FCA Non-Financial Misconduct: Your HR Could Be Your Downfall

A Joint Regulatory Update from RRCA Compliance & Angels Admin Support

The Financial Conduct Authority's approach to non-financial misconduct has shifted from reactive to proactive. What was once considered HR territory is now firmly within the scope of regulatory scrutiny, with the FCA explicitly stating that firms' culture, governance, and treatment of staff directly impact consumer outcomes and market integrity.

The uncomfortable truth is that many financial services firms, brokers, and MGAs are walking a compliance tightrope with outdated, inadequate, or entirely missing HR frameworks that could trigger regulatory action at any moment.

A Regulatory Watershed Moment – The Employment Rights Bill

The sweeping changes that came into effect in April 2025 aren't just employment law updates; they're FCA compliance landmines waiting to explode. The Employment Rights Bill has fundamentally altered the rights of employees, and firms that haven't adapted their HR policies and processes are now operating in direct contravention of both employment law and FCA expectations.

Key changes that will demand immediate attention:

• Day-one flexible working rights mean employees have the right to make a flexible working request from day one, and failure to have robust policies could trigger discrimination claims and FCA scrutiny around fair treatment.  Although this has now been delayed, coming into force in 2026, firms will need to start their review processes now.

• April 2025 – The enhanced neonatal care provisions mean you need to make sure that you have family-friendly policies in place.

• Strengthened redundancy protections will be coming into force.

• Gender pay gap reporting deadlines for employers with more than 250 staff came into force in April 2025.

The FCA's Non-Financial Misconduct Enforcement Reality

The regulator isn't issuing gentle warnings anymore. Recent enforcement actions demonstrate a clear pattern:

Cultural failings are treated as serious regulatory breaches. Poor HR practices aren't just employment issues; they're indicators of inadequate governance, risk management failures, and potential consumer detriment.

In adherence with the non-financial misconduct rules, the FCA expects firms to demonstrate:

• Robust recruitment and vetting procedures

• Clear, up-to-date employment contracts and job descriptions

• Comprehensive employee handbooks reflecting current law

• Effective grievance and disciplinary processes

• Regular, documented performance management

• Ongoing training on diversity, equity, inclusion, and conduct standards

Regulatory action is expensive. 

Beyond the immediate fines and enforcement costs, the commercial damage extends far deeper into every aspect of your business operations. Reputational damage from FCA disciplinary actions becomes a permanent public record that follows your firm indefinitely. At the same time, regulatory investigations create significant business disruption as senior management time and resources are diverted from revenue-generating activities to compliance firefighting.

The insurance implications alone can be catastrophic, with professional indemnity and regulatory cover potentially compromised precisely when you need it most. Client confidence erodes rapidly when regulatory issues surface, directly impacting business development opportunities and threatening existing client retention. Meanwhile, recruitment becomes increasingly challenging as top talent actively avoids firms with known compliance issues, creating a vicious cycle that undermines long-term business sustainability.

The hidden cost? Many firms discover their inadequate HR processes during regulatory visits, when it's too late for quiet remediation.

Would Your Current HR Policies Pass or Fail an MOT?

Ask yourself honestly:

Governance & Documentation

• Are all employee contracts compliant with the April 2025 changes?

• Do job descriptions accurately reflect roles and regulatory responsibilities?

• Is your employee handbook current and legally compliant?

Culture & Conduct

• Have all staff completed mandatory training on diversity, equity, and inclusion?

• Are grievance and disciplinary policies and procedures robust and consistently applied?

• Do you have clear policies on non-financial misconduct?

Risk Management

• Are performance reviews current, documented, and addressing conduct issues?

• Is your recruitment process designed to identify potential misconduct risks?

• Do you have adequate onboarding processes for regulatory awareness?

If you answered 'no' or 'uncertain' to any of these questions, you're operating with significant regulatory risk.

What Happens if The Regulator Conducts a Routine Visit?

Picture this: The FCA arrives for a routine visit. They ask to review:

• Recent disciplinary actions and their handling

• Evidence of your commitment to diversity and inclusion

• How have you adapted to recent employment law changes

• Your processes for identifying and managing conduct risks

Can you confidently produce comprehensive, up-to-date documentation that demonstrates regulatory compliance?

The Path Forward: Professional Partnership

This isn't a challenge you should face alone. The intersection of employment law, HR best practice, and FCA compliance requires specialist expertise that most firms don't maintain in-house.

Angels Admin Support brings practical, sector-specific HR expertise, working alongside RRCA Compliance, we ensure your HR framework doesn't just meet current requirements, it anticipates future regulatory expectations and protects your business.

Angel Admin Support provide a wide range of templates, guidance, advice and resources on a pay-as-you-go or retainer basis, so you know your HR is in good hands.

How To Get Your HR on Track

We know that many firms have little or no HR support. Maybe you’re relying on software for updates and templates, but you need the human touch to help you embed the changes across your business.

Our comprehensive HR health audit addresses:

• Full contract and policy audits against current legislation

• Employment Rights Bill compliance reviews

• Disciplinary and grievance procedures

• Training programme development and delivery if needed

Compliance: Act Now

The FCA's focus on non-financial misconduct isn't a trend; it's the new normal. Firms that adapt their HR practices proactively will thrive.

Your next step is simple but critical: Get your HR infrastructure independently assessed by professionals who understand both employment law and FCA expectations.

Don't wait for a regulatory visit to discover your vulnerabilities.

Contact Angie at Angels Admin Support today for your confidential HR compliance review: angie@angelsadminsupport.co.uk