Conduct Rules Scenarios: Practice Questions With Answers
Most conduct rules training ends with a short test built around scenarios: is this person covered, which rule has been broken, does the firm have to tell the FCA? The questions below are our own, written to reflect the FCA’s Code of Conduct sourcebook (COCON) as it stands in November 2026. Each has a short answer and the reason behind it. Use them to check your own understanding, to build training exercises, or to test candidates at interview.
Before You Start: The Rules in One Table
There are ten conduct rules: six Individual Conduct Rules and four Senior Manager Conduct Rules. Our conduct rules training guide lists them in full, with the exact wording from COCON 2.1 in the FCA Handbook.
| Rule | Short form |
|---|---|
| Rule 1 | Act with integrity |
| Rule 2 | Act with due skill, care and diligence |
| Rule 3 | Be open and cooperative with the FCA, the PRA and other regulators |
| Rule 4 | Pay due regard to customers’ interests and treat them fairly (where Rule 6 doesn’t apply) |
| Rule 5 | Observe proper standards of market conduct |
| Rule 6 | Act to deliver good outcomes for retail customers |
| SC1 to SC3 | Senior Managers: reasonable steps on control, compliance and delegation |
| SC4 | Senior Managers and NEDs: disclose what the FCA or PRA would reasonably expect to know |
Who Is Covered?
1. Marcus works on the front desk of a general insurer, greeting visitors and taking deliveries. Is he subject to the conduct rules?
Answer: No. Receptionists are one of the ancillary roles excluded from COCON, alongside switchboard operators, post room staff, security guards, cleaners and catering staff. The exclusion depends on what the person actually does. If Marcus also started logging customer complaints and deciding how to route them, the answer could change.
2. Aisha handles motor claims at the same insurer and has no senior role. Is she covered?
Answer: Yes. She is not a Senior Manager or certified, but she is an employee carrying out the firm’s financial services activities, and she isn’t in an ancillary role. She is conduct rules staff and subject to the six Individual Conduct Rules. Because claims handling for retail customers falls within the Consumer Duty, Rule 6 applies to that work and Rule 4 does not.
3. Ben works at a small solo-regulated mortgage broker. He doesn’t hold a senior management function and isn’t certified. Do the Senior Manager Conduct Rules apply to him?
Answer: No. Ben is subject to the Individual Conduct Rules as ordinary conduct rules staff, but SC1 to SC4 apply only to Senior Managers (and SC4 to non-executive directors). Being at a small firm doesn’t change that.
4. Priya is an independent non-executive director on the board of an investment firm. She doesn’t chair the board or any committee. Which rules apply to her?
Answer: Rules 1 to 6 and SC4. Standard NEDs are conduct rules staff, but SC1 to SC3 don’t apply to them because they have no executive responsibility for a business area. SC4 does apply, so Priya must disclose information the regulators would reasonably expect to know. See our guide to NEDs at FCA-regulated firms.
5. Tom, an IT helpdesk analyst, resets passwords. His colleague Jo, a developer, writes the code that calculates customer charges. Are either covered?
Answer: Jo is; Tom is not. IT helpdesk support is on the ancillary list. Writing code that determines what customers pay is not, and it involves judgement that directly affects outcomes. Jo is conduct rules staff.
6. The compliance officer at an investment firm leaves suddenly, and Grace steps in to cover the role for six weeks while a replacement is approved. Do the Senior Manager Conduct Rules apply to her?
Answer: Yes. A person covering a senior management function under the 12-week rule is subject to the Senior Manager Conduct Rules, even though they aren’t approved. COCON specifically includes them.
Which Rule Has Been Breached?
7. Sam, a financial adviser, backdates a suitability report so a file looks complete before an audit. Which rule?
Answer: Rule 1 (integrity). Deliberately falsifying records is a lack of integrity. Depending on the facts, it may breach other rules too, but integrity is the primary one.
8. During an FCA supervisory visit, Leah, a team leader, is asked whether her team has had any complaints about a product. She knows of several but says there have been none. Which rule?
Answer: Rule 3 (open and cooperative with regulators), and probably Rule 1 as well. Misleading the regulator, or failing to give information it asks for, is the core of Rule 3.
9. Ravi, a bond trader, tells a friend at another firm about a large client order before it is executed. Which rule?
Answer: Rule 5 (proper standards of market conduct). Passing on confidential order information breaches market conduct standards and may also be market abuse. This is why COCON says traders need deeper training on Rule 5.
10. Ellie, a finance analyst, reuses last quarter’s reconciliation for a regulatory return without checking the figures. They turn out to be wrong. Which rule?
Answer: Rule 2 (due skill, care and diligence). There is no suggestion of dishonesty, but she didn’t take the care the task needed. Carelessness, not dishonesty, is usually a Rule 2 matter.
11. Dev arranges commercial insurance for large corporate clients only. He fails to pass on a policy exclusion that matters to one client. Which rule?
Answer: Rule 4 (treat customers fairly). The Consumer Duty doesn’t cover this wholesale business, so Rule 6 doesn’t apply and Rule 4 does.
Senior Manager Conduct Rules
12. Olivia, the SMF approved for operations, hands reconciliation sign-off to a new junior employee and never checks how it is going. Errors build up over months. Which rule?
Answer: SC3 (delegation). Delegating isn’t a breach, but she must delegate to someone appropriate and oversee the work effectively. She did neither. Our guide to the duty of responsibility and reasonable steps covers what good oversight evidence looks like.
13. Internal audit reports to Callum, the SMF responsible for a lending division, that affordability checks are being skipped. He takes no action for a year. Which rules?
Answer: SC1 and SC2. He failed to take reasonable steps to make sure his area was controlled effectively and complied with regulatory requirements. If customers were harmed, Rule 6 may also be in point.
