Firms subject to Senior Managers and Certification Regimes
(SMCR) are obligated to capture, assess, and report breaches of
Conduct Rules by individuals who are in scope of the rules. Holding
individuals to account is a core concept of the new regime.
The first reporting window for in scope firms to notify the
Financial Conduct Authority of any Conduct Rule breaches opened on
1 September 2016 and closes on 31 October 2016. Below we provide a
reminder of the key requirements to help ensure your firm is ready
This initial annual report only
covers Certified Persons, with the conduct of other Conduct Rules
staff being included from 7 March 2017, once the rules apply to
The reporting period for this year
covers 7 March 2016 to 31 August 2016. Future reporting periods
will be for 12 months between September and the end of August the
Submissions should include
notification of any disciplinary action taken against conduct rules
staff which included a breach of the Conduct Rules.
Notifications should be made using
the newly created Form H. Within this form firms should include
personal details of any individual who has breached the Conduct
Rules, the basis for determining the breach and details of any
Reporting is mandatory for all firms
subject to SMCR even where there have been no breaches of the
Conduct Rules during the period. Where there are no breaches, firms
should use Form H to declare a 'nil return'.
In addition to this annual report, the regulator should be
notified within seven business days if firms become aware that an
individual carrying out a Senior Manager Function may have breached
the Conduct Rules.
Firms will also need to adhere to general regulatory obligations
to appropriately disclose anything of which the regulators would
reasonably expect notice. This may include reporting significant
breaches of the Conduct Rules ahead of the annual report.
Are you ready?
Ensuring that effective mechanisms to identify, assess and
record breaches of the Conduct Rules are in place should be high on
the list of regulatory priorities. Whilst this initial reporting
return only captures Certified Persons, as of 7 March 2017 it will
also cover the much larger pool of Conduct Rules staff.
Firms should ensure that they take this opportunity to assess
whether they have the appropriate systems and controls in place to
identify and mitigate potential breaches of the Conduct Rules and
to be able to accurately report breaches where they occur. This may
Providing tailored Conduct Rules
training to all staff subject to the rules, to ensure they
understand how the rules apply and what behaviour would constitute
a breach of the rules.
Linking HR disciplinary processes
with Compliance regulatory reporting to consider whether an
individual's actions constitute a breach of the Conduct
Establishing robust governance
processes to discuss, challenge and validate the annual report of
disciplinary action and breaches of the Conduct Rules.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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