Consultation on industry codes of conduct by the FCA

Published: 09 January 2018

The UK Financial Conduct Authority (FCA) has recently published a consultation paper proposing a general approach to supervising and enforcing the Senior Managers & Certification Regime (SM&CR) rules for authorised firms’ unregulated activities, including those covered by industry-written codes of conduct.

The consultation runs until 5 February 2018, the consultation paper and the online response form can be viewed here. As AIMA is not envisaging to have its guidance recognised, we are not planning to respond. Do contact us however if you still wanted to comment on the consultation (Marie-Adélaïde de Nicolay).

According to the proposed approach, the FCA would require firms and their senior management to consider industry codes of conduct in determining the ‘proper standard of market conduct’ as part of the SM&CR requirements (e.g. individual conduct rule 5, certification and regulatory referencing), including where there is no framework of rules.

For this reason, the FCA proposes that some particular industry codes be publicly recognised according to a specific set of criteria. In this consultation, the FCA seeks market participants’ opinion regarding the recognition process as well as regarding the proposed criterias, including whether the codes raise industry standards and have been subject to public scrutiny.

The intention is however not to give such codes a standing equivalent to binding regulation. Firms and their staff will not be required to become signatories to any particular code as their adherence will remain voluntary.

The FCA also intends to distinguish between industry or market codes that cover unregulated markets on the one hand, and industry-written guidance covering regulated markets on the other. Each will be treated differently under the regulatory regime, as explained in the table below.

AIMA guidance would fall under the categories ‘Industry guidance on regulatory rules’ and ‘industry codes/standards for unregulated markets’.

The FCA is also seeking views on whether it should extend the application of FCA Principle for Businesses 5 – A firm must observe proper standards of market conduct – to unregulated activities since it currently only applies to regulated activities and ancillary unregulated activities.


Industry guidance on regulatory rules

Industry guidance on regulated rules – confirmed by the FCA

Industry codes/standards for unregulated markets

Industry codes/ standards for unregulated markets – recognised by the FCA


No formal status – may be used evidentially within FCA enforcement action

The FCA will not take action against firms for behaviour in line with such guidance

No formal status – may be used evidentially within FCA enforcement action

The FCA will treat compliance by firms with recognised industry codes as tending to indicate compliance with FCA rules that require firms or individuals to observe ‘proper standards of market conduct’ in relation to unregulated markets and will usually not take action against firms for behaviour that is so compliant