FCA Conduct Rules Explained: Who They Apply To and What They Require

Two Tiers of Conduct Rules

The Conduct Rules split into two tiers. The Individual Conduct Rules apply to almost every employee at a regulated firm whose role isn’t purely ancillary — a materially broader population than either the SMF or Certification regimes cover. The Senior Manager Conduct Rules apply specifically to SMF holders, in addition to the Individual Conduct Rules, reflecting the heightened standard the SMCR expects of individuals carrying personal regulatory accountability.

The rules are in the FCA Handbook’s Code of Conduct sourcebook (COCON). Rule 6 was added when the Consumer Duty came into force, and where it applies it takes the place of Rule 4. Our guide to the Consumer Duty and the SMF framework explains how the two fit together.

Why the Senior Manager Conduct Rules Matter Specifically to Recruitment

The Senior Manager Conduct Rules are, in substance, a more granular expression of the same Duty of Responsibility that runs through every guide on this site — reasonable steps to control the business, ensure compliance, oversee delegation, and disclose appropriately to regulators. What makes them worth understanding specifically, rather than treating as background to the Duty of Responsibility, is that breaches of the Senior Manager Conduct Rules are assessed and reported to the FCA through a distinct notification process, separate from an SMF holder’s Statement of Responsibilities and separate from any Form A process. A candidate’s history of Conduct Rules breaches — their own, or their oversight of others’ — is a specific line of enquiry in a properly run fitness and proper assessment.

Who Is Exempt

The Conduct Rules don’t apply universally. Staff performing purely ancillary roles — reception, security, catering, and other functions with no connection to the firm’s regulated activities — fall outside the regime entirely. This exemption is narrower than firms sometimes assume: a role with any genuine connection to regulated activity, even a support function, typically falls inside the Conduct Rules’ scope, and firms that draw the ancillary-role line too generously risk leaving staff untrained and unassessed against a regime that actually applies to them.

How Breaches Are Actually Assessed

A Conduct Rules breach isn’t assessed the same way as a criminal offence, requiring intent or knowledge — the standard is closer to whether a reasonable person in that position, with that role’s responsibilities, would have acted as the individual did. This means a breach can occur through carelessness or poor judgement, not only through deliberate wrongdoing, which is precisely why the Individual Conduct Rules extend as broadly as they do — the framework is trying to embed a baseline standard of conduct across the whole regulated workforce, not simply catch deliberate misconduct at senior level.

Firms are required to notify the FCA when they determine a Conduct Rules breach has occurred and disciplinary action results, and to report this as part of their annual regulatory returns even where it doesn’t. This creates a running record that both the firm’s own governance and, over time, the regulator’s supervisory view can draw on — another reason a candidate’s Conduct Rules history is a genuine, checkable part of any thorough fitness and proper assessment.

What “Reasonable Steps” Looks Like in Practice

The Senior Manager Conduct Rules all turn on reasonable steps. The FCA does not expect a Senior Manager to prevent every failure, but it does expect them to be able to show what they did. In practice that means:

Our guide to the duty of responsibility and reasonable steps goes into more detail, and FCA enforcement trends shows where Senior Managers have fallen short.

The Firm’s Obligations

Firms must make sure the people the rules apply to know about them and understand how they apply in their own role. That means training at induction and refreshed regularly, tailored by role rather than delivered as a single generic module. Firms must also notify the FCA of breaches: within seven business days for a Senior Manager where disciplinary action results, and in an annual return for other staff. In most firms the compliance officer owns the training programme and the breach reporting, which is one reason the compliance role matters so much. See our compliance officer (SMF16) recruitment page.

What This Means for SMF Recruitment Specifically

Beyond the general Individual Conduct Rules that apply to any candidate joining a regulated firm, an incoming SMF holder needs genuine, practical fluency in the Senior Manager Conduct Rules specifically — not simply an awareness that they exist, but a clear, demonstrable understanding of what “reasonable steps” actually looks like in relation to the specific area they’ll be accountable for. This is exactly the same standard we test for throughout our designation guides in relation to the Duty of Responsibility, because the Senior Manager Conduct Rules and the Duty of Responsibility are, in practice, two expressions of the same underlying accountability.

To test your understanding, try our Conduct Rules quiz: 20 scenarios with answers, also available as a Word document for team training.

We test this in every Senior Manager search, from regulated chief executives (SMF1) to combined compliance officers and MLROs, through scenario questions about how the candidate would oversee their area, and through regulatory references that ask specifically about Conduct Rules breaches. Our guide to regulatory references explains what a previous employer must disclose.

Frequently Asked Questions

Who do the Conduct Rules apply to?

Almost everyone at a regulated firm whose role is not purely ancillary. Senior Managers are also subject to the four Senior Manager Conduct Rules.

What is Conduct Rule 6?

It requires staff to act to deliver good outcomes for retail customers. It came in with the Consumer Duty and replaces Rule 4 where the Duty applies.

Do non-executive directors have to follow the Conduct Rules?

Yes. Non-executives are subject to the Individual Conduct Rules and Senior Manager Conduct Rule 4, and non-executives who are SMF holders are subject to all the Senior Manager Conduct Rules relevant to their role.

Will a past Conduct Rules breach stop a Senior Manager being approved?

Not automatically. The firm and the FCA weigh how serious it was, how long ago, and what the person has done since. Being open about it counts in their favour.