The rule can tell people what not to do, but it cannot tell leaders how to lead

The FCA's expanded non-financial misconduct rules take effect from September, and they are a welcome and necessary step. But a rule can only ever be part of the answer. It tells firms what falls short, it does not tell a manager how to spot the early, cumulative version of a problem, or how to have that conversation once they've spotted it. That gap, between what the rule requires and what leadership actually has to do, is where most of this will be won or lost.

It's a gap the Chartered Insurance Institute has been examining directly, through a programme of research applying behavioural science to why non-financial misconduct persists despite the controls already in place. Their first phase, a literature review into the dynamics that let misconduct take root and stay concealed, reached a conclusion I've long believed, that regulation is necessary but not sufficient. In-group loyalty, normalisation, the quiet tolerance of a high performer's behaviour because of what they generate, these run deeper than a rulebook can reach. It's why I've been delighted to accept an invitation to join the CII's NFM advisory board for the next phase of this work, alongside a genuinely thoughtful group of practitioners on the same journey - moving the sector from compliance towards real cultural and behavioural change, rather than assuming one produces the other.

What stood out most in the CII's findings is that the hardest cases are rarely the clear ones. They sit in the grey areas of poor management, personality clashes or conduct that is inappropriate without quite meeting a defined threshold. Guidance cannot draw a hard line through territory like that. What it can do is expect firms to build the internal capability to exercise judgement, consistently, and that capability sits with leaders, not the policy documents.

That is an implementation dependency. A manager who notices a problem early and knows how to raise it does more for a firm's culture than the escalation matrix they follow. The extent to which these rules drive real change will rest on the strength of that leadership capability, not on the rules alone.

In my experience, grey-area conduct is rarely missed because no one noticed it. Someone usually did, and brought it to a leader, in a comment, a hesitation, a version of the story that didn't quite add up. What happens next depends on whether that leader is curious enough to follow it, or whether the quieter option of letting it pass, not making it their problem, wins out. The leaders who handle this well aren't just watching for it themselves, they've built a habit of taking other people's observations seriously enough to let them surface. That takes a leader who knows their own values well enough to act on what they're hearing, and who works just as hard at helping the people around them do the same.