14. Hannah, the CEO, learns that a key IT supplier has suffered a major outage that will disrupt customer payments for days. She decides not to tell the FCA until the board meets next month. Which rule?
Answer: SC4 (disclosure). A significant operational incident affecting customers is something the FCA would reasonably expect to hear about promptly. Waiting for a board meeting is not appropriate disclosure.
Consumer Duty and Rule 6
15. Lucy works in a retail bank’s call centre. She has been told to use a script that makes it hard for customers to cancel a savings product, and she follows it even when customers clearly want to leave. Is she in breach?
Answer: Potentially yes, under Rule 6. Rule 6 requires her to act in good faith, avoid foreseeable harm and enable customers to pursue their financial objectives. Following a firm process doesn’t automatically protect her if she can see it is harming customers; she should raise it. The managers who designed the script are more exposed. See our Consumer Duty guide for senior managers.
16. Noah designs a credit card for a target market that includes many customers in financial difficulty. He knows the fees will be hard for them to understand but launches anyway. Which rule?
Answer: Rule 6. Foreseeable harm to retail customers in the target market is exactly what Rule 6 is aimed at. Rule 6 is judged against what a prudent person designing the same product would do, taking account of the target market’s needs.
Reporting Breaches
17. A certified adviser receives a final written warning for a Rule 2 breach. How does the firm report it?
Answer: On the annual REP008 return. Under section 64C of FSMA, disciplinary action for a conduct rule breach by staff other than Senior Managers goes on REP008. For most firms the reporting period runs to 31 August and the return is due within two months.
18. A Senior Manager has their bonus reduced for an SC2 breach. When must the FCA be told?
Answer: Within seven business days of the firm concluding the disciplinary action, on Form D (or Form C if they are leaving). See the SMCR notification forms explained.
19. A firm suspends an employee while it investigates a possible Rule 1 breach. Is the suspension reportable?
Answer: Not on its own. A suspension used to allow an investigation is not disciplinary action for a COCON breach. If the investigation leads to a warning, dismissal or pay reduction for a breach, that is reportable. A minor breach dealt with by informal coaching is not reportable under section 64C either, although a serious matter may need to be raised early under Principle 11. The FCA’s conduct rules page sets out the routes.
20. Since 1 September 2026, could serious bullying of a colleague at an insurance broker be a conduct rule breach?
Answer: Yes. The FCA’s non-financial misconduct rules, in force from 1 September 2026, confirm that serious bullying, harassment and similar behaviour towards colleagues can breach Rule 1 or Rule 2 at firms other than banks, not only at banks.
Using Scenarios Like These When You Hire
Scenarios are one of the most useful tools in an interview for a compliance officer or Senior Manager. Anyone can recite the rules. Applying them to messy facts, and explaining the reasoning, shows whether a candidate can actually run the regime. That matters because in most firms the compliance officer (SMF16) writes the conduct rules training, advises HR on whether a disciplinary case is a COCON breach, and prepares the REP008 return.
A practical approach:
- Give the candidate two or three scenarios close to your own business, including one on scope and one on reporting.
- Look for accuracy (ten rules, Rule 6 replacing Rule 4 for retail business, the 1 September 2026 changes) and for judgement where the answer is “it depends”.
- For Senior Manager candidates, use an SC3 delegation scenario and ask what evidence of reasonable steps they would keep.
- Ask how they would turn the scenario into training for a front-line team.
Our guides to interviewing an SMF candidate and compliance officer recruitment go further, and conduct rules training covers what the FCA expects from training itself. For the wider rules, see conduct rules explained and the certification regime explained.
Conduct Rules and the People Who Own Them
Guides and services on the conduct rules, training and the senior roles behind them.
Conduct Rules
The rules in full.
→ Conduct rules training guide → Conduct rules explainedConduct rules training →
Compliance Officer
The SMF16 who runs it.
→ Compliance officer recruitment → SMF16 and SMF17Interviewing a compliance officer →
Senior Managers
Accountability at the top.
→ Senior manager functions → Fitness and proprietyFCA enforcement trends →
SMCR Guides
Training and the Duty.
→ SMCR training → Consumer Duty and SMFsSMCR glossary →
Every SMF Capital search is overseen by Adrian Lawrence FCA
Frequently Asked Questions
Is a receptionist subject to the conduct rules?
No, if reception is genuinely all they do. Receptionists are on COCON’s list of excluded ancillary roles.
Do the conduct rules apply to staff at solo-regulated firms?
Yes. All SMCR firms are covered. Staff who aren’t Senior Managers are subject to the six Individual Conduct Rules, but not SC1 to SC4.
Which rule covers misleading the FCA?
Rule 3, and often Rule 1. For Senior Managers, failing to disclose can also breach SC4.
Are these questions taken from an official FCA test?
No. They are our own scenarios, written to reflect the FCA’s rules. The FCA doesn’t publish a standard conduct rules test.
About the Author
Adrian Lawrence FCA is the founder of SMF Capital. He is a Chartered Accountant and Fellow of the ICAEW, holds a practising certificate in his own name, and is a former listed-company Finance Director with a BSc from Queen Mary College, University of London. He founded FD Capital in 2018 and has since built a network of five specialist recruitment practices. He oversees every SMF Capital search. View Adrian’s ICAEW profile.
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Adrian Lawrence FCA is the founder of SMF Capital and a Fellow of the Institute of Chartered Accountants in England and Wales and holds an ICAEW practising certificate in his own name. He holds a BSc from Queen Mary College, University of London, and has over 25 years of experience working with boards, investors and business owners across the UK. He founded SMF Capital to help FCA and PRA-regulated firms appoint the Senior Managers the regulators expect, with the fit and proper assessment built into every search, and personally leads every Senior Manager Function search.