Odey puts culture on trial: The FCA’s new non financial misconduct framework explained

The FCA’s focus on culture and personal conduct has intensified in recent years and the spotlight on non‑financial misconduct (NFM) has never been sharper. The ongoing Odey litigation, while not assessed under the forthcoming rules, has highlighted how allegations of personal misconduct and how firms deal with them can expose weaknesses in governance, culture, independence, fairness, and oversight. 

Although the FCA finalised the new conduct rule in summer 2025 (through CP25/18) and the new guidance (through PS25/23) in December 2025, the rules and guidance do not come into force until 1 September 2026, meaning the Odey case cannot be assessed under them. However, the case demonstrates the kinds of cultural and conduct risks the FCA intends to address. 

Against this backdrop, PS25/23 provides clarity on expectations for identifying, assessing and responding to NFM within the Code of Conduct (COCON) and Fit and Proper (FIT) regimes. Firms now have limited time to ensure their frameworks meet the new standards.

Background to the changes

NFM emerged as a regulatory priority following DP21/2 and CP23/20. CP25/18 sought views on standardising NFM expectations across non‑bank firms. Following strong feedback, the FCA published PS25/23 with finalised guidance.

The policy direction is clear: personal behaviour, even where not directly financial, can indicate deeper cultural failings and risks to consumer protection, market integrity and operational resilience. The extension of NFM expectations to around 37,000 additional firms reflects this regulatory shift.

What is the new NFM framework?

1. New conduct rule – COCON 1.1.7FR: Serious personal misconduct such as bullying, harassment, discrimination or violence may breach conduct rules where it creates an offensive, intimidating or humiliating environment (among others).
   
   
2. Enhancements to the FIT Test: The FCA has expanded its guidance on how NFM feeds into the FIT assessment. The updated guidance clarifies that certain behaviours, even if non financial, may indicate a material risk of breaching regulatory standards and therefore be relevant to an individual’s ongoing fitness and propriety.

Additional regulatory clarifications

The FCA’s guidance contains several detailed clarifications that go beyond the headline rule changes. These refinements are crucial because they show precisely how the regulator expects firms to exercise judgement in practice. They demonstrate the widening scope of what the FCA now considers “culture risk” - a theme brought sharply into focus by cases like Odey, where boundaries, escalation pathways and leadership accountability have all come under scrutiny.

• Territorial scope: The new COCON rule does not change the way in which COCON applies to overseas staff – COCON only applies to the conduct outside the UK of an employee who works for a UK firm (who is not an senior manager function manager or material risk taker) insofar as it concerns their dealing with a client in the UK.
• Seriousness threshold: Minor incidents will not normally meet the conduct rule threshold.
  Illustrative behaviours: Bullying, harassment, discrimination, sexual misconduct, intimidation and violence are examples that may fall within scope depending on context and impact.
• Manager and senior manager duties: Failures to investigate, escalate or follow up known misconduct (or misconduct they reasonably should have known) may themselves breach the conduct rules.
• No automatic regulatory outcomes under FIT assessments: Decisions must be on a case-by-case basis.

Reporting obligations

Reporting has long been an area of uncertainty for firms, and the FCA’s position in PS25/23 attempts to bring greater consistency. This matters because one of the central questions raised by the Odey case is whether concerns were escalated promptly, documented consistently, and reported where required. The new regime reinforces that reporting is not an administrative formality - it is a core mechanism for demonstrating cultural robustness.

Firms must continue reporting disciplinary actions involving conduct rules staff where a formal warning, suspension, dismissal or remuneration adjustment occurs. The FCA intends to explore streamlining conduct rule breach reporting under wider Senior Managers and Certification Regime reforms.  

Work versus private life – key distinctions

One of the most sensitive and often misunderstood aspects of the new framework is the dividing line between conduct at work and behaviour in private life. The FCA has now provided concrete examples to help firms navigate this area, recognising that cases like Odey blur the boundaries between professional influence, personal behaviour and reputational impact. These distinctions will be critical in guiding fair, defensible decisions.

• Conduct Rules apply only ‘at work’, but this includes client meetings, firm social events and remote working.  The FCA’s table at COCON 1.3.7G provides useful scenarios but firms will still need to exercise their judgement on a case-by-case basis.
• Private life conduct may affect fitness and propriety where it shows that there is a material risk that the person will breach the standards and requirements of the regulatory system. Examples of such conduct include dishonesty, violence and sexual misconduct.
• Social media used privately may be relevant to fitness and proprietary if social media activity demonstrates a material risk of breaching regulatory standards.

Leadership and cultural expectations

If the Odey litigation has demonstrated anything, it is that culture mirrors the conduct of senior leaders. PS25/23 reinforces this reality, placing heightened emphasis on leadership tone, oversight responsibilities, and the role of senior managers in shaping and safeguarding organisational culture.

The regime places particular weight on how firms handle allegations involving individuals with significant influence - a recurring theme in recent high profile cases. Senior leaders must be aware of power dynamics, maintain high standards of personal conduct, and ensure consistent application of behavioural expectations. Tone, context and seniority remain central to regulatory assessments.

What firms should be doing now

With the rules finalised and implementation approaching, firms must translate the FCA’s expectations into tangible action. The Odey case shows the risks of fragmented approaches to culture and conduct and why proactive preparation is now essential.

In order to ensure readiness, firms should:

• Conduct a gap analysis against PS25/23.
• Update conduct, grievance, disciplinary, whistleblowing and anti‑harassment policies.
• Consider their approach to conduct breach reporting, FIT assessments, and regulatory references.
• Provide NFM training, including sessions for senior managers.
• Strengthen speak‑up mechanisms and review cultural data.
• Assign clear senior management accountability for NFM.
• Review escalation models and threshold frameworks.

Key takeaways

The themes emerging from PS25/23 and highlighted so starkly by the Odey proceedings point to a single conclusion: culture is now a regulatory issue, not an internal one. These key takeaways distil the core messages for senior leaders navigating the transition into the new NFM framework:

• Early preparation is essential.
• NFM requires fair, consistent judgment.
• NFM now sits firmly within FCA conduct, cultural and governance expectations.
• Firms investing early in cultural alignment and systems will be better positioned for supervisory scrutiny.

The Odey proceedings have served as a stark reminder that cultural issues rarely stay contained.  Once exposed, they quickly become matters of regulatory scrutiny, reputational risk and public accountability. Although the case predates the new NFM regime and cannot be judged against the forthcoming standards, it has illustrated precisely the types of behaviours, governance failings and escalation gaps that the FCA is now seeking to address.

As the industry prepares for September 2026, the message is clear: firms cannot afford to treat NFM as a peripheral HR issue. Those that take culture seriously now will be significantly better positioned to meet regulatory expectations, protect their people and safeguard their reputation when the new standards take effect.

How we can help

We support firms with implementing NFM frameworks, conducting investigations, and aligning regulatory, cultural and employment law expectations. For tailored advice, please contact Caroline Stevenson.

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