What is the CBI’s View on Non-financial Misconduct?

The UK FCA is extending its rules on non-financial misconduct, or ‘NFM’, to thousands of non-bank firms, reflecting its view that issues such as bullying or harassment signal deeper cultural failings. Our Financial Regulation team explores whether the Central Bank of Ireland might take a similar approach.

The UK Financial Conduct Authority (FCA) is broadening its rules to capture non-financial misconduct (NFM) in non-banks as well as banks. The changes will extend the scope of NFM rules to approximately 37,000 non-bank regulated firms. Given the FCA’s continuing focus on the issue of NFM, in this article we consider the likelihood of the Central Bank of Ireland (CBI) adopting a similar approach to the issue.

What is NFM?

The FCA has stated that it considers NFM, which includes bullying, sexual harassment and violence between colleagues, to be a matter of regulatory concern and a warning sign of a failing culture within a firm. Not addressing NFM may lead to the departure of staff, discourage staff from speaking up, undermine performance or even enable financial misconduct. A key regulatory objective of the FCA is to prevent ‘rolling bad apples’ - people with a history of NFM moving from firm to firm, without the misconduct in question ever being addressed.

The FCA has defined NFM that can result in a breach of its conduct rules as unwanted conduct that:

• Has the purpose or effect of violating an individual’s dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment, or
• Is violent to an individual

This test extends to conduct between employees, including staff within group companies or contractors. It is also possible that conduct towards clients or business contacts may breach the FCA’s conduct rules. The FCA has attempted to align the wording of its rules with UK employment and equality law to avoid any unfair outcomes.

By now aligning the NFM rules in its Code of Conduct (COCON) that apply to banks and non-banks, the FCA endeavours to give firms the confidence to take action against serious NFM. The FCA is also aiming to drive consistency across the financial sector, and make it clearer to firms when an instance of NFM will constitute a regulatory breach. There are also implications for the FCA’s fitness and probity (F&P) assessment regime.

The FCA’s amended rules will take effect from September 2026, without any retrospective effect. This affords the FCA time to finalise any additional guidance which may be needed to help firms meet their obligations under the rules and to support consistent application of the rules.

Key areas under consultation

The FCA published its Consultation Paper (CP25/18) and accompanying Policy Statement in July 2025 and invited comments on its draft guidance. The consultation closed on 10 September 2025. The FCA aims to publish any finalised Handbook guidance by the end of 2025, affording firms sufficient time to update their processes and procedures.

The draft guidance is intended to assist firms in the context of interpreting COCON and F&P requirements, and addresses the following areas:

• The boundary between work and private life. An individual’s conduct in their personal or private life falls outside of the scope of COCON but may still be considered as part of an F&P assessment.
• When conduct is outside of a firm’s Senior Managers and Certification Regime (SMCR) financial activities.
• Factors to consider when determining whether NFM breaches COCON. This includes determining:
  • Whether the misconduct is ‘serious’
  • The effect of the conduct, including its perceived effect, and
  • Whether it relates to Individual Conduct Rule 1 (Integrity) or 2 (Due Skill, Care and Diligence) in COCON
• Examples of reasonable steps for managers to take to protect staff against NFM.

The draft guidance also includes explanatory material on how various types of conduct, including NFM, are relevant to a person’s fitness and probity to discharge regulated functions. Examples include a lack of integrity or dishonesty, criminal offences, or conduct that could undermine public confidence in the regulatory system.

What is the CBI’s view on NFM?

To date the CBI has not placed emphasis on the distinct concept of NFM in the same manner as the FCA has. The CBI has recognised that culture within firms must be continually managed and monitored at a senior level. The regulator has also identified a lack of accountability for misconduct as a key cultural driver of misconduct. It recognises that conduct risk has many drivers, including inappropriate, unethical or unlawful behaviour. The CBI has observed that culture is set from the top down and that it is a matter for boards and senior management, in the first instance, to set an effective culture.

In Ireland, all regulated firms are subject to the Central Bank (Individual Accountability Framework) Act 2023 (IAF). The Common Conduct Standards in the IAF set out the standards of behaviour for individuals and require individuals to take reasonable steps to ensure that the Common Conduct Standards are met. They include the requirement to act with honesty and integrity and with due skill, care and diligence. Additional Conduct Standards also apply to individuals in Pre-Approval Controlled Functions (PCFs) or any function whereby the individual can exert “significant influence” over the conduct of the firm’s affairs, e.g., senior executives.

The IAF outlines that a person acts with “honesty and integrity” when they, among other things:

• Have regard to the legitimate interests of the firm, its staff, customers and other persons with whom the firm engages
• Do not impede others from reporting to the management of the firm information relevant to or giving rise to a suspicion of the commission of a prescribed contravention or any other contravention of any other legal obligation or standard imposed on the firm, or any matter otherwise adversely affecting the firm or its customers.

The CBI indicated in its Guidance on the IAF that it did not intend to provide detailed explanation on what it means to act with honesty and integrity. This approach was taken on the basis that both terms are “well understood and commonly used”. It stated that acting with integrity in the performance of a role/function in a firm may take a number of forms.

While NFM is not specifically mentioned within the CBI’s IAF framework, it is feasible that the NFM of an individual could be construed as undermining their compliance concerning their individual accountability under the Common Conduct Standards.

Similarly, in terms of the CBI’s F&P regime, firms must be satisfied that individuals comply with the F&P Standards, under which individuals are required to be honest, ethical and to act with integrity. The CBI is currently undertaking a review of its F&P regime, so firms appointing Pre-Approval Controlled Functions (PCFs) can expect more clarity around the CBI’s expectations even if NFM in and of itself is not specifically called out.

The CBI’s draft F&P Guidance states that “Probity is a matter of character illuminated by an individual’s behaviour. In general, where an individual is found not to be an individual of probity due to a lack of honesty, integrity or ethical judgement, that individual may not be suitable for any CF or PCF.”

The CBI has made it clear that it expects individuals to disclose all information that is relevant or potentially relevant to an F&P assessment. If any doubt exists about whether a particular piece of information is material to the individual’s F&P, it is recommended to disclose this rather than run the risk of non-disclosure of material information. Consequently, evidence of NFM may form part of an individual’s F&P assessment.

Conclusion

It is evident that firms that fail to address NFM run the risk of financial, reputational and regulatory damage. Having seen the FCA’s focus on NFM, it remains to be seen whether the CBI will consider issuing specific guidance concerning NFM as a stand-alone regulatory breach.

In any event, it is crucial that Irish regulated firms have sufficient policies, processes and procedures in place to ensure that employees are in compliance with the requirements of the IAF and F&P regimes. In addition, the boards and senior management of firms should take steps to embed a positive work culture which does not tolerate or encourage NFM. This should include providing mechanisms for employees to speak out, employee training and the setting of clear behavioural and cultural expectations.

For further information and expert advice on complying with the IAF and F&P regimes, please contact a member of our Financial Regulation team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.