The Conduct Rules are the baseline standards of personal behaviour that the Senior Managers and Certification Regime (SM&CR) imposes on individuals in FCA and PRA regulated firms. They are contained in the Code of Conduct sourcebook, COCON, within the High Level Standards block of the FCA Handbook. The rules are split into two tiers: Tier 1 rules that apply to almost all staff, and Tier 2 rules that apply only to senior managers.
The Tier 1 Individual Conduct Rules
COCON 2.1 sets out the five core rules applying to nearly everyone: act with integrity; act with due skill, care and diligence; be open and cooperative with the regulators; pay due regard to customers’ interests and treat them fairly; and observe proper standards of market conduct. Following the introduction of the Consumer Duty, a sixth Individual Conduct Rule requires staff in scope to act to deliver good outcomes for retail customers.
The Tier 2 Senior Manager Conduct Rules
COCON 2.2 adds four rules for senior managers: take reasonable steps to ensure their area of the business is controlled effectively; take reasonable steps to ensure it complies with relevant regulatory requirements; take reasonable steps to ensure any delegation is appropriate and overseen; and disclose appropriately anything the regulators would reasonably expect to know. These rules reinforce the senior manager’s personal accountability under the Senior Managers Regime.
Application, training and reporting
The Conduct Rules apply to nearly all employees, with only narrow exceptions for purely ancillary functions (COCON 1). Firms must train staff on how the rules apply to their roles and must report breaches that result in disciplinary action: within seven business days for senior managers, and through the annual REP008 return for other Conduct Rules staff. A breach can lead to FCA enforcement action against the individual personally.