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COCON 1.1 1Application

COCON 1.1.1GRP

Under section 64A of the Act, the FCA may make rules about the conduct of certain persons9 working in firms9.

To whom does it apply?

COCON 1.1.1AR

9COCON applies to the persons set out in the table in COCON 1.1.2R.

COCON 1.1.2RRP

Table: To whom does COCON apply? 9

    9Persons to whom COCON applies

    Comments9

    (1) An SMF manager.9

    (2) An employee (“P”) of an SMCR firm12 who:9

    (a) performs the function of an SMF manager;9

    (b) is not an approved person to perform the function in question; and9

    (c) is required to be an approved person at the time P performs that function.9

    (3) An employee of an SMCR firm12 who would be performing an FCA-designated senior management function12 but for SUP 10C.3.13R (The 12-week rule). 9

    (4) A certification employee of an SMCR firm12.9

    This applies even if the certification employee has not been notified that COCON applies to them or notified of the rules that apply to them.9

    (5) An employee of an SMCR firm who would be performing an FCA certification function but for SYSC 27.5.1R (Emergency appointments) or SYSC 27.5.3R (Temporary12 UK role). 9

    12

    (6) Any employee of an SMCR firm12 not coming within another row of this table, except one listed in column (2) of this row (6) of this table12. 9

    (A)12 This row (6)12 does not apply to an employee of an SMCR firm12 who only performs functions falling within the scope of the following roles:9

    (a) receptionists;

    (b) switchboard operators;

    (c) post room staff;

    (d) reprographics/print room staff;

    (e) property/facilities management;

    (f) events management;

    (g) security guards;

    (h) invoice processing;

    (i) audio visual technicians;

    (j) vending machine staff;

    (k) medical staff;

    (l) archive records management;

    (m) drivers;

    (n) corporate social responsibility staff;

    (o) taking part in following activities of the firm:14

    14 (i) the firm’s activities as a data controller; or

    14(ii) the firm’s activities of data processing;

    as defined in the data protection legislation, but subject to Note (1) of this table14;data protection legislation;10

    (p) cleaners;

    (q) catering staff;

    (r) personal assistant or secretary;

    (s) information technology support (ie, helpdesk); and

    (t) human resources administrators /processors.

    1214

    121417

    (7) [deleted]12

    9

    12

    9

    (8) A board director of: a UK SMCR firm.12

    9999

    12

    9

    12

    9

    14Note (1): A function is only within paragraph (o) of column (2) (Comments) of row (6) of this table if the function does not require the employee concerned to exercise a significant amount of discretion or judgment.

COCON 1.1.2ARRP

9For Swiss general insurers, references in this sourcebook to parts of the PRA Rulebook for ‘Solvency II firms’ are to be read as references to the corresponding parts of the PRA Rulebook applying to large non-directive insurers.

COCON 1.1.3RRP

Rules 1 to 619 in COCON 2.1 apply to all conduct rules staff.

COCON 1.1.4RRP
  1. (1)

    Rules SC1 to SC4 in COCON 2.2 apply to all senior conduct rules staff members (subject to (2)).9

  2. (2)

    SC1 to SC3 in COCON 2.2 do not apply to a senior conduct rules staff member within paragraph (d) of the definition of senior conduct rules staff member (P)12 unless P also falls into paragraph (a) or (b) of that definition.12

    9
COCON 1.1.5GRP
  1. (1)

    The guidance in COCON 2.3 applies to SMCR firms12.

  2. (2)

    [deleted]9

    42
  3. (3)

    SYSC 27.6.3R12 provides that a function performed by a non-executive director of a firm acting as such is not an FCA certification function12 for that firm.

COCON 1.1.5AR

19The conduct of a member of the conduct rules staff of a firm is not within the scope of Rule 6 in COCON 2.1 (You must act to deliver good outcomes for retail customers):

  1. (1)

    unless the corresponding COCON firm activities of the firm are within the scope of PRIN 3.1 (Who?) so far as it applies to Principle 12; and

  2. (2)

    except to the extent that Principle 12 applies to that firm under PRIN 3.1.

To what conduct does it apply?

