SMCR Conduct Rules and Training

Posted on by Catherine Roberts

The FCA were given powers under the FSMA to write Conduct Rules for regulated business employees. These rules applied to the banking sector from 2016 onwards. Subsequently, the regime was extended to all solo-regulated firms from December 2019.

SMCR Templates Product IconWhat are the SMCR Conduct Rules?

The enforceable Conduct Rules set out expected standards of personal conduct for employees of regulated businesses. Additionally, the rules provide the regulator and firms with the standards by which an employee can be held accountable. The rules reside in the COCON (Code of Conduct) section of the FCA Handbook. There are 2 tiers of conduct rules that apply directly to employees. Both are designed to promote positive behaviour and reduce harm.

The Conduct Rules apply to a businesses regulated and unregulated activities (including any related ancillary activities). They apply to all Senior Managers, including those carrying out Certified Functions, Non-Executive Directors and any other employee not designated as ancillary staff.

You can review a full list of the individuals and roles considered to be ancillary staff under the COCON section of the FCA Handbook. You will also find the list in the FCA’s SMCR Guidance publication.

Conduct Rules Explained

First Tier – Individual Conduct Rules

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

Second Tier – Senior Manager Conduct Rules

SC1. You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.

SC2. 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.

SC3. 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.

SC4. You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice.

SMCR Policy Templates

It is mandatory for firms to provide their employees with training and guidance on the Conduct Rules, especially on how the rules apply to roles and duties. A Senior Manager must be allocated a Prescribed Responsibility (PR) for the training and oversight. All solo-regulated firms are expected to comply with the training and reporting requirements.

You don’t need to draft your framework of SMCR policies and controls from scratch. As a matter of fact, you don’t need to write them at all! Our customisable SMCR Toolkit is suitable for solo-regulated firms and contains all mandatory templates, procedures and registers. In addition, we have provided extensive training guidance on the Conduct Rules, therefore allowing you to develop your own compliant training sessions. We have also included tools and templates for assessing Senior Manager fitness and propriety.

Take a look at our SMCR Toolkit which provides most of the mandatory documents required by the SMCR rules. Accordingly, these apply to Core, Limited and Enhanced firms for SMCR compliance.

Catherine Roberts

Catherine Roberts is the founder and Director at Know Your Compliance Limited. She has worked in regulatory compliance and policy development for over 20 years, with first-hand experience in the financial services and consumer credit markets. Catherine is passionate about making compliance easier for businesses, developing templates and tools to simplify the process. When not tied to her computer writing policies, she enjoys reading, writing and graphic design.