Regulation  

FCA to focus on firms' implementation of conduct rules

FCA to focus on firms' implementation of conduct rules

The financial regulator will increase its supervisory focus on conduct rules under the Senior Managers and Certification Regime, which is due for implementation across advice firms at the end of this year. 

The Financial Conduct Authority published the findings of its review into the SMCR in the banking sector today (August 5), in which it found companies were not always sufficiently tailoring their conduct rule training to suit job roles within the business. 

The regulator said many firms were still often unable to explain what a conduct breach looked like in the context of their business and as a result announced it would be upping its supervision of how companies are embedding conduct rules and were meeting their responsibilities under the SMCR. 

The review focused on how well the rules had already been embraced by banks, but the FCA said the findings also apply to all solo-regulated firms which will be coming into the regime in December - including advice firms. 

The FCA said: "Firms are often using their own values to articulate how they bring the conduct rules to life. However, there was insufficient evidence to be confident that firms have clearly mapped the conduct rules to their values."

The regulator added: "The conduct rules are a critical foundation for firms’ culture and the conduct of individuals. It is essential that staff understand the rules and how they apply to them."

Under the Financial Services and Markets Act companies are required to "notify all relevant persons of the conduct rules that apply in relation to them" and "take all reasonable steps to secure that those persons understand how those rules apply in relation to them".

This includes providing suitable training to staff. 

The regulator's individual conduct rules specify: 

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 cooperative with the FCA, the PRA and other regulators.

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

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

The SMCR was introduced to banks in 2016 with an aim to increase individual accountability in the sector and is due to be rolled out to the wider financial services industry in December, replacing accountability rules for advisers under the Financial Conduct Authority's current Approved Persons Regime.

Under the new regime, senior individuals performing key roles will need FCA approval before starting work and they will receive a 'statement of responsibilities' that clearly says what they are responsible and accountable for.

The FCA hopes the regime will strengthen market integrity by making individuals more accountable.

rachel.addison@ft.com 

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