03.05.2021

What are the 5 SMCR Conduct Rules?

Bringing the 5 SMCR Conduct Rules to life – how the basics of the regime underpin the fitness, propriety and competence of all staff.

The five conduct rules of the Senior Management and Certification Regime (SMCR) have been around for several years under previous regulatory setups. However, instead of being the preserve of more senior people they now need to be adhered to by all employees (other than ancillary staff).

On the surface, the rules are fairly straightforward:

1. You must act with integrity:

It is amazing how the word ‘integrity’ can be interpreted by different people and different cultures. Integrity is fundamental to all aspects of business and it is important to give examples of how it can go wrong. Recent cases of individuals avoiding the payment of train fares, being found out and then finding themselves falling foul of this conduct rule are good ones to start with. Lacking in integrity can undermine all aspects of work culture and therefore the bottom line.

2. You must act with due skill, care and diligence:

It does seem obvious that everyone should work to the best of their abilities. This rule reinforces that idea. However, it is important to do so consistently in fair weather and poor. Organisations need to reinforce a culture where everyone is supported to build up their skills and apply them consistently.

3. You must be open and cooperative with the FCA, the PRA and other regulators:

This is another rule that makes sense. If one of the regulators starts an investigation or requires information, all staff should help them without hesitation. In financial services all firms operate within guidelines set by the regulator; ultimately they have the power to stop the organisation from trading. Why would you not cooperate?

4. You must pay due regard to the interests of customers and treat them fairly:

Fairness to clients and customers is a vital component of these rules – particularly with reference to retail customers. So often it may be tempting to adjust pricing or advice to enhance profitability and thus disadvantage the customer; under these rules it is clear that this should not happen.

5. You must observe proper standards of market conduct:

Finally, the integrity of the market place is vital. Without abiding by market standards confidence will be damaged and the negative effects far reaching. All staff need to be trained to understand how each relevant market operates and to make sure that they stick to those standards.

The fitness, propriety and competence of all staff relies on them all abiding by the conduct rules. Any breaches need to be reported to the regulator. Therefore all firms need to ensure that staff are regularly reminded and trained in how to stick to the rules at all times.