What is the 6th Conduct Rule?

If you work within the UK finance industry then you will have heard of the conduct rules. Set out by the Financial Conduct Authority (FCA) these rules set the standard that should be applied to all firms that are subject to the Senior Managers and Certification Regime (SMCR). Originally there were 5 conduct rules, but the FCA brought in a 6th conduct rule in July 2023. So, what is the 6th conduct rule and why was it introduced?

What are the 5 conduct rules?

The conduct rules were brought in to ensure staff within the UK Finance Industry are meeting a good standard of personal conduct, if they fall short of this the FCA can hold them to account. These rules help to ensure that there is a good level of protection for consumers, that the integrity of the UK financial system is maintained, and to promote competition in the interest of customers.

Previously the FCA set out 5 conduct rules that firms needed to demonstrate compliance with. These were:
1. To act with integrity
2. To act with due skill, care, and diligence
3. To be open and cooperative with the FCA, the PRA, and other regulators
4. To pay due regard to the interests of customers and treat them fairly
5. To observe proper standards of market conduct

An initial consultation paper published by the FCA in May 2021, raised the question of how to better protect consumers from harm in financial services. The outcome of this consultation is a 6th Conduct Rule.

What is the 6th conduct rule?

Following this consultation, the Consumer Duty introduced a 6th conduct rule in July 2023 for firms to follow. While the 5 Conduct Rules offer some protection, the 6th Conduct Rule not only highlights how consumers should be protected from financial harm, particularly during these turbulent economic times, but defines expectations and standards for this much more clearly. The 6th conduct rule states “All conduct rules staff must act to deliver good outcomes for retail customers”.

The Consumer Duty, combined with the FCA’s more assertive and data-led approach will enable them to move quickly to identify firms and/or practises that do not align with the 6th Conduct Rule. This allows more opportunities for intervention to protect consumers and to hold firms and Senior Managers accountable.

How does the Consumer Duty of Care fit in?

The Consumer Duty of Care was also brought in by the FCA this year to set out very clear and high standards for firms to understand what is expected of them. Firms will be monitored and accessed against 4 outcomes: product and services, price and value, consumer understanding, and consumer support.

Following on from this, the 6th conduct rule was added to ensure that the responsibilities of the Consumer Duty are carried out. You can read more about the Consumer Duty in our recent blog post What is the Consumer Duty of Care?

How does the 6th conduct rule impact SMCR?

Firms will need to demonstrate that they actively working to deliver good outcomes for consumers. This may mean reviewing current processes and procedures, and potentially a big culture change at an organisational level. Organisations and senior managers will need to demonstrate compliance with all 6 conduct rules as part of their SMCR process.

Between the 6th conduct rule and the Consumer Duty of Care, the FCA will have much more scope to intervene to ensure a high standard of conduct within UK financial services and good outcomes for consumers.

If your organisation needs some support in ensuring you can successfully demonstrate compliance with the 6th conduct rule, we can offer support, training, and solutions that will help make managing your SMCR simple. Get in touch now to find out how we can help.