“We believe that the requirement that only closed disciplinary proceedings should be reported should be sufficient to prevent malicious reporting. This also means that only proven violations of the Code of Conduct will be reported to us. It therefore follows from primary law that a link is necessary between the finding of an infringement of the code of conduct and a disciplinary measure. The Code of Conduct and regulatory references aim to increase individual accountability, which is at the heart of the Senior Management and Assurance (SMRP) regime. They have also received increased supervisory attention due to the practical problems they caused after implementation. Below, we remind you of the most important requirements related to reporting violations of codes of conduct and providing regulatory references. We also highlight some of the practical challenges that financial institutions face in these areas. In the notification form, companies are required to identify the details of the disciplinary sanctions taken, the code of conduct that has been violated and the person. Violations of the Code of Conduct by senior management must be reported to the FCA within 7 days.
Violations of the Code of Conduct by certifying staff or the Code of Conduct must be reported to the FCA annually in October using Form H (also known as “REP008 – Notice of Disciplinary Action”). However, if the violation is “serious”, it must be reported immediately. If a company does not report to the FCA, it must file a “zero return” with the FCA. “If a reason to take disciplinary action under section 64C of the Act (a requirement for authorized persons to notify the regulator of disciplinary action) is an act, omission or circumstance that constitutes a violation of the CCON, SMCR is required to notify the FCA of the disciplinary action.” A person violates the rules of conduct only if he is personally guilty. In other words, that person`s behavior must: The reporting requirement extends to all individuals who are subject to the Code of Conduct, but for the 2020 report, this means that only individuals who require certification (i.e., individuals in roles of significant harm) and board members who are not senior executives are covered. That`s because it`s a £64,000 issue and undoubtedly causes anxiety in the industry. Companies and their employees should already be aware of the Code of Conduct itself, including those of all persons responsible for conduct rules (COCON 2.1) and those of senior managers (COCON 2.2). Companies were required to train stakeholders (SMF, NED and certification staff) on the Code of Conduct by December 9 last year, and this should have included examples of company-specific conduct that would constitute a violation of the Code of Conduct. Further GUIDANCE from the FCA in the form of general conformity assessment factors and specific guidance on the rules themselves can be obtained from COCON 3 and 4 respectively. Flagrant violations of the rules (e.g. market abuse. B, which in turn constitute a violation of Rule 5 on market conduct) are sufficiently clear.
Where interpretation becomes more problematic are cases of accidental violations or those considered very minor. Businesses will be aware that reporting such events to the FCA could have a serious negative impact on an individual`s ability to work in the financial services sector. At the same time, neglecting repeated or gratuitous bad behavior is something that companies cannot ignore, and discovered failures are taken very seriously by the FCA. We assume that companies will seek legal assistance, at least in the most marginal cases. Assuming there have been reported cases of code of conduct violations during the relevant period, the following details should be provided: At Ashurst, we are well positioned to be able to conduct SMCR audits, which can help identify gaps and inconsistencies in a company`s approach to SMCR requirements. The breadth of our experience can help provide a practical market insight into what should and should not constitute a violation of the Code of Conduct. Our experts in our areas of financial regulation, labour law and litigation work together to ensure we can help companies best manage their regulatory, employment and litigation risks in this area. is carried out in such a way as to ensure that any delegation of responsibilities to an appropriate person is carried out and effectively monitored. Article 64C of the FSMA 2000 requires companies to inform the regulatory body of any disciplinary action taken against employees in connection with violations of the Code of Conduct.
This is a new requirement for fca`s “solo regulated” companies, although it has been in place for banks since 2017. The criterion of violation of the rule of personal fault leading to a violation of the rule remains a criterion of relevance. You must have failed to actually and reasonably violate the rule in the performance of your duties. This test, which has always been used under the AAP, will continue to be the test under these new codes of conduct, and the burden of proof will remain in the hands of the regulator, after weighing the likelihood, so regulators will have to prove that it is more likely than not that a person did not act reasonably for that person to violate a rule of conduct. Therefore, a violation of the Code of Conduct, which must be disclosed under a regulatory reference, should be accompanied by a disciplinary outcome. Companies subject to the SMCR are required to identify, assess and report violations of the Code of Conduct by persons falling within the scope of the Rules. Which population will fall under the disciplinary jurisdiction of regulators when it comes to complying with these rules? As we will see, as the regime currently applies to banks and insurers, this population of employees to whom the rules are supposed to apply is indeed a very, very large population. Companies only need to report disciplinary action for violations of the Code of Conduct for persons who are subject to the Code of Conduct at the time of the violation. Currently, the Code of Conduct applies to senior managers, assurance staff and directors who are not senior managers. The rules of conduct do not yet apply to other employees until March 31, 2021. . .