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The FCA’s latest proposals on non-financial misconduct (NFM) will add an additional factor to corporate transactions in the financial services sector. With new rules extending the regulatory spotlight to a wider range of firms, acquirers should consider NFM risks and policies as part of their due diligence processes. This development is set to influence risk assessment and post-completion integration, making NFM compliance a concern for buyers and sellers alike.

On 2 July 2025, the Financial Conduct Authority (FCA) published Consultation Paper CP 25/18, outlining new rule changes and proposals to tackle NFM in the financial services industry. NFM refers to the type of serious misconduct described in the new rules and covers behaviour such as bullying, violence and sexual harassment which do not involve financial wrongdoing but can breach regulatory standards and seriously undermine workplace culture. The publication follows concerns being raised by the regulator about NFM behaviours going unchallenged in certain pockets of the industry.

Previously, only banks were subject to wider scope rules. The new final rules extend the scope of the Code of Conduct (COCON) sourcebook and align the rules more closely between banks and non-banks, so that COCON now applies the conduct rules to staff of all FSMA firms holding a Part 4A permission (eg insurers, consumer credit lenders, asset managers etc) when they are performing tasks for their regulated employer, irrespective of whether or not those tasks are part of the firm’s regulated activities (SMCR financial activities).

The revised rules have also been adjusted to align more closely with employment law and in particular the definition of ‘harassment’ as set out in the Equality Act 2010.

The rule changes will come into force on 1 September 2026 and will not apply retrospectively.

Proposals for consultation include:

• COCON – The FCA’s proposed amendment to the rules on NFM in COCON. In addition, the FCA will consider providing additional guidance in COCON on how NFM can be a breach of the COCON rules with examples of scenarios illustrating the boundary between work and private life, when conduct is outside of a firm’s SMCR financial activities and when NFM may be out of scope in a non-bank.
• Fit and Proper test for Employees and Senior Personnel (FIT) – The FCA proposes including explanatory material on how various types of conduct, including NFM, are relevant to fitness and propriety and form part of the FIT section of the FCA Handbook, including the relevancy of similarly serious behaviour in a person’s private or personal life.

What does this mean?

• Risk and exposure – The extension of NFM rules means that regulatory risk in relation to workplace conduct will be relevant to a much wider range of transactions. Failure to comply and subsequently address any issues of non-compliance relating to NFM could expose a regulated firm and, as a consequence, a buyer to possible regulatory scrutiny and reputational damage.
• Due diligence – Buyers considering the acquisition of a financial services business should now assess whether the target has effective policies and procedures in place to address NFM, including checking staff awareness and training. If such policies are absent post-September 2026, it would be advisable to recommend their introduction post-completion and to align the target’s compliance, HR and governance (eg board) with the buyer’s on NFM going forward to ensure regulatory compliance.
• Integration and governance – Firms should ensure that NFM compliance is integrated into any target’s policies, systems, board reporting and senior management attestations. This will help demonstrate ongoing commitment to regulatory standards and mitigate future risks of both employment claims and regulatory scrutiny, as well as ensuring that a safe workplace culture is being promoted.
• Communication to staff – Although the COCON rule change does not come into effect until next year, firms are reminded of their duty under section 64B of the Financial Services and Markets Act 2000 to notify staff about the conduct rules and take all reasonable steps to make sure they understand how they apply to them. Firms are expected to keep these requirements under review and will need to update internal conduct documents and training materials to properly reflect the new rules and guidance.

What’s next?

The consultation closed on 10 September 2025. The FCA is currently reviewing feedback and is expected to set out its final regulatory approach before the end of the year.

• The resumption of the early termination program has already resulted in a notable increase in the number of early termination requests granted. Based on historical data (FY2011 to FY2020), roughly 79% of early termination requests were granted each year. With the suspension of early termination granting in February 2021, the percentage of transactions granted early termination essentially dropped to 0%. Although the precise percentage of transactions granted early termination may vary, it is reasonable to expect a return to the pre-FY2021 standard. Note, however, that a grant of early termination does not necessarily result in a substantially shorter HSR waiting period.⁶
• A renewed willingness on the part of the Agencies to consider remedies is providing merging parties with more avenues to resolve antitrust issues and, ultimately, consummate transactions. This is already playing out in practice, with several transactions in recent months addressing concerns raised by the Agencies via consent decrees and settlements.

Up next: forthcoming client alerts

The latest edition of our merger control trends report will delve further into developments in U.S. merger control and impacts on merging parties, as well as provide global trends in merger control enforcement.

Footnotes

1. See, e.g., Jonathan Kanter, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Just., Remarks to the New York State Bar Association Antitrust Section (Jan. 24, 2022) “[W]hen the division concludes that a merger is likely to lessen competition, in most situations we should seek a simple injunction to block the transaction. It is the surest way to preserve competition.”

2. Of the total number (2,031) of notified transactions, 1,973 were subject to HSR review. Notified transactions that are not subject to HSR review include: (i) incomplete notifications, (ii) exempt transactions (e.g., which are reviewable by another federal agency but are still subject to filing with the FTC and DOJ), (iii) non-reportable transactions, and (iv) withdrawn transactions.

3. On February 10, 2025, new HSR rules and merger notification forms came into effect. The new rules and forms were unanimously approved by all five FTC Commissioners, with a concurrence from the DOJ, on October 10, 2024. See our prior client alert on this topic. 

4. See supra note 3.

5. The FTC has not yet released September 2025 preliminary HSR Transactions data.

6. Current reporting suggests that, in some cases, the Agencies are granting early termination shortly before, or on the day of, the end of the 30-day waiting period (see Flavia Fortes and Wesley Brown, Early terminations of US merger period being granted at the last minute, MLEX (Sep. 24, 2025)).