Published: 23rd November 2017


Of relevance to: Authorised firms, particularly those already subject to the Senior Managers and Certification Regime, including banks, building societies, credit unions and certain large investment banks
Key date: Comments to FCA by 5 February 2018

It is to be made clear to all authorised firms and their staff that the FCA expects good conduct in all financial markets and activities, not just those covered by regulatory rules and principles.

The proposals in CP17/37 follow several high-profile cases of serious misconduct in unregulated wholesale financial markets by individuals working at authorised firms, and the development of a number of new codes of conduct to cover some of those activities and raise standards.

The CP17/37 proposals will also be relevant to a wider group of firms as the FCA is currently consulting on extending its Senior Managers and Certification Regime (SMCR) to all authorised firms when HM Treasury sets the implementation date (likely to be in the second half of 2018). The SMCR does not apply to firms which are not authorised under the Financial Services and Markets Act 2000.

Limited Scope Firms will typically have fewer Senior Management Functions than firms in the core SMCR, maintaining the exemption for firms which already have exemptions under the current Approved Persons Regime.

The FCA are concerned that failure of authorised firms and their staff to meet appropriate standards of conduct in unregulated markets may harm broader confidence in the operation of regulated financial markets.

All authorised firms are therefore invited to comment on the FCA proposal to extend the application of FCA Principle 5 – A firm must observe proper standards of market conduct – to unregulated activities.

The FCA have advised they may take enforcement action in cases of serious and egregious misconduct leading to harm or potential harm, particularly where they consider the firm or individual has not adhered to the SMCR rules and/or FCA-recognised industry codes of conduct that, in their view, set out proper standards of market conduct for unregulated markets and activities.

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