FCA misconduct rules take effect as financial redress reform gathers pace

Two significant changes are reshaping expectations across UK financial services. The Financial Conduct Authority's rules and guidance on serious non-financial misconduct are now in force, while the Financial Ombudsman Service, the FCA and the government are progressing a separate programme to modernise consumer redress.

They are not one reform. One concerns conduct, fitness and accountability inside regulated firms. The other concerns what happens when financial businesses cause customer harm and complaints reach, or risk overwhelming, the Ombudsman. Their common theme is earlier action: firms are expected to identify problems, take responsibility and put matters right before they become entrenched.

From 1 September 2026, a new FCA rule extended the scope of the individual conduct rules in non-bank firms covered by the Senior Managers and Certification Regime. Serious bullying, harassment or violence against colleagues can now amount to a conduct-rule breach where there is a sufficient link to the person's work or role.

The change brings non-bank firms closer to the position already applying in banking. It is aimed at FSMA firms with a Part 4A permission and at staff who are subject to the FCA's conduct rules or Fit and Proper test. It does not extend to every financial business or every employee, and the FCA says the new conduct rule does not apply retrospectively.

The conduct rules and the Fit and Proper test remain distinct. The new conduct rule focuses on specified work-related behaviour. Fitness and propriety assessments can take account of a broader range of relevant misconduct, including conduct outside work, where it genuinely bears on honesty, integrity, reputation, competence or financial soundness.

The FCA says firms do not need to monitor employees' private lives or social-media accounts, revisit past conduct decisions, or investigate allegations that are trivial, implausible or irrelevant. Firms must also continue to comply with privacy, employment and other applicable law.

This matters because a robust regime is not the same as an indiscriminate one. Allegations should be assessed proportionately, findings should rest on evidence, and managers are accountable by reference to what they knew, what authority they had and what reasonable steps were open to them.

The immediate subject is behaviour within firms, but the FCA's concern is wider than human-resources policy. A culture that tolerates serious misconduct can also weaken challenge, escalation and decision making. Those weaknesses can affect whether customer harm is noticed, reported and corrected.

The new framework does not turn an employment grievance into a consumer complaint or create an automatic right to compensation. It strengthens the accountability regime governing people in financial services. Consumers pursuing a problem with a financial product or service still use the firm's complaint process and, where eligible, the Financial Ombudsman Service.

The Financial Ombudsman Service is an independent dispute-resolution body, not a second financial regulator. It decides individual complaints on what is fair and reasonable. The FCA sets rules for regulated firms and can act across a market. Reform is intended to improve how those roles interact when the same issue starts appearing across large numbers of complaints.

On 11 August 2026, following a joint consultation with the FCA, the Ombudsman confirmed operational changes. New dismissal grounds will apply from 1 October 2026 for complaints that are not appropriate for the service or are better dealt with elsewhere. A new registration stage is planned for 2027, and joint thematic reviews are intended to show firms how complaint outcomes align with regulatory rules.

Some wider changes depend on the Financial Services and Markets Bill now before Parliament. These include a proposed ten-year time limit, subject to exceptions in FCA rules; a referral mechanism for issues with significant sector-wide implications or ambiguity in FCA rules; and powers enabling the FCA to set the response to exceptional mass-redress events.

That sequence is a practical reading of the reform direction, not a new three-step statutory test. The aim is to make complaint handling more informative and preventive, so repeated harm is remedied at source and fewer near-identical cases need to be escalated one by one.

If the reforms work as intended, consumers should see earlier recognition of widespread problems, more consistent outcomes and less need to repeat arguments already established across similar cases. The test will be whether greater predictability for firms is delivered without narrowing effective access to independent redress.

The misconduct framework and redress reform address different failures, but both challenge a reactive culture. A firm should not wait for behaviour to damage its workplace before acting, just as it should not wait for hundreds of customers to reach the Ombudsman before recognising a systemic complaint problem.

For consumers, the important distinction is status. The FCA's non-financial misconduct rule and guidance are already in force. The Ombudsman has confirmed some service changes, but significant parts of the wider redress package still require consultation, implementation or legislation. ConsumerWise will continue to separate what firms must do now from what policymakers propose they should do next.

For help with an individual financial complaint, see the ConsumerWise guide to the Financial Ombudsman Service and the wider complaints and disputes hub.