Conduct rules

This summary is based on the consultation paper (CP17/25) published by the FCA on 26 July 2017. The consultation has now closed and we have submitted our response to the FCA (details available here).

On 13 December 2017, the FCA published two further consultation papers relating to FCA solo-regulated firms: (i) CP 17/40 which focuses on transitioning to the SMCR and how firms and their senior staff will move over to the new regime, and (ii) CP 17/42 on the duty of responsibility. These consultations will close on 21 February 2018.

The Conduct Rules will replace the previous Statements of Principle for Approved Persons. Some are specifically designated as applying only to Senior Managers (these are the second tier rules) with the rest applicable to everyone that is subject to the Conduct Rules.

The Conduct Rules do not apply to staff that hold ancillary roles that are not specific to the financial services business. These include staff such as receptionists and cleaners.

The first tier Conduct Rules (which apply to everyone in scope) are:

Rule 1: You must act with integrity

Rule 2: You must act with due skill, care and diligence

Rule 3: You must be open and co-operative with the FCA, the PRA and other regulators.

Rule 4: You must pay due regard to the interests of the customer and treat them fairly.

Rule 5: You must observe proper standards of market conduct.

The second tier conduct rules (which apply only to Senior Managers) are:

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 relevant requirements and standards of the regulatory regime.

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.

It is proposed that the Conduct Rules will apply to Senior Managers and Certification Staff from commencement of the SMCR.  Firms will have 12 months from commencement before the Conduct Rules will apply to all other Conduct Rules staff.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.