Application to firms
The Conduct Rules apply to the regulated and unregulated financial services activity of a firm[1]. However, more specifically, for FCA solo-regulated firms, the Conduct Rules apply to:
- the “financial activities” of the firm; or
- any activities of the firm that might have (or might reasonably be regarded as like to have) a negative effect on:
- the integrity of the UK financial system; or
- the ability of the firm to meet threshold conditions related to it being “fit and proper”; or
- the ability of the firm to meet regulatory requirements regarding financial resources.[2]
[1] COCON 1.1.6R to 1.1.7R
[2] COCON 1.1.7AR
Application to individuals
As far as individuals are concerned, the Conduct Rules apply to[1]:
- Senior Managers;
- individuals who would be considered Senior Managers except for the fact that they are operating under the ‘emergency 12-week rule’;
- non-executive directors who are not Senior Managers;
- Certification Employees;
- individuals who would be Certification Employees except for the fact that they are operating under the ‘emergency 4-week rule’;
- individuals who would be Certification Employees except for the fact that they are operating under the ‘temporary UK role’ exemption (in other words, the rule that the Certification Regime does not apply to any individual who is based outside of the UK and spends no more than 30 days per annum performing an activity that would otherwise be subject to the Certification Regime); and
- all other employees of the firm (other than “ancillary staff”).
[1] See COCON 1.1.2R
Exclusions
Ancillary Staff
- Receptionists
- Switchboard operators
- Postroom staff
- Reprographics/print room staff
- Property/facilities management
- Events management
- Security guards
- Invoice processing
- Audio-visual technicians
- Vending machine staff
- Medical staff
- Archive records management
- Drivers
- Corporate & social responsibility staff
- Data controllers and data processors*
- Cleaners
- Catering staff
- Invoice processing
- IT support
- Human resources administrators/processors
*Note, however, that if the employee would have to exercise a “significant degree of discretion or judgment” they would NOT be regarded as “ancillary staff” under this heading and so WOULD be subject to the Conduct Rules.
Territorial limitations
The Conduct Rules applies to Senior Managers, non-approved NEDs and Certification Employees who are “material risk takers” irrespective of where they perform activities.[1] However, beyond that, the Conduct Rules only apply to conduct:
- performed from the UK, or
- which involves “dealing with” UK clients of the firm from an overseas “establishment” of a UK firm.[2]
The phrase “dealing with” is interpreted quite widely by the FCA and includes ‘having contact with customers’. In other words, it is NOT restricted to dealings with clients of the firm.
[1] COCON 1.1.9R
[2] COCON 1.1.10R
