What are the FCA Conduct Rules?
The FCA's Conduct Rules form a fundamental part of the Senior Managers and Certification Regime, which will apply to almost all FCA authorised firms from December 2019. To understand the part the Conduct Rules play, think of the Regime as a pyramid, with the Senior Managers Regime at the top, the Certification Regime in the middle, and the Conduct Rules forming the base. The Senior Managers Regime is designed to ensure that those in the most senior positions have the skills, knowledge and capability required to do the job and are accountable for their actions. The Certification Regime is designed to ensure that those with significant impact within the firm are skilled, knowledgeable and capable. Both Senior Managers and Certified staff should be assessed and certified as fit and proper at least once a year. The Conduct Rules apply to all firms, and to all staff within a firm, with the exception of ancillary staff (e.g. Receptionists, Reprographics staff, Security Guards). Importantly, they apply to both regulated and unregulated financial services activities.
There are two tiers of the Conduct Rules.
The first tier – consisting of five rules – applies to everyone. The second tier – consisting of four rules – applies only to Senior Managers. The only exception here is that Senior Manager rule 4 also applies to all non-executive and executive directors. The rules apply to staff directly and aim to set basic standards of good personal conduct, against which the FCA can hold people to account.
Tier one – Individual Conduct Rules
1. You must act with integrity
2. You must act with due care, skill and diligence
3. You must be open and cooperative with the FCA, the PRA and other regulators
4. You must pay due regard to the interests of customers and treat them fairly
5. You must observe proper standards of market conduct
Tier two – Senior Manager Conduct Rules
SC1. You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively
SC2. You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system
SC3. You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively
SC4. You must disclose appropriately any information of which the FCA or PRA would
reasonably expect notice
However, it is not enough to simply meet the Conduct Rules; firms must also provide training to all staff. This training should ensure that staff are notified of the rules that apply to them, and that those staff understand how the rules apply to them. Senior Managers and Certification Staff need to be trained in, and abide by, the Conduct Rules from 9 December 2019. Firms should ensure that all other staff are trained within 12 months of the start of the Regime. Training records, such as a certificate or training log, must be maintained.
Providing a robust overview of the applicable Conduct Rules, along with clear examples of how the rules apply practically and the consequences of failing to follow the rules is essential to meet the FCA’s requirements.
At RB Compliance, we offer two Conduct Rules e-learning courses:
1. Senior Manager Conduct Rules Training
2. Certification and all other staff Conduct Rules Training.
Both courses include a mix of videos, small amounts of text and plenty of scenarios to assist a clear understanding of:
1. The conduct rules themselves
2. An overview of SM&CR
3. How the conduct rules practically apply to a range of organisations / roles
4. Consequences for failing to follow the rules (such as the inclusion on future regulatory references or a finding that the individual is not fit and proper).