Beyond the new FCA rules: How firms should investigate non-financial misconduct

The real challenge beyond the rule change

On 1 September 2026, the FCA’s new non-financial misconduct (NFM) rules came into force.^[1]Non-financial misconduct in financial services | FCA By now, most firms should have updated policies, revised training materials and considered the implications for conduct rule breaches, fitness and propriety assessments, regulatory references and governance frameworks.

It would be wrong to view 1 September as the point at which NFM became a regulatory issue. The FCA’s Fit and Proper regime (FIT) already allowed firms to consider relevant misconduct when assessing an individual’s suitability to perform their role. The significance of the latest changes is that serious work related bullying, harassment and violence can now constitute a conduct rule breach in non-banking firms, supported by additional guidance on the application of both COCON and FIT. In our experience, this increases the importance of consistent and well evidenced decision making when allegations arise.

The regulatory change itself has been well documented for some months now. What is less straightforward is how firms apply those requirements when faced with a real allegation.

Consider the following scenario: a concern is raised about the conduct of a senior employee following a work-related event. There is no recording. Witness accounts differ. Some individuals are reluctant to become involved. Messages exchanged afterwards provide context but do not establish precisely what happened. The firm must decide whether the conduct occurred, whether it breaches internal policies, whether it engages COCON or FIT and whether any reporting obligations arise.

This is where the real challenge begins.

Much of the debate surrounding NFM has focused on defining the boundaries of unacceptable behaviour. The FCA has now provided firms with a clearer framework and guidance. What it cannot provide is an answer to every factual dispute. As the FCA itself acknowledges, “no guidance can cover every scenario, and firms will always need to exercise judgement” when applying the rules.

The quality of those decisions is crucial. An investigation that is perceived as biased, inconsistent or superficial may create as much risk as the underlying allegation itself. Equally, a well conducted investigation can help firms demonstrate that decisions were reached through a fair, balanced and evidence-based process, even where the outcome remains contested.

What does NFM misconduct mean in practice?

NFM is a broad term that encompasses behaviours which may not involve financial wrongdoing but can nevertheless raise concerns about an individual’s conduct, integrity or fitness to perform a regulated role. Importantly, the relevant conduct will not always occur within the four walls of the office. Allegations may arise from client events, conferences, business travel, work related social functions or other situations connected to an individual’s professional role. In some circumstances, conduct in an individual’s private life may also be relevant when assessing fitness and propriety, although the FCA has made clear that private conduct should not automatically be assumed to have implications for workplace conduct and that firms must consider the specific facts and circumstances of each case.

Why NFM investigations present different challenges

Investigations involving NFM frequently centre on behavioural issues and are often characterised by limited documentary or transactional evidence. Such matters commonly involve allegations of bullying, harassment, intimidation, discrimination, and sexual harassment. Given the nature of these allegations, investigators are often required to assess competing accounts of events where corroborative evidence may be limited.

Unlike many financial crime, fraud or regulatory investigations, there may be no clear documentary trail that establishes what occurred. Allegations may arise from conversations, meetings, social events or interpersonal interactions where little contemporaneous evidence exists and witnesses may genuinely recall the same event differently. The central question is which account of events is more likely to be accurate, requiring a more careful assessment of credibility, reliability, consistency and corroboration.

This is why NFM investigations are often described as “one person’s word against another’s.” The challenge is not choosing between two competing narratives, but evaluating all available evidence to determine which account is most consistent with the facts.

Conducting a defensible NFM investigation

Preparation and scoping

At the outset, the investigation should establish a clear understanding of the allegations under review, including the specific behaviours or actions being assessed and the relevant internal policies, codes of conduct, regulatory obligations, or legal requirements that may apply.

Particular consideration should be given to whether the investigator has the experience, independence and authority required for the matter under review. The investigator must be independent, objective, and free from any actual, perceived, or potential conflicts of interest that could undermine confidence in the process or its outcomes.

Early steps should also be taken to identify, secure, and preserve all potentially relevant information and records. This may include electronic communications, messaging platforms, access logs, CCTV footage, personnel records, and other sources of evidence. Timely preservation of evidence reduces the risk of information being lost, altered, or inadvertently destroyed and supports the integrity, defensibility, and transparency of the investigative process.

Gathering and preserving evidence

The investigation should be supported by evidence that is relevant to the matters under review and sufficient to allow informed conclusions to be reached. Investigators should consider the quality, reliability, and probative value of all available information when determining the facts of a matter.

Sources of evidence may include:

• Documentary records: Emails, correspondence, instant messages, reports, personnel records, access logs, and other business records.
• Witness accounts: Information obtained through interviews with complainants, subjects, and other individuals who may have knowledge of the events in question.
• Electronic and physical evidence: CCTV footage, system records, metadata, device activity logs, photographs, and other relevant artefacts.

