New FCA changes significantly increase the overlap between employment law and individual professional regulation: Will Clayton comments.
The FCA's new rules on non-financial misconduct, which came into force on 1 September 2026 expand those workplace allegations that can now become a career-ending regulatory problem. Allegations of bullying, harassment or violence can engage the FCA's Conduct Rules and fitness and propriety regime and the consequences of getting that assessment wrong can be profound.
For non-bank SM&CR firms, the Conduct Rules now expressly extend to serious bullying, harassment and violence towards colleagues where there is a sufficient work-related link, even where it involves a single incident.
But not every finding of workplace misconduct is a Conduct Rules breach and not every Conduct Rules breach means that somebody is no longer fit and proper.
Distinction between COCON and FIT
COCON and FIT are separate regimes and the distinction matters enormously when investigating allegations against Senior Managers and Certified Persons.
A regulated employer may now have to answer at least three distinct questions:
What actually happened, and does it amount to misconduct under the employer's disciplinary rules?
Does the conduct fall within COCON and, applying the FCA's tests, amount to a Conduct Rules breach?
Separately, what, if anything, does it say about the individual's fitness and propriety?
There is both the temptation and a real danger in allowing those questions to merge but an HR finding of "bullying" or "harassment" should not simply be converted into a regulatory finding.
The FCA's own guidance requires considerably more analysis. Seriousness matters. Context matters. The individual's intention, recklessness or carelessness may matter. The work-related connection matters. And FIT requires its own assessment of relevance and significance.
The distinction between work and private life is also more nuanced than some headlines about the new regime suggest.
Conduct outside the COCON perimeter may still potentially be relevant to fitness and propriety. But that does not give regulated firms carte blanche to police employees' private lives.
Why the changes matter
For the individuals concerned, the stakes can be exceptionally high. What starts as an internal grievance or HR complaint can potentially lead to:
• disciplinary proceedings;
• dismissal;
• a Conduct Rules finding;
• an adverse fitness and propriety assessment;
• regulatory notification; and
• consequences for future employment and regulatory references.
In other words, an allegation about workplace behaviour can potentially follow somebody long after the employment relationship has ended. That is why the quality and fairness of these investigations matters.
For regulated employers, the new regime means that HR, Employment Legal, Compliance and Regulatory Legal need to be clear which question they are answering, under which test, and on what evidence.
For Senior Managers and Certified Persons facing serious allegations, it means recognising from the outset that there may effectively be two cases to defend: the employment case and the regulatory case.
That is also why early, joined-up specialist advice is so important.
Joined up advice
These cases do not fit neatly into an employment law box or a regulatory law box. Decisions taken at the beginning of an internal investigation — about its scope, the evidence, suspension, interviews, findings and regulatory notifications — can have consequences across both.
At Constantine Law, our employment and regulatory specialists work together on precisely these kinds of cases, acting both for regulated firms and for Senior Managers and Certified Persons whose careers may be at stake.
That multidisciplinary approach matters. The employment strategy needs to take account of the regulatory consequences from day one — and the regulatory strategy needs to understand the employment process in which the allegations are actually being determined.
By the time an employment investigation has concluded, it may be too late to undo a decision which has created an avoidable regulatory problem.
The FCA's changes significantly increase the overlap between employment law and individual professional regulation.
For firms and individuals alike, getting specialist advice early may therefore be just as important as getting the eventual decision right.
Will Clayton is a partner at Constantine Law.
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