steps” by the end of June 2025. They explained that this process has taken longer than previously expected to ensure that their approach is both proportionate and aligned with planned legislation.

This follows the FCA’s Chief Operating Officer’s recent speech at the 10th Annual Culture and Conduct in Financial Services Summit, Culture is contagious, when she made reference to NFM issues and the importance of a good workplace culture –  in particular:

• The importance of a healthy firm culture, especially in relation to how it impacts outcomes for consumers, markets and the economy
• Emphasising, in the context of the FCA’s support for the government’s focus on economic growth, their view that the risk-taking required to drive growth is dependent on having a foundation of healthy firm cultures
• That NFM is one of the clearest warning signs of a failing, toxic culture
• That Senior Managers play a vital role in a firm’s culture

Previously, the FCA published its Culture and non-financial misconduct survey findings on reported incidents of NFM during 2021-2023 which found that in 2023 alone, 2,347 NFM allegations were reported. 

Given the high level of reported allegations, the FCA expects firms to reflect on this data and consider what action they need to take to improve workplace culture - and to ensure that they:

• Take allegations of NFM seriously
• Have effective systems in place to identify, investigate and remedy promptly and fairly substantiated allegations 
• Comply with their regulatory responsibilities and reporting requirements

Diversity and inclusion (D&I) proposals

It had been anticipated that the FCA and PRA would publish a policy statement on their D&I proposals for firms, following a consultation (in September 2023) on measures to improve D&I in financial services (CP23/20 and CP18/23). 

However, in letters to the Treasury Select Committee (FCA letter and PRA letter) in March 2025, they confirmed that they will not now be taking forward their D&I proposals. The reasons for this include that they wanted to avoid additional regulatory burdens on firms as well as the potential overlap with the government’s legislative agenda on employment rights, gender action plans and disability and ethnicity pay gap reporting.  

The regulators will also review the impact of removing the bonus cap on gender pay and inequality. Given the time it will take for firms to make changes, it is likely this will take place in the 2026/27 financial year.

What this means for firms

Despite the FCA’s announcement on its D&I proposals, DEI should still be a focus for firms, not least because there is a significant degree of crossover between DEI and NFM. Another important factor, for large firms in particular, it that the government is still planning (at this time) to implement ambitious equality legislation. Their proposals include the introduction of mandatory ethnicity and disability pay gap reporting (for employers with more than 250 staff) and equal pay rights. 

Firms should look out for the next announcement from the FCA on NFM and, in the meantime, ensure that they are continuing to take steps to encourage a healthy firm culture. Regular staff training is one of the key steps firms should take to improve workplace culture, avoid NFM issues arising, and as a step towards compliance with the new proactive duty to take reasonable steps to prevent sexual harassment in the workplace. 

Of course, international employers (and particularly those that operate in the US) are also watching developments in the US around DEI at the moment too.  It remains to be seen whether those developments will impact on DEI in the UK in the longer term.

Please get in touch if you would like to discuss the issues raised in this article further, and to enquire about our inclusive workplace culture e-training for staff which includes NFM.