On 20 July 2018, the Financial Conduct Authority (FCA) published a policy statement, Industry codes of conduct and feedback on FCA principle 5.
The policy statement summarises the feedback from the FCA’s 2017 consultation paper on industry codes of conduct and FCA principle 5: ‘you must observe proper standards of market conduct’. To encourage individuals and businesses to fulfil principle 5, the FCA proposed a number of methods to increase the transparency of market conduct codes. The feedback on the proposals noted:
- respondents were supportive of our aim to improve transparency about the status of market codes, and to be clear on our approach given the clear links included within the Senior Managers & Certification Regime; however
- some respondents were concerned that recognising codes may imply a ‘quasi-legal status’ that undermines their voluntary nature.
In response to this, the FCA proposes the following steps:
- establishing a process through which certain codes in priority areas can be recognised, to encourage but not mandate their use;
- to publicly consult on each panel decision to recognise a code, to provide transparency to market participants and let people share views if they disagree that a market code does represent proper standards; and
- to not consult on extending principle 5 for businesses to wholly unregulated activities at this time, but instead continue to consider the case for this in light of the effectiveness of the code recognition process.