We wrote recently about the Conduct Rules and, in particular, breaches and notifications . See here.
This article is intended to clarify some of the grey around COCON breaches. All of the following is taken from Policy Statement PS 18-14.
When is disciplinary action required?
When and how a firm decides to undertake disciplinary action is a matter for individual firms. The FCA has not imposed a wider duty on firms to investigate all potential breaches or disclose information that they have not been able to verify.
When is notification required?
Section 64C of FSMA requires firms to notify the FCA of disciplinary action taken against relevant individuals because of breaches of the Conduct Rules. Under FSMA, disciplinary action covers:
- issuing a formal written warning
- suspension or dismissal of an individual
- reduction or recovery of any of the person’s remuneration
Firms should only report Conduct Rule breaches where they result in one of these courses of action, and once the relevant disciplinary process has been completed. This means that if an individual leaves the firm during the disciplinary process and the process can’t be completed, the firm should not submit a report.
For Senior Managers, the notification requirements apply more widely than just the Conduct Rules. They also cover other factors including fitness and propriety. For notifications made due to breaches of the Conduct Rules, the 7-day period begins once disciplinary action has been concluded.
Firms should only report Conduct Rule breaches once disciplinary action has concluded. If a firm takes disciplinary action for a Conduct Rule breach but the employee appeals, or plans to, this should still be reported to the FCA.
In some circumstances, individuals will appeal the outcome of a concluded disciplinary process and the decision will be overturned. Where an appeal is successful, firms should update the FCA in the following REP008 submission. It is expected that these instances will be rare given the annual submission cycle and that this is likely only to occur where a disciplinary process is concluded shortly before the due date for REP008 so leaving insufficient time to assess the appeal before submission. In the case of a Senior Manager, a firm should report the result of a successful appeal as soon as reasonably practicable after the appeal.