What Are the Conduct Rules?

The Conduct Rules are a set of basic standards of personal behaviour that apply to individuals working in firms regulated under the Senior Managers and Certification Regime. They’re set out in the FCA’s Code of Conduct sourcebook, COCON. Dual-regulated firms such as banks and insurers are also subject to equivalent PRA rules.

There are two tiers:

• The Individual Conduct Rules, which apply to almost everyone at the firm.
• The Senior Manager Conduct Rules, which apply additionally to Senior Managers.

The rules apply to individuals personally. A breach can lead to disciplinary action by the firm and, in serious cases, enforcement action by the regulator against the individual. Our page on the Conduct Rules explained covers the background to the regime.

The Six Individual Conduct Rules

Rule 6 was added when the Consumer Duty came into force. Where an individual’s work relates to retail customers within the scope of the Consumer Duty, Rule 6 applies and Rule 4 does not. For other customers, such as professional clients, Rule 4 continues to apply. Our article on the Consumer Duty and the SMF framework explains how accountability for customer outcomes works.

The Senior Manager Conduct Rules

Senior Managers must follow all the Individual Conduct Rules, plus four more:

The first three turn on “reasonable steps”, which is why Senior Managers need to be able to show what they did, not just what they intended. Our guide to Senior Manager Functions explains the roles they apply to.

Who the Conduct Rules Apply To

The Individual Conduct Rules apply to almost everyone at a firm in the regime, not just senior or customer-facing staff. They apply to employees and, in many cases, to contractors and secondees performing roles for the firm. Certified staff are covered in our guide to the Certification Regime.

Ancillary Staff: Who Is Excluded

The rules don’t apply to staff whose roles aren’t specific to financial services: roles that would be carried out in the same way at any other business. The FCA gives examples including:

• receptionists and switchboard operators
• post room, reprographics and print staff
• property, facilities and security staff
• catering, cleaning and vending staff
• events and audiovisual staff
• IT helpdesk staff
• HR administrators and processors
• invoice processors
• personal assistants and secretaries, unless they have a significant role in the firm’s regulated activities

The test is the nature of the role, not the person’s seniority or the type of firm. A receptionist at an insurer is excluded; an insurance claims handler is not.

Examples of Breaches

COCON includes guidance on conduct that would breach each rule. Common examples used in training include:

Non-Financial Misconduct

Breaches aren’t limited to financial or customer matters. The FCA has made clear that serious non-financial misconduct, such as bullying, harassment and violence towards colleagues, can breach the Conduct Rules, particularly Rule 1, and is relevant to whether someone is fit and proper. The FCA has extended its rules in this area across firms in the regime, so firms should check the current COCON text and make sure their training and disciplinary processes cover non-financial misconduct.

What Firms Must Do

Firms have specific obligations around the Conduct Rules:

Designing Effective Training

The regulator expects training to help people understand how the rules apply to their own role, not just recite them. Effective programmes typically include:

• Role-specific examples. An adviser, a trader, a claims handler and a Senior Manager face very different situations.
• Scenarios and questions that test judgement, like the examples in the FAQ below.
• Induction training before or shortly after someone starts, and regular refreshers.
• Specific training for Senior Managers on SC1–SC4 and on evidencing reasonable steps.
• Coverage of non-financial misconduct and speaking up.
• Updates when the rules change, as they did with the Consumer Duty.

Many firms refresh Conduct Rules training annually, alongside the annual fitness and propriety assessment of certified staff.

Reporting Breaches to the FCA

Reporting is triggered where the firm takes disciplinary action in relation to a breach. Disciplinary action includes a formal written warning, suspension or dismissal, or a reduction or recovery of pay. Our guide to the SMCR notification forms covers the forms in more detail. Breaches also need to be disclosed in regulatory references when the individual moves firm.

What Happens If You Breach a Conduct Rule

• The firm may take disciplinary action, from a written warning to dismissal, and may adjust variable pay.
• The breach may be reported to the FCA and disclosed in future regulatory references for up to six years.
• Fitness and propriety may be affected, which can stop someone holding a certified or Senior Manager role.
• The regulator can take enforcement action against individuals in serious cases, including public censure, financial penalties and prohibition from working in financial services.