COCON 1.1.5BR
  1. (1)

    19The restrictions of the scope of COCON in COCON 1.1.7AR to COCON 1.1.7ER (when they apply) are in addition to those in COCON 1.1.6R to COCON 1.1.7R.

  2. (2)

    The restrictions of the scope of COCON in COCON 1.1.7AR to COCON 1.1.7ER (when they apply) are cumulative.

COCON 1.1.5CG
  1. (1)

    19The effect of COCON 1.1.5BR(1) is that conduct that is within the scope of COCON 1.1.7AR to COCON 1.1.7ER but outside the scope of COCON 1.1.6R to COCON 1.1.7R is outside the scope of COCON and vice versa.

  2. (2)

    The effect of COCON 1.1.5BR(2) is that conduct of a member of the conduct rules staff of a firm:

    1. (a)

      is outside the scope of COCON even if it is excluded by only one of the rules in COCON 1.1.7AR to COCON 1.1.7ER; and

    2. (b)

      is outside the scope of:

      1. (i)

        Rule 4 in COCON 2.1 (You must pay due regard to the interests of customers and treat them fairly) even if the only rule excluding it is COCON 1.1.7ER; and

      2. (ii)

        Rule 6 in COCON 2.1 (You must act to deliver good outcomes for retail customers) even if the only rule excluding it is COCON 1.1.7CR.

COCON 1.1.6RRP

For a person (P) who is an approved person, COCON applies to the conduct of P in relation to the performance by P of functions relating to the carrying on of activities (whether or not regulated activities) by the firm (Firm A)12 on whose application approval was given to P.

[Note: sections 64A(4) and (5)(a) of the Act (Rules of conduct)]

COCON 1.1.6AR

12For a person (P) who is a board director of a firm (Firm A) but is not an approved person of Firm A, COCON applies to the conduct of P in relation to the performance by P of functions relating to the carrying on of activities (whether or not regulated activities) by Firm A.

[Note: sections 64A(4) and (5)(ab) of the Act (Rules of conduct)]

COCON 1.1.7RRP
9
  1. (1)

    For a person (P) subject to COCON who is not an approved person, COCON applies to the conduct of P in relation to the performance by P of functions relating to the carrying on of activities (whether or not regulated activities) by P’s employer (Firm A).12

    9
  2. (2)

    This rule does not apply where COCON 1.1.6A applies.12

    9

[Note: sections 64A(4)12 9and (5)(b) of the Act (Rules of conduct)]

COCON 1.1.7-AR
  1. (1)

    19The term “COCON firm activities” means (in relation to conduct of P in relation to Firm A) the corresponding activities of Firm A as referred to in COCON 1.1.6R to COCON 1.1.7R (To what conduct does it apply?).

  2. (2)

    A person is a member of the conduct rules staff of Firm A if they meet the description of P in relation to that firm in COCON 1.1.6R to COCON 1.1.7R.

  3. (3)

    The terms “P” and “Firm A” have the same meaning as they do in COCON 1.1.6R to COCON 1.1.7R.

COCON 1.1.7AR
  1. (1)

    12Where Firm A in COCON 1.1.6R to COCON 1.1.7R is an SMCR firm other than an SMCR banking firm, the application of COCON is further restricted by this rule.

  2. (2)

    COCON only applies to conduct that forms part of, or is for the purpose of, any of the following:

    1. (a)

      the SMCR financial activities of Firm A; or

    2. (b)

      any activities of Firm A that have, or might reasonably be regarded as likely to have, a negative effect on:

      1. (i)

        the integrity of the UK financial system; or

      2. (ii)

        the ability of Firm A to meet the “fit and proper” test in threshold condition 2E and 3D (Suitability); or

      3. (iii)

        the ability of Firm A to meet the applicable requirements and standards under the regulatory system relating to Firm A’s financial resources.

