City firms race to comply as FCA expands bullying and harassment crackdown to 40,000 companies

The Financial Conduct Authority (FCA) is widening the scope of its conduct rules to cover approximately 40,000 firms, including hedge funds, asset managers, insurance companies and pension funds. From next month, these firms will be obliged to report any allegations or findings of bullying, harassment, or other non-financial wrongdoing to the regulator, just as banks have done since 2015.

The move follows a series of high-profile scandals across the financial sector that exposed systemic failures in workplace culture. The FCA has argued that non-financial misconduct is not a separate issue from financial misconduct — it often signals deeper cultural problems that can lead to consumer harm and market abuse.

Industry bodies have acknowledged the need to tackle toxic cultures but warn that the expanded regime could be burdensome, particularly for smaller firms with limited compliance resources. The Investment Association and the Alternative Investment Management Association (AIMA) have both urged the FCA to provide clearer guidance on what constitutes a reportable event and to ensure proportionality.

Firms are now racing to update their internal policies, train staff, and establish reporting lines to the FCA. Many are hiring external consultants to conduct cultural audits. The FCA has indicated it will take a tough stance on firms that fail to comply, with potential fines and enforcement action.

Employee advocates and whistleblowing groups have welcomed the expansion, saying it will protect workers and hold firms accountable. However, some critics question whether the FCA has the resources to handle the expected surge in reports, and whether the rules will genuinely change behaviour or simply generate more paperwork.

The FCA has stressed that the new rules are part of a broader effort to improve accountability and trust in the financial services industry, which employs over one million people in the UK.

Why This Matters

The expansion affects nearly 40,000 firms, bringing thousands of non-bank financial institutions under the same conduct rules that banks have faced since 2015 — a significant regulatory shift.
For employees, the rules may provide stronger protections against workplace bullying and harassment, but will also require firms to invest in compliance infrastructure.
The success of the crackdown depends on the FCA's enforcement capacity and whether firms treat the new requirements as a box-ticking exercise or a genuine cultural change.

Background

The FCA's conduct rules were originally introduced after the 2012 LIBOR scandal and the Parliamentary Commission on Banking Standards, which highlighted the link between poor culture and financial misconduct. Banks were required to report non-financial misconduct from 2015. Over the past decade, allegations of bullying and harassment have persisted across the City, including at hedge funds and asset managers. The FCA conducted a consultation in 2024 proposing to extend the rules, which closed in early 2025. The final rules were published in June 2026, giving firms a three-month implementation window.

Key Perspectives

[FCA]: The regulator views non-financial misconduct as a leading indicator of broader cultural failures that can result in poor outcomes for consumers and markets. It argues that extending the rules is necessary to protect market integrity and hold individuals accountable. [City firms and industry bodies]: Many firms accept the principle but worry about the practical implementation, especially for smaller firms. They are calling for clearer guidance on what must be reported and for a proportionate approach to avoid excessive compliance costs. [Employee advocates and whistleblowers]: They welcome the expansion as a long-overdue step that will give workers a formal channel to report misconduct without fear of retaliation. They hope the FCA will use its enforcement powers to hold senior managers responsible. [Critics]: Some question whether the FCA has the resources to process thousands of new reports, and whether the rules will lead to a flood of vexatious complaints. Others argue that regulation alone cannot change workplace culture — firms need to embed values from the top.

What to Watch

The number of reports filed in the first quarter after the rules take effect, and the FCA's response time and enforcement actions.
Any legal challenges from firms that argue the rules are too broad or disproportionate.
Whether the FCA publishes aggregated data on complaints, which would provide a benchmark for cultural health across the industry.

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