Conduct Rules are a key element of the SM&CR. They create a responsibility and accountability for good conduct for all staff to whom they apply, and the First Tier rules apply to nearly all staff. Senior Managers are subject to an additional four rules. The rules are shown in the table below.
Breaches of the Conduct Rules
Firms are required to notify the FCA when disciplinary action has been taken against a person for a Conduct Rules breach. Notification of disciplinary action is only required if that action was because of Conduct Rule breaches.
The timing for Conduct Rule breaches is:
- For Senior Managers – within 7 business days of concluding disciplinary action;
- For other individuals – notification must be made every year.
Most firms will report in October, for the reporting year 1 September to 31 August, with a due date of 2 months later. Limited Permission Consumer Credit firms will report in line with their reporting year, alongside their annual return.
The first REP008 is due on 02/11/20 for the period 09/12/19-31/08/20, unless you are a limited permission consumer credit firm.
Firms that don’t submit REP008 by the reporting deadline will be charged a late return fee of £250.
A nil return is required if there have been no breaches resulting in disciplinary action.
Disciplinary action means:
- issuing of a formal written warning;
- suspension or dismissal of a person; or
- reduction or recovery of remuneration (clawback).
Who to include in REP008
For the first return, only certain individuals will be in scope.
Conduct Rules breaches by Senior Managers should not be included in REP008. Instead, disciplinary action for Conduct Rule breaches against Senior Managers must be reported on Connect using Form D (or Form C where the individual no longer performs a Senior Management Function).
Disciplinary action for Conduct Rule breaches by all other individuals must be included in REP008.
Firms are only required to report disciplinary action for breaches of the Conduct Rules for individuals who were subject to the Conduct Rules at the time the breach occurred.
FCA Principle 11
The new notification requirement doesn’t change or remove firms’ obligations to report concerns about an individual’s conduct under existing rules and principles, such as FCA Principle 11.
“A firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.”
Guidance on implementing SM&CR is available. Specific guidance on Conduct Rules and REP008 is in Chapter 11.