  3. (3)

    This rule does not apply where COCON 1.1.7BR applies.15

  4. (4)

    This rule does not apply to Rule 6 in COCON 2.1 (You must act to deliver good outcomes for retail customers).19

COCON 1.1.7BR
  1. (1)

    15Where a member (M) of the conduct rules staff of Firm A as described in COCON 1.1.6R to COCON 1.1.7R meets the condition in (c) and Firm A meets the conditions in (a) and (b), the application of COCON to the conduct of M in relation to Firm A is further restricted by this rule:

    1. (a)

      the firm is a pure benchmark SMCR firm;

    2. (b)

      the firm is an Annex II benchmark administrator (whether or not it also administers other benchmarks); and

    3. (c)

      M does not perform any functions described in COCON 1.1.6R to COCON 1.1.7R in relation to Firm A with respect to any benchmark that the firm administers except a benchmark that is subject to Annex II to the benchmarks regulation.

  2. (2)
    1. (a)

      The only conduct to which the following rules apply is the conduct described in (2)(b):

      1. (i)

        the rules in COCON 2.1 (Individual conduct rules); and

      2. (ii)

        rule SC4 in COCON 2.2 (You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice).

    2. (b)

      The rules in (2)(a) apply only to any of the following:

      1. (i)

        the performance of a function by M in relation to the carrying on of a regulated activity by Firm A;

      2. (ii)

        (if M is an SMF manager) the performance by M of a controlled function in relation to Firm A (whether or not approval has been sought and granted).

  3. (3)

    Rules SC1 to SC3 in COCON 2.2 (Senior manager conduct rules) apply only to conduct:

    1. (a)

      that comes within (2)(b); or

    2. (b)

      that comes within COCON 1.1.7AR, but this paragraph (3)(b) only applies in a prudential context.

COCON 1.1.7CR

19The conduct of a member of the conduct rules staff of a firm is not within the scope of Rule 6 in COCON 2.1 (You must act to deliver good outcomes for retail customers) unless the corresponding COCON firm activities of the firm are within the scope of PRIN 3.2 (What?) so far as it applies to Principle 12.

COCON 1.1.7DG

19The effect of COCON 1.1.7C is that a person’s conduct is not within the scope of Rule 6 in COCON 2.1 if the related activities of the firm fall outside the scope of Principle 12. If Principle 12 applies, Rule 6 in COCON 2.1 only applies if the conduct is also within the scope of the other relevant COCON application rules (although one of the COCON application rules (COCON 1.1.7AR) does not apply to Rule 6).

COCON 1.1.7ER

19To the extent that Rule 6 in COCON 2.1 (You must act to deliver good outcomes for retail customers) applies to the conduct of a person, Rule 4 in COCON 2.1 (You must pay due regard to the interests of customers and treat them fairly) does not apply to that conduct of that person.

COCON 1.1.8GRP
  1. (1)

    More than one of12 COCON 1.1.6R to12 COCON 1.1.7ER19 may apply to the same individual performing several roles.

    1215
  2. (2)

    For example, say that an individual (A) is an approved person for firm X and is employed by firm Y in a role that does not involve a controlled function or being a director.12

    42
  3. (3)

    COCON 1.1.6R applies to A’s role with firm X and COCON 1.1.7R applies to A’s role with firm Y.

COCON 1.1.8AR
  1. (1)

    12This rule applies to a person (P):

    1. (a)

      who is an approved person approved to perform a controlled function under SUP 10A (FCA Approved Persons in Appointed Representatives)15;

    2. (b)

      for whom P’s authorised approved person employer is an SMCR firm (F); and

    3. (c)

      to whom COCON also applies in P’s capacity as a member of F’s conduct rules staff.

  2. (2)

    COCON does not apply to conduct of P to the extent that:

    1. (a)

      that conduct relates to the performance by P of functions:

      1. (i)

        in (1)(a); or

      2. (ii)

        in relation to the carrying on of a regulated activity by the appointed representative concerned; and

    2. (b)

      APER applies to that conduct.

Where does it apply?

COCON 1.1.8BR

19The restrictions of the scope of COCON in COCON 1.1.9R to COCON 1.1.10R on the one hand and COCON 1.1.11C on the other are cumulative.

COCON 1.1.9RRP
  1. (1)

    COCON applies to the conduct of 6conduct rules staff set out in (2) 6wherever it is performed.

  2. (2)

    6This rule applies to:

    1. (a)

      a senior conduct rules staff member; and

    2. (b)

      a certification employee performing FCA certification function (6)12 (material risk takers) in the table in SYSC 27.7.3R for a UK SMCR firm12.

