COCON 1 Application and purpose

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

For 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.

Rules 1 to 6 in COCON 2.1 apply to all conduct rules staff.

1. (1)

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

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) unless:

   1. (a) P also falls into one of the other paragraphs of that definition; or
   2. (b) P would fall within row (3) or (9) of the table in COCON 1.1.2R (Table: To whom does COCON apply?) if P were an employee.

The 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 the Consumer Duty; and

2. (2)

    except to the extent that the Consumer Duty applies to that firm under PRIN 3.1.

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) on whose application approval was given to P.

For 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)]

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).

2. (2)

   This rule does not apply where COCON 1.1.6A applies.

1. (1)

   The 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.

1. (1)

    Where 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, subject to COCON 1.1.7FR.

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.

4. (4)

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

1. (1)

    Where 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 (subject to COCON 1.1.7FR):

   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.

The 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.

To 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.

1. (1)

   This 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);

   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.

The 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.

1. (1)

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

2. (2)

   This rule applies to:

   1. (a)

      a senior conduct rules staff member; and

   2. (b)

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

1. (1)

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

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:

   1. (a)

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

   2. (b)

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

3. (3)

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

The 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 the Consumer Duty.

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 day, to the extent that those requirements continue to have effect after IP completion day under the EUWA.

This section deals with the restrictions on the scope of COCON based on:

1. (1) the activities of the firm in COCON 1.1.6R to COCON 1.1.7R (To what conduct does it apply? (Limitations in the Act)) (COCON 1.3.2G to COCON 1.3.9G deal with this);
2. (2) the SMCR financial activities of a firm in COCON 1.1.7AR (To what conduct does it apply? (Other limitations: Non-banks)) (COCON 1.3.10G to COCON 1.3.16G deal with this); and
3. (3) COCON 1.1.7BR (To what conduct does it apply? (Other limitations: Benchmark firms)) (COCON 1.3.17G deals with this).

1. (1) The effect of COCON 1.1.6R to COCON 1.1.7R is that conduct relating to the conduct rules staff member’s private or personal life is outside the scope of COCON.
2. (2) However, this does not mean that a senior conduct rules staff member is not required to disclose information about their private or personal life under COCON 2.2.4R (SC4). A senior conduct rules staff member should disclose such matters if they are material to an assessment of fitness and propriety under FIT. COCON 4.2.33G (SC4: You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice) gives examples of matters that should be disclosed.

Factors that point towards conduct being within the scope of COCON 1.1.6R to COCON 1.1.7R include:

1. (1) the conduct occurred when the conduct rules staff member was present on the firm's premises;
2. (2) the conduct occurred when the conduct rules staff member was working on the firm's business;
3. (3) the conduct involved a client, a professional acquaintance, another member of the firm's staff or someone the conduct rules staff member had dealt with on behalf of their firm;
4. (4) the conduct was carried out using equipment supplied by or made available by the firm or by involving the firm's staff;
5. (5) the conduct arose in a business context, including an official or an informal event organised or supported by the firm or in which the firm participates, whether it is held at the firm's premises or at another location;
6. (6) the position of the conduct rules staff member as a conduct rules staff member of the firm helped them to carry out the conduct; or
7. (7) the purpose (misguided or not) of the conduct was to benefit the firm.

1. (1) Whether conduct is within the scope of COCON depends on the specific facts of each case. It is therefore not possible to set out scenarios in the Handbook and say whether in all cases the conduct in question will be within the scope of COCON.
2. (2) Paragraph (1) means that:
   1. (a) the list of factors in COCON 1.3.4G is not exhaustive; and
   2. (b) the presence or absence of one of the factors in COCON 1.3.4G is not by itself conclusive.
3. (3) Another result of (1) is that:
   1. (a) when the table in COCON 1.3.7G says that conduct is generally within the scope of COCON, that means that the facts of the scenario are ones that point towards the conduct coming within the scope of COCON; and
   2. (b) when the table in COCON 1.3.7G says that conduct is generally outside the scope of COCON, that means that the facts of the scenario are ones that point against the conduct coming within the scope of COCON,
   3. but that in an individual case all the other features of the case are also relevant.

1. (1) The table in COCON 1.3.7G sets out examples of when a person's conduct is outside the scope of COCON because it is part of their private or personal life and when it is not excluded for that reason (subject to COCON 1.3.5G).
2. (2) As explained in Note (2) to the table, conduct to which ‘Yes’ applies is not necessarily within the scope of COCON as it may be excluded by one of the other scope rules in COCON 1.1 (Application). For example, it may be excluded by the exclusion in COCON 1.1.7AR (To what conduct does it apply? (Other limitations: Non-banks)).
3. (3) Another example of the point in (2) is that if M (as referred to in the notes to the table) is based in an overseas office of the firm and carries out the conduct from there (or from their home in the country where the overseas office is located), the conduct will be outside the scope of COCON under COCON 1.1.10R (Where does it apply?) unless M comes within COCON 1.1.9R (which deals with senior conduct rules staff members and material risk takers) or within COCON 1.1.10R(2)(b) (which deals with clients in the United Kingdom).

