The FCA’s new rules on non-financial misconduct: whistleblowing and the rising burden on managers

This is our fourth article in our series on the FCA’s new rules on non-financial misconduct, which come into force on 1 September 2026. Our series focuses on key issues for HR professionals and other individuals with responsibility for people issues in regulated financial services firms. 

In this article, we look at the role of managers in the new regulatory framework, particularly in the context of speak up and whistleblowing channels.

The FCA’s new rules and guidance on non‑financial misconduct come into force on 1 September 2026. Internal reporting and escalation channels will play an increasingly critical role in identifying and addressing non-financial misconduct within the workplace and in work-associated environments. 

The role of managers in tone-setting and culture

The FCA guidance sets the bar high for managers’ diligence in spotting, intervening, preventing and reporting non-financial misconduct (such as bullying, harassment and other forms of inappropriate conduct) in the workplace and in work-associated environments.  In this context, ‘managers’ includes both Senior Managers holding Senior Management Functions within FCA-regulated firms and also small ‘m’ managers who are subject to the Conduct Rules. 

There is additional jeopardy for managers because they are at risk of personal breach of the Conduct Rules for failing to take steps to prevent non-financial misconduct that falls within the rules' regulatory reach. 

What does this mean for managers?

The FCA accepts that managers cannot be responsible for failing to stop non-financial misconduct if they could not reasonably have known about it.  However, failures by a manager to take reasonable steps to prevent non-financial misconduct may amount to a breach of Conduct Rule 2 (the duty to act with due skill, care and diligence).  The FCA has given some examples of potential managerial failures, which could result in failures to prevent and/or failures to act.  These examples include: 

• failing to intervene where appropriate if the manager knows or should know of the misconduct
• failing to operate the firm’s policies appropriately
• failing appropriately to deal with complaints.

The role of managers and whistleblowing

There is particular focus in the guidance on whistleblowing, given the importance of speak ups in the new framework.  In a whistleblowing context, a manager may be personally accountable in the following (non-exhaustive) circumstances:

COCON Rule 1 – Act with Integrity

A manager will be in breach of Conduct Rule 1 if they retaliate or allow retaliation against a worker who has:

• raised concerns through the firm’s internal whistleblowing channels
• reported misconduct to the FCA (or PRA)
• participated in an investigation into non-financial misconduct. 

Conduct Rule 2 – Act with Due Skill, Care and Diligence

A manager will be in breach of Conduct Rule 2, if they fail to take reasonable steps to:

• prevent or stop harassment, bullying or similar misconduct if they know or should know about it
• implement or operate policies and controls that detect and address non-financial misconduct
• appropriately investigate complaints and ensure fair outcomes
• create a workplace where people feel safe to speak up
• escalate concerns beyond their function if they are lacking in authority to act directly.

The bar for managers’ diligence is high – perhaps higher than firms might expect.  There is, therefore, clearly a role for HR to ensure that managers feel supported and equipped to act (and react) in the face of potential non-financial misconduct.  Key to that support is training, clear escalation channels and consistency across the firm. 

Wider employment law changes

These developments sit alongside extensive employment law changes to the law of harassment more generally.  The Employment Rights Act 2025 is introducing broader protections against third-party harassment, clearer protections for whistleblowers and certain restrictions (still to be determined)  around the use of non-disclosure agreements. 

How can HR practically support managers?

From an HR compliance perspective, firms may consider taking the following steps:

• consistent and regular training for managers on ways of identifying, responding to and escalating non-financial misconduct concerns
• establishing clear, accessible and confidential reporting channels (which may include anonymous routes)
• ensuring that managers are aware of those channels and can point workers to them
• reviewing investigation frameworks to ensure that these are fit for purpose
• encouraging a speak up culture through training and line manager messaging so that workers must feel supported in raising concerns, that their concerns will be taken seriously, and that they will be protected from retaliation.

Ultimately, firms should be looking to identify concerns from an early stage, ensuring that concerns are addressed before they escalate and expose managers to personal regulatory scrutiny.  

You can catch up on our earlier articles here: 

The FCA’s new rules on non-financial misconduct: key issues for HR professionals in regulated firms

The FCA’s new rules on non-financial misconduct: dealing with issues which arise in an employee’s private life

The FCA’s new rules on non-financial misconduct: social media and the right to offend

If you have any questions about the impact of non-financial misconduct reform on your firm, then please do not hesitate to get in touch with James Green, Carlene Nicol or your usual Burges Salmon contact.