The FCA has published Consultation Paper 17/37: Consultation paper on industry codes of conduct and discussion paper on FCA Principle 5 (CP17/37). CP17/37 notes that firms and their staff should be clear about the FCA’s expectations of good conduct. However, for markets and activities not covered by regulatory rules and principles, the FCA’s expectations of authorised firms are less clear. Therefore, CP17/37 sets out proposals to address this issue, in light of the development of voluntary industry-written codes of conduct for unregulated financial markets and separately, the FCA’s Senior Managers Regime and Certification Regime (SM&CR).
In CP17/37 the FCA proposes:
- a general approach to supervising and enforcing its SM&CR rules for unregulated markets and activities, including those covered by industry-written codes of conduct. The FCA expects firms and their senior management to consider market codes in determining the proper standard of market conduct as part of the SM&CR requirements and obligations, including where the FCA does not have a framework of rules. The FCA will supervise adherence to the SM&CR rules and may take enforcement action in cases of serious and egregious misconduct leading to potential harm;
- that it publicly recognises particular industry codes of conduct that set out proper standards of market conduct for unregulated markets and activities. This proposed approach means the FCA will review and assess industry codes against a new criteria and then publicly state that it considers a particular code a helpful explanation of the proper standard of market conduct for a particular market; and
- extending the application of FCA Principle for Businesses 5 – A Firms must observe proper standards of market conduct – to unregulated activities. This would place both firms and their staff under comparable obligations to observe proper standards of market conduct and help ensure the FCA is clear about its expectations of firms.
The deadline for comments on CP17/37 is 5 February 2018.
The FCA expects to publish a policy statement outlining any Handbook changes in Q1 2018. The FCA intends to adopt the general approach immediately after publication of the policy statement, given that FCA rules are already in place to support this. If it proceeds with the new approach to recognising industry codes, the FCA will start accepting applications for codes to be considered after the policy statement is published.
View FCA consults on clarifying expectations of firms relating to unregulated markets and activities, 3 November 2017