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The FCA’s Conduct Rules – The New Requirement to Report

Since 9 December 2019, the majority of FCA solo-regulated firms have been subject to the Senior Managers and Certification Regime (SM&CR) including the Conduct Rules which set basic standards of good personal conduct against which the FCA can hold people to account. As such, the rules are enforceable by the FCA and are intended ‘to improve individual accountability and awareness of conduct issues across firms.’

Whilst most firms are now familiar with the Conduct Rules, 2 November 2020 marks the first time that most solo-regulated firms will have to submit an annual notification regarding breaches of the Conduct Rules where disciplinary action has been taken. This is a requirement under section 64C FSMA and requires firms to report details about individuals who have committed breaches of the Conduct Rules, details of what Conduct Rules have been breached and details of disciplinary action taken (issuance of a formal written warning, suspension or dismissal, or the reduction or recovery of a person’s remuneration). The report is called REP008, and must be completed and submitted using Gabriel. The important thing to note, however, is that all firms must submit an annual notification even if there haven’t been any Conduct Rule breaches resulting in disciplinary action at that firm.

Time for Submission

The REP008 has been added to all solo-regulated firms’ Gabriel schedules so checking this is an easy way to determine when your report is due. Limited Permission Consumer Credit firms need to submit REP008 reports within 2 months of their accounting reference date, or the next business day if this falls on a weekend. All other solo-regulated firms must submit the REP008 report by 31 October, or the next business day if this falls on a weekend. Given the 31 October this year is a Saturday, the reporting date for most solo-regulated firms is 2 November 2020.

The submission for 2 November 2020 will cover the period from 9 December 2019, however, all subsequent REP008 reporting periods will cover a full year:

  • For Limited Permission Consumer Credit firms, the reporting periods is the firm’s annual financial reporting period ending on its accounting reference date.

  • For all other solo-regulated firms the reporting period is 1 September to 31 August.

Who to Report On

One of the first things to note, is that Conduct Rule breaches by Senior Managers should not be included. They must be reported on separate forms using Connect Form D or Form C.

Firms need only report disciplinary action for breaches of the Conduct Rules for individuals subject to the Conduct Rules at the time the breach occurred. Currently the Conduct Rules apply to Senior Managers, Certification Staff and Directors who are not Senior Managers. The Conduct Rules do not yet apply to other employees until 31 March 2021. As such, for those reporting this November, only breaches of the Conduct Rules leading to disciplinary action of Certification Staff and Directors who are not Senior Managers should be reported on in the REP008. After 31 March 2021, disciplinary actions for breaches of the Conduct Rules by all individuals who are subject to the Conduct Rules (apart from Senior Managers) should be included in REP008.

Where an employee is appealing, or plans to appeal disciplinary action, this should still be reported in the REP008.

Conclusion

To conclude, firms should be checking now whether they have any details to report on for their REP008 submission and should ensure that even if they do not have any such details they submit a nil return. If returns are not submitted on time, a late return fee of £250 will be charged. Firms should also bear in mind, that their reports for next year will need to cover other employees, as well as Certification Staff and Directors who are not Senior Managers, and should set up adequate checks and recording procedures to ensure Conduct Rule breaches are reported when required to the FCA.

 

© Copyright 2022 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 231
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About this Author

Paul Anderson Financial Services Attorney Squire Patton Boggs Leeds, UK
Partner

Paul Anderson has specialised in financial services matters for over 15 years. His particular expertise covers a range of retail and wholesale financial services businesses, including clients from the banking, investment management, insurance, building society, broker dealer and IFA sectors, as well as intermediaries in the energy, investment and insurance sectors.

Paul was previously International Counsel at Prudential Bache, the UK investment business of Prudential Financial, Inc., where he supported the investment management, stock broking and commodity trading parts of the...

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