FCA Handbook - COCON 2 Individual conduct rules

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COCON 2.1 Individual conduct rules

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.

[Note: See COCON 2.4 for what this means]

COCON 2.2 Senior manager conduct rules

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.

COCON 2.3 Firms: training and breaches

Under section 64B of the Act, an SMCR firm must:

(1)
ensure that all persons subject to the rules in COCON are notified of the rules that apply to them; and
(2)
take all reasonable steps to ensure that those persons understand how the rules in COCON apply to them.

(1)
The steps that an SMCR firm must take to ensure that its conduct rules staff understand how the rules in COCON apply to them include the provision of suitable training.
(2)
Suitable training should always ensure that those who are subject to the rules in COCON have an awareness and broad understanding of all of the rules in COCON, and that they also have a deeper understanding of the practical application of the specific rules which are relevant to their work.
(3)
For example:
1. (a)
  for individuals who trade in the markets, rule 5 in COCON 2.1.5R may apply in various circumstances arising in the individual’s day-to-day activities and additional training may be appropriate to ensure that the individual knows how that rule applies to those activities in those various circumstances; or
2. (b)
  for individuals who deal directly with customers, rule 4 in COCON 2.1.4R may apply in various circumstances which makes additional training appropriate for such individuals.

There are rules and guidance in SUP 15.3 (General notification requirements) and SUP 15.11 (Notification of COCON breaches and disciplinary action) that deal with reporting by an SMCR firm of COCON breaches to the FCA.

COCON 2.4 The Consumer Duty

Application

This section applies to Rule 6 in COCON 2.1 (You must act to deliver good outcomes for retail customers).

In this section, the term “you” means a member of a firm’s conduct rules staff.

Meaning of retail customer

(1)
This rule describes how the definition of retail customer applies for the purposes of Rule 6.
(2)
A retail customer means, in relation to a member of the conduct rules staff of a firm, a retail customer of that firm for the purposes of PRIN.

A person may be a retail customer of a firm for the purposes of Rule 6 even though that person is not a direct client of that firm and there is no direct relationship between them. This is in particular the effect of paragraphs (2)(f) and (2)(g) of the definition of retail customer.

Obligations: Introduction

(1)
COCON 2.4.6R to COCON 2.4.8R exhaust what is required by Rule 6.
(2)
Any reference in the Handbook to the obligations on a member of a firm’s conduct rules staff under Rule 6 is a reference to the requirements imposed by COCON 2.4.6R to COCON 2.4.8R.

Obligations: Rules

(1)
You must act in good faith towards retail customers.
(2)
Acting in good faith is a standard of conduct characterised by honesty, fair and open dealing and acting consistently with the reasonable expectations of retail customers.

You must avoid causing foreseeable harm to retail customers.

You must enable and support retail customers to pursue their financial objectives.

Reasonable application of Individual Conduct Rule 6

The obligations in Rule 6 must be interpreted in accordance with the standard that could reasonably be expected of a prudent person subject to COCON (as set out in COCON 1 (Application)):

(1)
carrying on the same activity in relation to the same product; and
(2)
taking appropriate account of the needs and characteristics of retail customers based on the needs and characteristics of retail customers in the relevant target market or of individual retail customers as the context requires.

References to Principle 12

Any reference in COCON to Principle 12 must be read in accordance with PRIN 2A.1.1R and PRIN 2A.1.2R (Application) and PRIN 2A.2.26R (Interaction between Principle 12 and cross-cutting obligations).