EnOC Simplifies: the Conduct Rules

The Senior Managers and Certification Regime (SM&CR) is made up of three elements: the Senior Managers Regime, the Certification Regime, and the Conduct Rules.

The regime is due to come into force for Financial Conduct Authority (FCA) solo-regulated firms from 9 December 2019, completely replacing the Approved Persons Regime (APR). For more info on the events that led to the regulatory reform, read EnOC’s guide on how the SM&CR came to be.

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‍The Conduct Rules

Under SM&CR, the new Conduct Rules will apply to all firms; Core, Enhanced and Limited Scope, and to all staff (excluding ancillary staff). This is part of a drive to bolster and embed a base level of conduct and behaviour throughout the financial services industry.  

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What are the Conduct Rules? ‍

There are two tiers of Conduct Rules: the Individual Conduct Rules and the Senior Manager Conduct Rules.

The Individual Conduct Rules apply to almost every staff, except for ancillary staff such as cleaners, receptionists and security guards.

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Individual Conduct Rules:

1. You must act with integrity
2. You must act with due skill, care 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

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Senior Manager Conduct Rules:

1. You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively
2. 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
3. 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
4. You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice

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Training

Training of the Conduct Rules should be tailored to individual roles, and how the rules will apply to staff specifically.

Training of the Conduct Rules is a Prescribed Responsibility (b-1) that must be assigned to a Senior Manager, i.e. someone holding a SMF.

The Transitional Arrangements for fit and proper assessments only apply to Certified Staff. All Senior Managers must have completed Conduct Rules training and Fit and Proper Assessments before 9 December 2019. All other staff will have a further 12 months from 9 December 2019 to complete fitness and propriety assessments and to be trained in the Conduct Rules.

Refer to FCA’s “Guide for FCA solo-regulated firms”:

• Sec 10 - how firms should assess whether SMFs, Non-Executive Directors or Certification staff are fit and proper to do their job
• Sec 11 - who Conduct Rules applies to, and the training and notification requirements linked to the Conduct Rules

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Breaches and the reporting of breaches

Every Senior Manager will have a Duty of Responsibility as a result of FSMA. If a firm commits a breach, the Senior Manager responsible for that area could be held accountable if they did not take reasonable steps to prevent or stop the breach.

Conduct Rules breaches resulting in disciplinary action by Senior Managers must be reported to the FCA within 7 days, and breaches by other staff must be reported annually through the FCA’s GABRIEL system.

Firms are required to make annual Conduct Rules notification to the FCA even if there haven’t been any breaches, to make sure firms correctly monitor and identify Conduct Rule breaches.

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Forms

• Form D - is used for various functions which include notifying FCA of conduct rule breaches and disciplinary action, related to conduct rules, by Senior Managers
• REP008 – is used to notify the FCA of whether the firm has taken disciplinary action for Conduct Rule breaches in the reporting period against individuals who are not Senior Managers

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EnOC significantly reduces the administration burden, removes complexities, and allows companies to actually focus on the duties of responsibility and accountability.

Check out the platform at www.enoc.pro and find out how EnOC can help speed up your SM&CR journey.

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