As the Financial Conduct Authority (FCA) sharpens its focus on non-financial misconduct, new draft guidance has been released to clarify how firms should address bullying, harassment, and other forms of inappropriate behaviour. The regulator’s move is part of a broader mission to deepen trust in the financial services sector by ensuring workplace culture aligns with expected standards of conduct.

But while the FCA’s intentions have been welcomed by many, employment law experts are warning that the current proposals may not go far enough to protect either victims or the wrongly accused.

“A positive development — but there are significant shortcomings,” said Justin Murray, Employment and Litigation Partner at law firm Spencer West LLP.

Murray acknowledged that the FCA’s draft guidance is a step in the right direction, particularly for employees seeking more robust protections in cases of bullying and harassment. However, he cautioned that practical and legal gaps in the system could limit the impact of the regulator’s efforts.

“Employees who face bullying or harassment often rely on internal grievance processes, which may be dealt with unfairly,” he explained. “This can leave them with no option but to resign and pursue lengthy Employment Tribunal claims — a process that can result in stigma and reduced employability.”

On the other side, Murray warned that employees who are falsely accused of misconduct face serious consequences, including dismissal, regulatory reporting, and damaging references that could render them unemployable for years.

“Those wrongly accused of misconduct risk disciplinary action and regulatory references meaning unemployability for at least six years,” he said. “Yet, there are no regulatory sanctions for firms failing to investigate grievances properly, nor any mechanisms for the FCA to correct wrongful findings.”

The FCA’s push to address non-financial misconduct follows growing scrutiny over toxic workplace cultures and their broader impact on trust in financial markets. Yet, as Murray notes, unless firms are held to account for the way they handle grievances — and individuals have accessible routes to challenge unfair outcomes — the guidance may fall short of its intended purpose.

“These gaps undermine the effectiveness of the new guidance,” Murray concluded. “They need to be addressed if we are serious about eliminating workplace misconduct — both financial and non-financial — across the industry.”

The FCA’s draft guidance remains open for consultation. As the sector reflects on its next steps, many will be watching closely to see whether the final framework provides both the protection and accountability the industry now demands.