For Senior Managers, the Duty of Responsibility adds further exposure. See our analysis of FCA enforcement trends.

Frequently Asked Questions

How many Conduct Rules are there?

Ten in total: six Individual Conduct Rules that apply to almost all staff, and four Senior Manager Conduct Rules (SC1–SC4) that apply additionally to Senior Managers.

Who do the Conduct Rules apply to?

Almost everyone working at a firm in the Senior Managers and Certification Regime, including Senior Managers, certified staff, non-executive directors and most other employees. Only ancillary staff, whose roles aren’t specific to financial services, are excluded.

Is a receptionist at an insurance company subject to the Conduct Rules?

No. Receptionists are ancillary staff: their role is generic and would be carried out in the same way at a firm that isn’t regulated by the FCA, so they’re excluded. Insurance firms themselves are within the regime, so it’s the nature of the role that matters, not the type of firm.

Are all public-facing staff subject to the Conduct Rules?

Not automatically. Customer-facing roles in regulated activities, such as advisers or claims handlers, are covered. Public-facing ancillary roles, such as receptionists or security staff, are not.

Do the Conduct Rules apply to non-executive directors?

Yes. Non-executive directors who aren’t Senior Managers are subject to Individual Conduct Rules 1, 2 and 3 and Senior Manager Conduct Rule SC4. Non-executives who hold a Senior Manager Function, such as the Chair, are subject to the rules that apply to Senior Managers.

Do the Conduct Rules apply to contractors and temporary staff?

Often, yes, where they perform a role for the firm that isn’t ancillary. Firms should assess each contractor’s role and include them in training where the rules apply.

What is Conduct Rule 5?

“You must observe proper standards of market conduct.” It’s mainly relevant to people whose work can affect financial markets, such as traders, investment managers and those with access to inside information. Breaches include insider dealing and market manipulation.

What is Conduct Rule 6, and does it replace Rule 4?

Rule 6, “You must act to deliver good outcomes for retail customers”, came in with the Consumer Duty. Where your work relates to retail customers within the Consumer Duty’s scope, Rule 6 applies instead of Rule 4. For other customers, Rule 4 still applies.

Which rule is breached if an adviser deliberately hides a product’s charges?

Rule 1 (integrity), because it’s deliberately misleading. It would also be inconsistent with Rule 6 (or Rule 4 for non-retail customers).

Which rule is breached if someone fails to tell the regulator about information it would expect to know?

For any individual, Rule 3 (being open and cooperative with regulators). For a Senior Manager, also SC4 (disclosing information the regulator would reasonably expect notice of).

Can bullying or harassment breach the Conduct Rules?

Yes. Serious non-financial misconduct towards colleagues can breach the Conduct Rules, particularly Rule 1, and is relevant to fitness and propriety.

Do the Conduct Rules apply outside work?

The rules apply to conduct in relation to your role. Conduct outside work can still be relevant to whether you’re fit and proper, so serious personal misconduct may have consequences even if it isn’t a Conduct Rules breach.

How often must Conduct Rules training be done?

The rules don’t set a fixed frequency. Firms must make sure staff understand how the rules apply to them. Most provide induction training and an annual refresher, plus updates when the rules change.

Who reports a breach to the FCA?

The firm. Breaches by Senior Managers that lead to disciplinary action are reported within seven business days. Breaches by other staff are reported annually.

Can the FCA fine an individual for breaching a Conduct Rule?

Yes. In serious cases, the regulator can take enforcement action against individuals, including fines, public censure and prohibition.

Do the Conduct Rules apply to staff at firms outside the Senior Managers regime?

No. They apply at firms within the regime. Payment and e-money institutions authorised only under their own regulations, for example, aren’t subject to the Conduct Rules, although their staff are still expected to behave properly and the firm must meet its own regulatory obligations.

Does a breach always lead to dismissal?

No. The firm’s response should be proportionate. Many breaches lead to training, a warning or a change of role. Serious or deliberate breaches can lead to dismissal.