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Applying Conduct Rules to all Non-Executive Directors in the Banking and Insurance Sectors

These new rules are part of the new accountability regimes introduced in March 2016 for banks and insurers and will result in changes to the Code of Conduct sourcebook (COCON).  COCON is formed of two sets of conduct rules: five individual conduct rules and four senior managers conduct rules.  The new rules set out in PS17/8 come into force on 3 July 2017.
 
The main new requirement is that Standard NEDs will be subject to the five Individual Conduct Rules set out in the Code of Conduct Sourcebook (COCON 2.1) and to Senior Conduct Rule 4.
 
The five individual conduct rules are:
 
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.
 
Senior Conduct Rule 4 requires individuals to 'disclose appropriately any information of which the FCA or PRA would reasonably expect notice'.   
 
As well as the above, the FCA has clarified that Individual Conduct Rule 2 applies to a director (whether executive or non-executive) when acting as a member of the board or other governing body or of its committees.
 
The Policy Statement also clarifies that Individual Conduct Rule 2 applies to a director (whether executive or non-executive) when acting as a member of the board or other governing body or of its committees
 
Senior Conduct Rules 1, 2 and 3 would not apply to a standard NED unless, as well as being a standard NED, they were also a 'senior conduct rules staff member'.
 
The guidance in COCON 1 (Annex 1) on the role and responsibilities of NEDs will also be extended to insurance firms.  This guidance can be found here.