FCA Handbook - SUP 15.11 Notification of COCON breaches and disciplinary action

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SUP 15.11 Notification of COCON breaches and disciplinary action

Reasons for making a notification to the FCA

Under section 64A of the Act, the FCA may make rules about the conduct of approved persons and certain other persons who work for a firm.

COCON sets out rules under section 64A of the Act and guidance on those rules for SMCR firms.

Under section 64C of the Act, a firm must notify the FCA if it takes disciplinary action against certain people working for an SMCR firm and the reason for this action is a reason specified in rules made by the FCA (those rules are set out in SUP 15.11.6R).

Disciplinary action against a person is defined in section 64C of the Act as the issuing of a formal written warning, the suspension or dismissal of that person or the reduction or recovery of any of such person's remuneration.

If a reason for taking disciplinary action as referred to in section 64C of the Act (Requirement for authorised persons to notify regulator of disciplinary action) is any action, failure to act or circumstance that amounts to a breach of COCON, then the SMCR firm is required to notify the FCA of the disciplinary action.

The effect of section 64C of the Act and SUP 15.11.6R is that the reporting obligation in section 64C of the Act and in this section:

(1)
only applies to SMCR firms; and
(2)
only covers persons who are subject to COCON (who are called conduct rules staff in the FCA Handbook) rather than to the whole workforce of an SMCR firm.

A firm should make a separate notification about a person under section 64C of the Act where:

(1)
it has made a notification to the FCA about the person pursuant to SUP 15.3.11R(1)(a) because of a breach of COCON; and
(2)
it subsequently takes disciplinary action against the person for the action, failure to act, or circumstance, that amounted to a breach of COCON.

If, after a firm has made a notification for a person (A) pursuant to section 64C of the Act, it becomes aware of facts or matters which cause it to change its view that A has breached COCON, or cause it to determine that A has breached a provision of COCON other than the provision to which the notification related, the firm should inform the FCA of those facts and matters and its revised conclusion in line with a firm’s obligation to comply with Principle 11, SUP 15.6.4R and, if applicable, SUP 10C or SUP 15.11.13R(4).

(1)
If a firm takes disciplinary action as a result of a conduct breach (see SUP 15.11.6R) against an employee but the employee has appealed or plans to appeal, the firm should still report the disciplinary action under section 64C of the Act but should include the appeal in the notification.
(2)
The firm should update the FCA on the outcome of any appeal.

In relation to any conduct rules staff, the FCA does not expect a firm to notify it pursuant to section 64C of the Act if the breach of COCON occurred before the application of COCON to that firm.

Timing and form of notifications: SMF managers

Where a firm is required to notify the FCA pursuant to section 64C of the Act and that notification relates to an SMF manager, SUP 10C sets out how and when the notification must be made, and the relevant notification rules in SUP 10C apply.

Timing and form of notifications: conduct rules staff other than SMF managers

(1)
A firm must make any notifications required pursuant to section 64C of the Act relating to conduct rules staff other than SMF managers in accordance with SUP 15.11.13R to SUP 15.11.15R.
(2)
That notification must be made annually.
(3)
Each notification must:
1. (a)
  cover;
  1. (i)
    (in the case of a firm falling within SYSC 23 Annex 1 6.7R (credit firms with limited permission)) the 12 month period ending on the last day of December; or
  2. (ii)
    (for any other firm) the 12 month period ending on the last day of August; and
2. (b)
  be submitted to the FCA:
  1. (i)
    within two months of the end of the reporting period in (a)(i) or (a)(ii); or
  2. (ii)
    (if the end of the submission period in (b)(i) falls on a day which is not a business day) so as to be received no later than the first business day after the end of that submission period.
(4)
SUP 15.6.4R and SUP 15.6.5R (updates to a notification that is or has become incorrect) apply to a notification under this rule but the firm must include the update or correction in the next notification it is due to make under this rule rather than in the time and manner otherwise required for notifications under those rules.
(5)
[deleted]
(6)
(3)(a)(i) applies whether or not the firm is a limited scope SMCR firm.

SUP 15.11.8G and SUP 15.11.9G(2) give examples of when a notification should be updated under SUP 15.11.13R(4).

Timing and form of notifications: SMF managers

If a firm has nothing to report under section 64C of the Act or SUP 15.11.13R(4) for a particular reporting period, there is no requirement to make a nil return and so the firm should not send a notification for that period.

Timing and form of notifications: conduct rules staff other than SMF managers

(1)
A firm other than a credit union must make each notification pursuant to SUP 15.11.13R (notifications about section 64C of the Act relating to conduct rules staff other than SMF managers) by submitting it online through the FCA’s website using the electronic system made available by the FCA for this purpose.
(2)
A firm must use the version of Form H (named REP008 – Notification of Disciplinary Action) made available on the electronic system referred to in (1), which is based on the version found in SUP 15 Annex 7R.
(3)
If the information technology systems used by the FCA fail and online submission is unavailable for 24 hours or more, SUP 15.11.15R applies until such time as the facilities for online submission are restored.

(1)
If the information technology systems used by the FCA fail and online submission is unavailable for 24 hours or more, the FCA will endeavour to publish a notice on its website confirming that:
1. (a)
  online submission is unavailable; and
2. (b)
  the alternative methods of submission in SUP 15.11.15R apply.
(2)
Where SUP 15.11.14R(3) applies to a firm, GEN 1.3.2R (Emergency) does not apply.

A credit union must make each notification pursuant to SUP 15.11.13R (notifications about section 64C of the Act relating to conduct rules staff other than SMF managers) in accordance with the rules and guidance in SUP 15.7, using Form H as set out in SUP 15 Annex 7R.

General guidance on notifications of rule breaches and disciplinary action

The obligation to notify pursuant to section 64C of the Act or to update or correct a notification under SUP 15.11.13R(4) does not replace or limit a firm’s obligation to comply with Principle 11.

When considering whether to make a notification pursuant to section 64C of the Act, a firm should also consider whether a notification should be made under any notification rules, including, without limitation, any notification rules that require a notification to be made to the PRA.

The obligations to make a notification pursuant to section 64C of the Act apply notwithstanding any agreement (for example a 'COT 3' Agreement settled by the Advisory, Conciliation and Arbitration Service (ACAS)) or any other arrangements entered into by a firm and an employee upon termination of the employee's employment. A firm should not enter into any such arrangements or agreements that could conflict with its obligations under this section.

Failing to disclose relevant information to the FCA may be a criminal offence under section 398 of the Act.