The introduction of the SMCR marked a regulatory shift from collective to individual responsibility. For employees who are subject to the FCA Code of Conduct, in addition to the suitability check, companies must also assess whether misconduct constitutes a violation of the Code of Conduct. The Code of Conduct is designed to cover the activities of employees within the scope in both regulated and unregulated parts of a company. For companies, it is difficult to assess when non-financial misconduct, especially outside the workplace, also constitutes a violation of the rules of conduct. The FCA provided a non-exhaustive list of examples of conduct that would be considered a violation of the Code of Conduct. These are listed below with reference to each rule of conduct. What are CFA`s expectations for how companies deal with non-financial misconduct? 5. You must comply with the correct standards of market conduct The full name of the new tax return is REP008 – Notification of Disciplinary Action Against Code of Conduct Employees (excluding SMF Managers). A downloadable version of the declaration (also known as Form H) can be found in Annex 7R of SUP 15.
REP008 is an annual return that must normally be submitted no later than October 31 or the next business day of each year. This year, October 31 falls on a weekend, so the return is due for November 2. The reference period is from 1 September to 31 August; For this year, however, the period from December 9, 2019 (SM&CR`s effective date) to December 31, 2019 also applies. August 2020.The disciplinary measures mentioned in REP008 include: Claims management companies are subject to different rules (which are summarized in the FCA Guide). However, not all cases of misconduct would require immediate notification – companies will face the challenge of determining whether an issue is important enough to warrant disclosure to a regulator. The factors to be taken into account are: however, it is not enough to comply with the rules of conduct; Companies must also train all employees. This training should allow employees to be informed of the rules that apply to them and to understand how the rules apply to them. Managers and certification staff must be trained and comply with the Code of Conduct of 9 December 2019. Companies should ensure that all other employees are trained within 12 months of the start of the program. Training records, such as . B a certificate or training protocol must be retained. Assuming that there have been reported cases of breaches of the Code of Conduct during the relevant period, the following details must be provided: Many regulated companies in the UK will currently (re)assess staff as appropriate and appropriate and train staff in accordance with the FCA Code of Conduct (or PRA).
The FCA recently banned three people from working in the financial services sector for non-financial misconduct outside the workplace. The enforcement actions are therefore a timely reminder to regulated businesses that the FCA has indicated that it will focus more on how businesses deal with non-financial employee misconduct inside and outside the workplace. The first step – consisting of five rules – applies to everyone. The second stage – consisting of four rules – applies only to senior managers. The only exception to this rule is that Senior Officer Rule 4 applies equally to all non-executive and executive directors. The rules apply directly to staff and are intended to establish basic standards of good personal conduct against which the FCA can hold people accountable. It is clear that there is a growing focus on how regulated companies deal with non-financial misconduct, and that failure to adequately address these issues can be seen by the CFA as an indicator of a bad culture. Companies would be advised to conduct an assessment of how they would deal with or deal with cases of non-financial misconduct by employees in practice. In January 2020, a letter titled “Dear CEO”[7] was published by Jonathan Davidson, FCA`s Executive Director of Supervision, Retail and Licensing, regarding non-financial misconduct. While the letter was addressed to the wholesale general insurance industry, it is indicative of the FCA`s approach to non-financial misconduct across the regulated sector. Specifically, Mr.
Davidson noted that non-financial misconduct and an unhealthy culture are one of the main causes of harm. How a company handles non-financial misconduct throughout the organization, including discrimination, harassment, victimization, and bullying, is seen as an indication of a company`s culture. CFA expects companies and leaders to incorporate healthy cultures by identifying and changing key drivers of their culture. Mr. Davidson pointed out that the CFA`s “Approach to Oversight” document highlights the 4 main drivers of culture. These factors are: leadership; Purpose; approach to rewarding and managing people; and governance, systems and controls. What are the challenges that businesses face in terms of non-financial misconduct? In response to recent final notices, Mark Steward, FCA`s Executive Director of Enforcement and Market Surveillance, said: “The FCA expects high standards of character, honesty, relevance and adequacy from those operating in the financial services industry and will take steps to ensure that these standards are met.” [4] This suggests that the regulatory orientation of the pathway places more emphasis on how companies deal with cases of non-financial misconduct. This is supported by other important ANNOUNCEMENTS from the FCA on the subject. However, regulated businesses may face a number of challenges when assessing non-financial misconduct, especially when it occurs outside the workplace. For a UK branch of a foreign company, the Code of Conduct applies only to the extent that it is performed by a person working for the UK branch. In order to incorporate the required standards of professional conduct into your business, employees must be trained in the rules of conduct. Here are some concrete steps you can take to ensure it succeeds: The nature, scope, and complexity of the business are also a relevant factor in determining whether a senior executive has violated a senior management rule of conduct.
The larger and more complex the business, the greater the CFA`s expectations when it comes to assessing whether the executive`s conduct was “appropriate” (and vice versa). The Code of Conduct applies to senior managers, unapproved DEDs and assurance employees who are “significant risk takers” regardless of where they operate. In addition, however, the Code of Conduct only applies to conduct: companies should consider what types of employee behavior inside and outside the workplace could be considered non-financial misconduct that no longer makes a person “fit and proper” or constitutes a violation of the FCA Code of Conduct (or PRA), which can be reported to the appropriate regulatory body. Companies are advised to properly document this assessment and examine how it is communicated to employees. [4] www.fca.org.uk/news/press-releases/fca-bans-three-individuals-working-financial-services-industry-non-financial-misconduct The FCA provides a number of examples of the type of conduct that would violate the Code of Conduct, which requires a person to act with “reasonable skill, care and diligence.” Here are some examples: The report must contain details of the disciplinary actions taken by the company during the reporting period if the reason for the disciplinary action is a violation of the Code of Conduct. The regulator is likely to consider this to be broadly applicable. For example, in a letter from Megan Butler, EXECUTIVE DIRECTOR OF SUPERVISION AT THE CFA, to the Special Committee on Women and Equality, she confirmed that “sexual harassment and other forms of non-financial misconduct may be a violation of our Code of Conduct.” A person only violates the rules of conduct if he is personally guilty. .