      12
COCON 1.1.9AG
  1. (1)

    12This paragraph deals with how COCON 1.1.9R applies to a certification employee (P) who performs the material risk taker FCA certification function and another FCA certification function for the same UK SMCR firm.

  2. (2)

    If P’s conduct relates to both FCA certification functions (because for example those two functions cover the same activities) COCON applies without territorial limitation to P’s conduct.

  3. (3)

    If part of P’s conduct relates to the material risk taker FCA certification function and the rest of P’s conduct relates to the other FCA certification function, COCON only applies without territorial limitation to P’s conduct in relation to the material risk taker FCA certification function.

COCON 1.1.10RRP
  1. (1)

    This rule applies to members of a firm’s conduct rules staff apart from conduct rules staff in COCON 1.1.9R. 6

    522
  2. (2)

    Subject to (3), COCON only applies to the conduct of persons to whom this rule applies (as set out in (1)) if that conduct:6

    1. (a)

      6is performed from an establishment maintained in the United Kingdom by the SMCR firm; or12

    2. (b)

      6involves dealing with a client of the firm in the United Kingdom from an establishment overseas.

    5
  3. (3)

    6Paragraph (2)(b) only applies to a UK SMCR firm12.

COCON 1.1.11GRP

The FCA interprets the phrase ‘dealing with’ in COCON 1.1.10R as including having contact with customers and extending beyond ‘dealing’ as used in the phrase ‘dealing in investments’. ‘Dealing in’ is used in Schedule 2 to the Act to describe, in general terms, the regulated activities which are specified in Part II of the Regulated Activities Order.

COCON 1.1.11AGRP

6The FCA interprets the phrase ‘a client of the firm in the United Kingdom’ in COCON 1.1.10R as referring to:

  1. (1)

    for a client which is a body corporate, its office or branch in the United Kingdom; or

  2. (2)

    for a client who is an individual, a client who is in the United Kingdom at the time of the dealing.

COCON 1.1.11BG
  1. (1)

    14The Regulated Activities Order has an effect on the territorial scope of COCON.

  2. (2)

    This is because whether or not conduct involves regulated activities may affect how and whether COCON applies. Therefore where overseas activities are excluded from being regulated activities by the Regulated Activities Order, that will have an effect on COCON.

  3. (3)

    An example of (1) is the territorial restriction relating to regulated claims management activities.

  4. (4)

    As explained in PERG 2.4A (Link between regulated claims management activities and Great Britain), a claims management activity specified in the Regulated Activities Order is only a regulated activity if it is carried on by way of business in Great Britain.

  5. (5)

    The result is that a claims management activity specified in the Regulated Activities Order carried on outside Great Britain is an unregulated activity for the purposes of COCON.

  6. (6)

    This restriction:

    1. (a)

      applies to conduct rules staff coming within COCON 1.1.9R as well as to other conduct rules staff; and

    2. (b)

      applies in addition to the restriction in COCON 1.1.10R.

COCON 1.1.11CR

19The conduct of a member of the conduct rules staff of a firm is not within the scope of Rule 6 in COCON 2.1 (You must act to deliver good outcomes for retail customers) unless the corresponding COCON firm activities of the firm are within the scope of PRIN 3.3 (Where?) so far as it applies to Principle 12.

COCON 1.1.11DG

19The effect of COCON 1.1.8BR and COCON 1.1.11CR is that conduct of a member of a firm’s conduct rules staff is only within the territorial scope of Rule 6 in COCON 2.1 if it is within the scope of COCON 1.1.9R to COCON 1.1.10R and the corresponding activity of their firm is within the territorial scope of Principle 12 as set out in PRIN 3.3.

COCON 1.1.12RRP

A person will not be subject to COCON to the extent that this would be contrary to the requirements of an EU measure passed or made before IP completion day16, to the extent that those requirements continue to have effect after IP completion day16 under the EUWA.1813

511

Purpose

COCON 1.1.13GRP

The purpose of this chapter is to set out rules for conduct rules staff and to provide guidance about those rules2 to firms whose staff are subject to them2.

COCON 1.1.14GRP

COCON 1 Annex 1 has guidance on the role and responsibilities of non-executive directors to whom COCON applies9.