In its SMCR guide for solo-regulated firms, the FCA says it replaced the Approved Persons Regime with the SMCR for banking firms in March 2016. The FCA also says the SMCR has applied to the majority of solo-regulated firms since December 9, 2019. We previously explored what SMCR entails.

The FCA describes the Conduct Rules as enforceable rules that set "basic standards of good personal conduct", against which it can hold people to account. They apply to a firm's regulated and unregulated financial services activities, including related ancillary activities.

What are the SMCR Conduct Rules?

The SMCR Conduct Rules are the FCA's rules of behavior for individuals working in regulated firms. The FCA sets them out in the COCON section of its Handbook as six individual conduct rules (COCON 2.1) and four senior manager conduct rules (COCON 2.2). Both sets are listed below.

First tier: individual conduct rules

These are the six individual conduct rules in COCON 2.1:

  • Rule 1: You must act with integrity
  • Rule 2: You must act with due skill, care and diligence
  • Rule 3: You must be open and cooperative with the FCA, the PRA and other regulators
  • Rule 4: You must pay due regard to the interests of customers and treat them fairly
  • Rule 5: You must observe proper standards of market conduct
  • Rule 6: You must act to deliver good outcomes for retail customers

Second tier: senior manager conduct rules

These are the four senior manager conduct rules in COCON 2.2:

  • SC1: You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively
  • SC2: You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system
  • SC3: You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively
  • SC4: You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice

The FCA's guide says the first tier applies to most employees and directors and the second tier applies only to Senior Managers, and adds that SC4 applies to all non-executive and executive directors.

What is Individual Conduct Rule 6?

Rule 6 reads: "You must act to deliver good outcomes for retail customers." COCON 2.4, headed The Consumer Duty, sets out what it requires of a firm's conduct rules staff:

  • "You must act in good faith towards retail customers."
  • "You must avoid causing foreseeable harm to retail customers."
  • "You must enable and support retail customers to pursue their financial objectives."

COCON 2.4 adds that a person can be a retail customer for the purposes of Rule 6 even if they are not a direct client of the firm and there is no direct relationship between them.

Who must comply with the SMCR Conduct Rules?

According to the FCA's guide, the Conduct Rules apply to:

  • all Senior Managers
  • all Certification Staff
  • all non-executive directors who are not Senior Managers
  • all other employees, except ancillary staff

The guide says the rules apply to the majority of employees working in firms because a broad range of staff have the potential to cause harm. The FCA also says that in this context "employee" is defined more broadly than its usual meaning and generally includes groups such as volunteers, contractors and temporary staff.

Ancillary staff are people who do not perform a role specific to financial services. The FCA's list includes receptionists, security guards, medical staff, cleaners, catering staff and information technology support (helpdesk). Check the full list in section 11 of the guide. The rules also have territorial limits, which the same section covers. The FCA adds that the Conduct Rules do not apply to a sole trader as an individual unless they hold a senior management function, but they do apply to the sole trader's employees unless those employees perform an excluded ancillary role.

When the Conduct Rules started to apply

The FCA says the Conduct Rules applied to Senior Managers, Certification Staff and directors of UK SMCR firms who are not Senior Managers from December 9, 2019. Under its transitional arrangements, they started to apply to all other employees, except ancillary staff, from March 31, 2021.

How to embed the SMCR Conduct Rules into your firm

Under section 64B of the Financial Services and Markets Act 2000 (FSMA), firms must train relevant staff on how the Conduct Rules apply to their role. The guide says a Senior Manager must be allocated the Prescribed Responsibility for this, and that the Conduct Rules Prescribed Responsibility does not apply to Limited Scope firms.

Train staff on how the rules apply to their role

The FCA's guide gives an example firm that trains all staff in roles that involve, or are connected to, financial services activities. Employees who only perform roles on the ancillary staff list do not need to be trained on the Conduct Rules.

Report Conduct Rule breaches to the FCA

  • Senior Managers: firms notify the FCA within 7 business days of concluding disciplinary action, using Form D (or Form C where the individual will no longer be approved).
  • Other individuals: firms report annually using REP008. For most solo-regulated firms the reporting period runs from September 1 to August 31 and the deadline is October 31, or the next business day if that falls on a weekend. Limited Permission Consumer Credit firms follow a different timetable, which the FCA's REP008 page sets out.
  • Nothing to report: since August 28, 2025 the FCA has said firms no longer need to submit a nil return when they have nothing to report.

The FCA defines disciplinary action as issuing a formal written warning, suspension or dismissal of a person, or reduction or recovery of remuneration (clawback). The guide adds that the notification requirement does not change or remove firms' obligations to report concerns about an individual's conduct under existing rules and principles, such as FCA Principle 11.

Why the SMCR Conduct Rules matter

The FCA says the SMCR aims to reduce harm to consumers and strengthen market integrity by creating a system that enables firms and regulators to hold people to account. As part of this it aims to encourage staff to take personal responsibility for their actions, improve conduct at all levels and make sure firms and staff clearly understand and can show who does what. The FCA adds that because the Conduct Rules apply to staff directly, they will help shape the culture, standards and policies of firms as a whole.