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How To Build Effective Conduct Rules Training
With the Consumer Duty due to be implemented in April 2023, it is tempting to think that concentrating on the Duty will be all that is really needed to stay on track for compliance this year. In fact, the requirements within the Duty put a renewed emphasis on existing requirements and regimes and highlight just how important it is to meet the full tranche of regulatory requirements.
The interaction between the Duty and existing FCA regulations is made very clear in the connection between the Duty and the Conduct Rules. The Conduct Rules are part of the Senior Managers and Certification Regime (SM&CR), introduced in 2019 for all solo-regulated firms, and for banks and insurers in the preceding years. The Regime as a whole was designed to improve standards of conduct for all, and tier 1 of the Conduct Rules is the element that applies to all staff working on financial services tasks.
The FCA have proposed an amendment to the Conduct Rules to reflect the higher standard of behaviour introduced in the Consumer Duty. In practice this will add a new rule to COCON that requires all conduct rules staff to ‘act to deliver good outcomes for retail customers’ where firm activities fall within the scope of the Consumer Duty. In practice, the new rule would apply to retail-activity conduct, and the old Rule 4 (‘pay due regard to the interests of customers and treat them fairly’) would apply to non-retail activity.
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This puts emphasis on proactivity in achieving good outcomes – something that may well be very new to many tier 1 staff members. Training is therefore vital. Refresher training for the Conduct Rules should be completed at least annually regardless; re-training will be all the more important for 2023, given the new expectations.
From the FCA’s perspective Conduct Rules training must meet a minimum standard, and to this end it has published a set of positive indicators and negative indicators, highlighting what suitable characteristics of training look like in practice.
On a basic level, training must effectively ensure that staff understand which rules apply to them, and how they apply practically to their role. Ideally, it should teach what good practice looks like, and what a breach will look like, and be presented clearly as a step change in regulatory expectations. The training should also make plain that staff are encouraged to speak up if they see poor behaviour that is not in the spirit of the Conduct Rules.
There are two tiers of rules. The first applies to almost all members of staff, with some exceptions, such as reception staff who do not undertake financial services work, reprographics and IT staff. This tier – known as tier 1 or the Individual Conduct Rules – set the overarching standards for behaviour in financial services firms. This tier also applies to Certification Staff and to Senior Managers. The FCA expects that training explains how these rules apply both in theory and in practice. The second tier is the Senior Managers Conduct Rules, and these apply only to those with a Senior Management Function. One of the rules in this tier also applies to non-executive directors. Regardless of the tier, training must be interactive, use realistic scenarios and present the nuances of how the rules apply.
As with all training, the expectation is that learning is regularly reinforced. This is important even where content does not change that often – for example with complaints handling – as autopilot can take over and lead individual practice in different directions. It’s also useful where best practice has updated throughout the year or changed. It is vital where there are regulatory changes or updates – as there will be from April 2023 when the new Tier 1 rule is introduced. Staff should be provided with training that helps them to understand how their role fits with the Conduct Rules in practice.
Ideally, training should be re-visitable so that staff can revise the rules, scenarios and expectations once they are familiar with their day-to-day work. The FCA have made clear that they expect training to put the Conduct Rules firmly into the wider context of the Senior Managers and Certification Regime, so that all staff are aware of the importance of the rules.
One of the positive indicators highlighted by the FCA is that training should include scenarios that reflect real-world situations. For training to be effective, it must engage the audience. Simply setting out what the rules are is not likely to be good enough. Involving staff in their training, asking them to put themselves into scenarios to think about what the rules mean for staff working with clients, personal data and vulnerable customers, is the basic expectation.
Particularly given the updated Rule 4, training material should make clear what good outcomes look like for consumers. In the plain wording of the rule, it may be difficult for some to envisage what this will actually mean in practice for staff at all levels. But one key takeaway is that the changed rule doesn’t mean that the old rule is now obsolete. The spirit of the ‘old’ rule - to pay due regard to the interests of customers and to treat them fairly - is still very much part of conduct expectations; in fact, not meeting it means a likely breach of the conduct rules. Given the updated wording, effective training must show staff what fair treatment is, what good outcomes are, and put this into the context of the current economic climate.
Our courses are designed to help staff at all levels understand what the conduct rules are, why they are important and what is expected of them. At the core of each course is what accountability and good conduct look like in practice, with clear explanations, and realistic scenarios. Reassurance that learners have understood the training is provided through quizzes and a final assessment.
Our training is accessed via our online portal, meaning that every staff member can take their training at a time that is convenient to them. Once training has been completed, staff can access the learning from the course following completion.
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.
Our updated courses for 2022 are now available. For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.bell@rbcompliance.co.uk. Courses updated for the new tier 1 rule 4 will be released later in 2022.
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