Conduct Rules Training FAQs
With the extended deadline for the roll-out of the Financial Conduct Authority’s (FCA) Senior Managers and Certification Regime to solo-regulated firms approaching on 31 March, this week is the final call for firms to ensure that in-scope staff are trained on the Conduct Rules and how they apply.
This matters – the FCA intend to increase regulatory focus on how firms embed the conduct rules and have signalled that they intend to take actions where firms fall short of their expectations.
Effective training for all employees to whom one or both tiers of the Conduct Rules applies is key for compliance with the SM&CR. Training provided must be comprehensive – it must cover each of the conduct rules, it must be engaging to embed learning, and it should set out clear scenarios so that staff can understand how the rules might apply in practice.
As the Conduct Rules will, as of 31 March, be fully in force across most FCA regulated firms, policy and process for investigating, dealing with, and reporting potential breaches should be in place. This will need to involve HR departments or those with responsibility for staff administration, in order to oversee ongoing requirements such as new starter training, regulatory references, new starter and annual fit and proper assessments, and breach reporting. There should be a clear process for reporting potential breaches, which should then be investigated in a timely manner, and by independent individuals to avoid any conflicts of interest.
Breaches of the conduct rules should be included in the training, which should cover what breaches of each rule might look like in the real world – training should also ideally show what good practice looks like.
In the run-up to the deadline date, queries around the requirements of conduct rules training have highlighted a few common questions, so here we take a look at what you need to know about conduct rules training in the final run-up:
1. How do we know which staff need to be trained in the Conduct Rules?
A. Most staff in financial services firms will fall within the scope of the Conduct Rules but there are some exceptions – ancillary staff are out of scope. The FCA provide a fairly detailed list of the types of roles that the Conduct Rules do not apply to, including receptionists, post room staff, event management, invoice processing, cleaners, PAs and secretaries. If you are unsure, if any staff member has the potential to cause harm to customers or to the market, they’re likely to fall in-scope.
2. Some of our firm’s activities are unregulated – are staff that work on unregulated activities in-scope?
A. Yes – the Conduct Rules apply to both regulated and unregulated financial services activities. This includes any activity that is carried on in connection with a regulated activity.
3. Which Tier do staff need to be trained on?
A. There are two tiers of Conduct Rules. The first tier, or the Individual Conduct Rules - sometimes referred to as ICRs – apply to all in-scope staff, including senior managers and non-executive directors. The second tier – which is sometimes shortened to SC – only applies to Senior Managers. But Senior Managers must be trained on both tiers and on how those nine rules apply to them.
Be aware – non-executive and executive directors are also obliged to abide by one of the second tier rules – SC4, the rule that states ‘you must disclose appropriately any information of which the FCA or PRA would reasonably expect notice’. The reason for this is that these directors would be expected to have sight of information which should be reported to the FCA, and this goes beyond the less-proactive rule to be ‘open and cooperative’ with the regulators that is rule 3 of tier one.
4. Can the training be delivered online?
A. Yes. Firms must provide training on the Conduct Rules, and many firms are opting to use online resources to do this, particularly as the ongoing pandemic makes in-person training difficult. The training should cover the rules themselves in enough detail to reflect both the spirit of the rule and what abiding by the rule might look like in practice. It should also set out what good looks like, and what a breach looks like, as well as the potential consequences of breaches for the firm, the individual and for consumers.
We offer two online Conduct Rules courses, which allow Senior Managers and Certification and all other staff to access and complete the training at their own convenience, ideal for those who want to complete the training in their own time, and to come back to it to refresh later on. They provide clear and comprehensive training in the Rules, including a mix of videos, small amounts of text and plenty of scenarios to demonstrate how the rules apply practically.
For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.email@example.com.