Regulator faces fire over new rules - is it overstepping?
A regulatory expansion by the Financial Conduct Authority (FCA) has reignited a debate over the limits of its remit, as critics question whether a financial regulator is the right body to oversee workplace conduct such as bullying, harassment and violence.
From September 2026, some 37,000 regulated firms beyond banking will be required to report substantiated cases of serious personal misconduct in staff regulatory references. The FCA says the move aims to align standards across the financial services sector and boost trust in the industry. But several observers are questioning whether the regulator has overreached - or strayed too far from its core mandate.
“This is grade A mission creep,” wrote Andrew Griffith MP, former City Minister and Shadow Secretary of State for Business and Trade, in a strongly worded LinkedIn post. “It’s a perfect example of the unintended consequences of having too many well paid, deeply ‘woke’, public sector regulators making work for themselves.”
Griffith argued that matters such as harassment and violence are already governed by existing criminal, employment and civil law. “Clearly that conduct and those offences are wrong - I don’t condone or diminish in any way,” he said. “But at a time the FCA should be straining every sinew to help the UK’s flagging competitiveness… what on earth are they playing at?”
The post, widely circulated in Westminster and among City professionals, expressed concern that the FCA’s priorities were misaligned at a time when the UK is struggling to attract international listings and capital investment. “There is more rain on the moon than London IPOs right now,” Griffith quipped.
Between principle and practicality
The FCA’s position is that misconduct - even where non-financial - has a bearing on fitness, propriety and firm culture, and therefore on consumer trust and market integrity. But the regulator’s increasingly expansive interpretation of its conduct remit has fuelled criticism that it is drifting beyond its core competencies.
Brokers working at the intersection of finance and client interaction hold a more mixed view.
“I guess it’s in the name to a degree. You know - the Conduct Authority,” said Harry Arnold of Anderson Harris. “Being decent and kind is just a fundamental part of how we go about [business]. I don’t need a regulator to tell me not to be rude to the people on the end of the phone.”
Yet Arnold also acknowledged that poor conduct does occur - and that the idea of conduct being regulated may not be entirely misplaced.
“We deal with a whole host of other intermediaries… most of those institutions are much bigger than us,” he said. “So conducting yourself correctly, maybe that does need to be something that a regulator gets involved in.”
Arnold also raised a note of concern about the regulatory imbalance between consumer protections and adviser welfare. “There’s a huge onus on how advisers treat consumers,” he said. “But I do wonder sometimes whether there’s a bit of a misunderstanding about what goes on for advisers… what’s there to protect me?”
A wider credibility gap?
The FCA has already come under scrutiny this year for its regulatory approach and its impact on growth and competitiveness. In March, the House of Lords Industry and Regulators Committee criticised the UK’s financial services regulators for a “lack of accountability and transparency” and warned of overregulation deterring investment.
Meanwhile, former Chancellor Kwasi Kwarteng called for a “radical action plan” to reduce regulatory burdens in financial services and reignite economic growth, warning that “UK competitiveness has been left behind”.
A recent Insurance Business UK survey of industry responses to the Lords report found that the FCA’s expanding scope - particularly in areas outside pure financial regulation - has raised concerns among brokers, insurers and legal professionals alike. Some argue that while cultural change is essential, behavioural oversight may sit better within HR, law enforcement or professional bodies.
The road ahead
Despite the criticism, the FCA is pressing forward. Its rules will require firms to take a more active role in assessing behavioural misconduct - and, crucially, to ensure it follows individuals between employers via formal references. Whether this marks a necessary evolution of professional standards or a case of regulatory overreach remains a live question.
For now, industry participants are being asked to respond to ongoing consultations about the implementation and scope of the changes. But the broader challenge facing the FCA may be one of credibility - convincing firms, advisers and policymakers that it is not only right in principle, but also the right institution to drive this change.