Interviews should be planned and conducted in a fair, objective, and structured manner to obtain complete and accurate information. Questioning should encourage participants to provide their own account of events in their own words, while avoiding assumptions, leading questions, or expressions of bias. Comprehensive records of interviews should be maintained to ensure transparency and support the evidential basis of the investigation.

Appropriate safeguards should be implemented to protect the confidentiality of the investigation and the individuals involved. Information should be shared strictly on a need-to-know basis, taking into account legal, regulatory, and organisational requirements. Maintaining confidentiality helps preserve the integrity of the process, encourages cooperation from participants, and reduces the risk of interference, retaliation, or other actions that could compromise the investigation.

Fair opportunity to respond

A fundamental component of any workplace investigation is ensuring that all relevant parties are afforded an appropriate opportunity to present their account of events. Individuals who raise concerns, as well as those who are the subject of allegations, should be given a reasonable opportunity to provide information, respond to evidence where appropriate, and identify any relevant witnesses or supporting material.

Evaluation of evidence and findings

When assessing the evidence, investigators should adopt a structured and objective approach to determine what conclusions can reasonably be drawn from the information gathered. Rather than relying on any single piece of evidence, findings should be informed by a holistic assessment of the facts and circumstances of the case.

Relevant considerations may include:

• The extent to which accounts are supported by other available evidence.
• The consistency of information provided by witnesses and parties involved.
• The strength and quality of the evidence obtained during the investigation.
• Whether explanations and accounts are logical and remain coherent when tested against the broader evidence.

Documentation and record keeping

Maintaining accurate and comprehensive records throughout an investigation is essential to demonstrating how findings were reached and why decisions were made.

Documentation should clearly capture the investigative steps undertaken, the evidence considered, key decisions made during the process, and the basis on which conclusions were reached. A well-maintained record provides transparency, supports accountability, and enables the organisation to explain and substantiate its decision-making where required.

Reporting and post‑investigation steps

Upon completion of the investigation, a formal report should be prepared to provide a clear and balanced summary of the matter. The report should set out:

• The scope of the investigation and the allegations considered.
• The evidence and information reviewed.
• The relevant policies, standards, or regulatory requirements applied.
• The factual findings and the reasoning supporting those findings.
• Any recommendations, remedial actions, or lessons identified.

The report should present conclusions in a clear, objective, and evidence-based manner, demonstrating how the available information was evaluated in reaching the final outcome.

Where the investigation identifies conduct that may give rise to legal, regulatory, disciplinary, or governance considerations, organisations should assess whether any further escalation, disclosure, remediation, or reporting obligations arise under the applicable regulatory framework.

Questions Boards should be asking

• Would our process produce the same result if the allegation concerned a high performer or senior executive?
• Who decides whether an allegation engages COCON, FIT, reporting obligations or a regulatory reference?
• Can we show how evidence both for and against a finding was tested?
• Does our management information help us identify patterns, recurring themes, delays and inconsistent outcomes, or does it simply tell us how many cases have been reported?
• Could the Board explain why a case was investigated, not investigated or closed?
• How do we satisfy ourselves that investigations are being conducted consistently and by individuals with appropriate experience and independence?

Conclusion

The FCA has provided greater clarity on how NFM should be considered under COCON and FIT. The more difficult task remains the same: establishing the facts in situations where evidence is incomplete, accounts differ and the consequences for individuals can be significant. Policies and frameworks are important, but it is the quality of the investigation and the judgement exercised throughout it that will ultimately determine whether a firm’s response is fair, consistent and defensible.

In cases involving senior individuals, significant regulatory implications or disputed evidence, firms may also wish to consider whether an independent investigation would provide greater confidence in both the process and the outcome.

About the authors

Priya Giuliani is a Chartered Accountant with 30 years of experience in investigations, regulatory compliance, governance, and risk management. She has provided expert witness evidence in civil and criminal proceedings, including matters before the UK High Court and HMRC tribunals. Her work has included complex investigations involving fraud, misconduct, regulatory breaches, asset tracing, confiscation proceedings, and financial analysis, as well as advising organisations on regulatory expectations, controls, and compliance frameworks.

Priya specialises in helping organisations respond to regulatory, operational, and integrity related risks through investigations, independent reviews, compliance assessments, and dispute resolution support. She has extensive experience working with regulated firms, corporates, legal advisers, regulators, and law enforcement agencies in the UK and internationally.

Joyce Nkini-Iwisi has nearly 20 years of experience in investigations, risk, and compliance. She has been appointed as an expert on several occasions. Joyce has testified on various conduct matters and led investigations into human rights violations for clients in the energy and mining industries. She has acted as an expert witness in internal tribunals for employment and labor law disputes, along with supporting experts in civil proceedings at the Labour and High Courts in Nigeria and in South Africa.

Joyce specialises in employment and labour matters, with a focus on employee or workplace misconduct and financial risk management, including anti-bribery, corruption, and fraud investigations. She has expertise in reviewing allegations of bullying, harassment, intimidation, and safeguarding concerns, including sexual harassment.

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