PIMFA
Regulatory Update
Developing a diverse and inclusive culture is essential to achieving positive consumer and business outcomes. The FCA has made clear they want to see an industry where everyone has the opportunity to succeed based on their abilities, regardless of background, and where diverse perspectives are valued. Creating an environment where people feel safe to speak up is essential to supporting strong cultures that promote consumer protection and market integrity.
In 2023 the FCA consulted on proposals to introduce a new regulatory framework on Diversity and Inclusion (D&I) in the financial sector (CP23/20 Diversity and inclusion in the financial sector – working together to drive change). This built on their July 2021 Discussion Paper (DP21/2). The FCA stated that greater diversity and inclusion can help by ensuring that firms benefit from a broad range of skills, knowledge and experiences, both in their decision-making and throughout the design and provision of products and services. Yet diversity by itself is unlikely to be sufficient. Firms also need to foster inclusive and healthy workplace cultures in which staff from all backgrounds feel comfortable contributing, speaking up and challenging ingrained views and practices.
On 8 March 2024 the House of Commons Treasury Committee published its report on its Inquiry into Sexism in the City. Its predecessor Committee in 2018 identified a range of barriers faced by women in financial services that contributed to gender inequity, including poor workplace cultures, unconscious bias and the impact of maternity leave and childcare. The Committee said that, disappointingly, five years on, many of the barriers identified in 2018 remained stubbornly in place. The Committee made recommendations necessary for tackling sexism in financial services, including:
- Legislation to ban the use of non-disclosure agreements (NDAs) in sexual harassment cases
- Stronger protections for whistleblowers in sexual harassment cases
- Ban on prospective employers asking for salary history
- Legal requirement to include salary bands on job adverts
- Reduce the size threshold for gender pay gap reporting from 250+ to 50+ employees for firms in the financial services sector
- Businesses with wide gender pay gaps must explain the disparity and publish an action plan
- Regulators should drop their plans for extensive diversity data reporting and target settin
On 11 March 2025 the FCA confirmed that in light of expected legislative developments and to avoid additional burdens on firms, a decision had been made not to move forward with proposed diversity and inclusion (D&I) rules for financial firms. Instead, the FCA decided to prioritise the work to tackle non-financial misconduct, which can help to improve outcomes for markets and consumers and reduce harm. The FCA issued an update in a letter to the Treasury Select Committee:
In July 2025 the FCA published Consultation Paper 25/18 Tackling non-financial misconduct in financial services Consultation on guidance in the Code of Conduct (COCON) and the Fit and Proper Test for Employees and Senior Personnel (FIT) sourcebooks including Policy Statement on amendment to the Code of Conduct (COCON) (CP23/20). The FCA confirmed final rules in a Policy Statement (PS), extending existing non-financial misconduct (NFM) rules in banks to non-banks. The regulator also consulted on whether additional Handbook guidance was needed to support firms in applying the rules consistently.
The FCA said that robust and appropriate action to tackle NFM within firms helps foster healthy and inclusive workplace cultures where people are empowered to speak up and raise concerns. This supports the FCA’s objectives by:
- Deterring wrongdoing that can harm individuals and contribute to an unhealthy workplace culture.
- Preventing the development of workplace cultures that facilitate further wrongdoing and regulatory breaches that result in consumer harm and damage to market integrity.
- Countering ‘rolling bad apples’ by including NFM in the regulatory references provided to prospective employers.
- Attracting and retaining a wider range of people in financial services, increasing diversity of thought and experience.
- Fostering psychologically safe workplaces that nurture creativity and promote innovation in the interests of consumers.
- Promoting constructive challenge and better decision-making, supporting good governance and appropriate risk taking.
- Upholding regulatory standards and public confidence in the financial sector
On 12 December 2025 published its final guidance on Non-Financial Misconduct in its Policy Statement PS25/23 Tackling non‑financial misconduct in financial services Guidance in the Code of Conduct (COCON) and the Fit and Proper test for Employees and Senior Personnel (FIT) sourcebooks. The guidance covers how firms can apply the rules on minimum standards of behaviour for financial services employees, and the factors they should take into account when assessing whether someone is fit and proper for their role. The new guidance will come into force on 1 September 2026.
The FCA made some small changes to address the main areas of feedback:
- New examples and flow charts to support the application of the new rule.
- Clearer alignment with employment law.
- Clarification that managers’ accountability is relative to their knowledge and authority.
- Clarification that firms are not expected to investigate trivial or implausible allegations or breach privacy law.
The FCA states that tackling NFM in firms helps foster healthy and inclusive workplace cultures where people are empowered to speak up and raise concerns. This supports the FCA’s objectives by:
- Supporting firms to make fair, consistent decisions and take decisive action when standards are breached.
- Deterring wrongdoing that can harm individuals and create an unhealthy workplace culture.
- Preventing the development of workplace cultures that facilitate further wrongdoing and regulatory breaches that harm consumers and damage market integrity.
- Improving standards of behaviour by including NFM in regulatory references to ensure past misconduct is disclosed when individuals move firms.
- Attracting and retaining a wider range of people in financial services, increasing diversity of thought and experience.
- Fostering psychologically safe workplaces that nurture creativity and promote innovation in consumers’ interests.
- Encouraging constructive challenge and better decision making, supporting good governance and responsible risk taking.
- Upholding regulatory standards and public confidence in the financial sector
The FCA confirms that the publication brings their policy work on NFM to a close and the regulator will now focus on how firms are tackling it in practice.
