SUP 15.11 Notification of COCON breaches and disciplinary action1

1Under section 64A of the Act, the FCA may make rules about the conduct of approved persons and persons who are employees of relevant authorised persons.

COCON sets out rules and guidance about the conduct of conduct rules staff.

Under section 64C of the Act, a firm must notify the FCA if it takes disciplinary action against any conduct rules staff and the reason for this action is a reason specified in rules made by the FCA in SUP 15.11.6R.

Disciplinary action is defined in section 64C of the Act as the issuing of a formal written warning, the suspension or dismissal of a person who is a member of a relevant authorised person's conduct rules staff or the reduction or recovery of any of such person's remuneration.

A firm should make a separate notification about a person under section 64C of the Act where:

1. (1)

   it has made a notification to the FCA about a person pursuant to SUP 15.3.11R(1)(a) because of a breach of COCON2; and

2. (2)

   it subsequently takes disciplinary action against the person for the action, failure to act, or circumstance, that amounted to a breach of COCON.

If, after a firm has made a notification for a person (A) pursuant to section 64C of the Act,2 it becomes aware of facts or matters which cause it to change its view that A has breached COCON, or cause it to determine that A has breached a provision of COCON other than the provision to which the notification related, the firm should inform the FCA of those facts and matters and its revised conclusion in line with a firm’s obligation to comply with Principle 11, SUP 15.6.4R and, if applicable, SUP 10C or SUP 15.11.13R(4)3.

If a firm takes disciplinary action as a result of a conduct breach (see SUP 15.11.6R) against an employee but the employee has appealed or plans to appeal, the firm should still report the disciplinary action under section 64C of the Act but should include the appeal in the notification. The firm should update the FCA on the outcome of any appeal.2

In relation to any conduct rules staff, the FCA does not expect a firm to notify it pursuant to2 section 64C of the Act if the2 breach of COCON occurred before the application of COCON to that firm.

Where a firm is required to notify the FCA pursuant to2 section 64C of the Act and that notification relates to an SMF manager, SUP 10C sets out how and when the notification must be made, and the relevant notification rules in SUP 10C apply.

3SUP 15.11.8G gives examples of when a notification should be updated under SUP 15.11.13R(4).

1. (1)

   3If the information technology systems used by the FCA fail and online submission is unavailable for 24 hours or more, the FCA will endeavour to publish a notice on its website confirming that:

   1. (a)

      online submission is unavailable; and

   2. (b)

      the alternative methods of submission in SUP 15.11.15R apply.

2. (2)

   Where SUP 15.11.14R(3) applies to a firm, GEN 1.3.2R (Emergency) does not apply.

A firm is3 required to submit nil return notifications about3 section 64C of the Act in the case of certification employees and other conduct rules staff (see SUP 15.11.13R(5)). However, a credit union is not required to make a nil return3.

The obligation to notify pursuant to2 section 64C of the Act or to update or correct a notification under SUP 15.11.13R(4)3 does not replace or limit a firm’s obligation to comply with Principle 11.

When considering whether to make a notification pursuant to2 section 64C of the Act, a firm should also consider whether a notification should be made under any notification rules, including, without limitation, any notification rules that require a notification to be made to the PRA.

The obligations to make a notification pursuant to2 section 64C of the Act apply notwithstanding any agreement (for example a 'COT 3' Agreement settled by the Advisory, Conciliation and Arbitration Service (ACAS)) or any other arrangements entered into by a firm and an employee upon termination of the employee's employment. A firm should not enter into any such arrangements or agreements that could conflict with its obligations under this section.

Failing to disclose relevant information to the FCA may be a criminal offence under section 398 of the Act.