The scope of COCON is not limited to conduct that is authorised by the firm or carried out with a view (misguided or not) that it is for the firm's benefit. Conduct is not excluded from the scope of COCON just because the firm forbids it (for instance, in a staff handbook) or it is calculated to harm the firm. Thus, for example, the following conduct is within the scope of COCON 1.1.6R to COCON 1.1.7R:

1. (1) misappropriating a client’s or the firm's assets;
2. (2) providing false or inaccurate details about the member of the conduct rules staff's training, qualifications, past employment record or experience;
3. (3) misusing the assets or confidential information of a client or the firm to make a personal profit;
4. (4) misconduct against a client;
5. (5) harassment of a fellow member of the workforce; and
6. (6) maliciously sabotaging a firm's information technology systems or altering or erasing its data.

When COCON is restricted to SMCR financial activities, it covers more than conduct involving direct dealings with counterparties and customers (and potential ones) or their assets at the point of sale or at the time of the transaction or service. It can also cover matters such as the following:

1. (1) conduct arising out of such direct dealings, such as record-keeping, valuations and reporting;
2. (2) after-sale or post-transaction activities such as settlement, queries, dealing with the exercise of rights by the firm or the customer, complaints, cancellations, renewals and generally dealing with the customer or counterparty through the lifecycle of the product or relationship;
3. (3) designing and operating policies and procedures relating to the conduct of the firm's relationship with counterparties and customers, such as:
   1. (a) product or services design;
   2. (b) policies and procedures about what services and products to sell or buy;
   3. (c) policies and procedures about product distribution;
   4. (d) policies and procedures for the conduct of the relationship between the firm and a customer in relation to products and services already sold or delivered; and
   5. (e) policies and procedures for the monitoring of customer outcomes for products and services already sold or delivered; and
4. (4) management and monitoring of these activities.

COCON is not restricted to the activities in COCON 1.3.11G. For example, it covers:

1. (1) participation in meetings of the firm's governing body and its committees and other management forums;
2. (2) conduct in relation to internal systems, controls and operations supporting the activities in COCON 1.3.11G;
3. (3) conduct in relation to acquisition and management of resources used to support the activities in COCON 1.3.11G; and
4. (4) conduct in relation to systems and controls to monitor and control risks such as liquidity, operational, solvency, market and trading risks.

1. (1) Conduct of an individual is not within the scope of COCON just because it is carried on in relation to an activity of their firm that is connected to an SMCR financial activity that is carried on by the firm but that is not itself an SMCR financial activity.
2. (2) For example, the misconduct of the employee in the following examples is not within the scope of COCON:
   1. (a) A firm's main business is to sell physical goods. It sells some of them on credit and so has permission for consumer credit. An employee steals some of the firm's stock.
   2. (b) A firm's main business is to sell cars. It also sells connected insurance and so has permission for insurance distribution activities. An employee commits a serious driving offence while moving one of the cars the firm sells.
3. (3) However, conduct in (2) is relevant to the fitness and propriety under FIT of the employee, if the employee is subject to FIT.

1. (1) COCON 1.1.7FR says that the restriction of the scope of COCON to conduct in relation to a firm's SMCR financial activities under COCON 1.1.7AR does not apply to harassment or similar conduct in relation to a fellow member of the workforce. Instead, COCON 1.1.7FR(5) excludes such conduct if it clearly only relates to a part of the firm's business that does not carry on regulated activities or other SMCR financial activities, as illustrated further in the table in COCON 1.3.15G.
2. (2) COCON 1.3.15G gives examples of how the exclusion in COCON 1.1.7FR(5) applies to conduct of a conduct rules staff member in relation to a fellow member of the workforce when a firm has both a financial services business and a non-financial services business.
3. (3) The example relates to internal audit. The example corresponds to the example in SYSC 25.3.4G (Management responsibilities maps: Exclusion of non-financial services activities for some firms).

COCON does not apply unless all the following conditions are met:

1. (1) the person whose conduct is in question is of a kind to whom COCON applies (section 2 of COCON 1 Annex 2 deals with this);
2. (2) the conduct is of a kind to which COCON applies (section 3 of COCON 1 Annex 2 deals with this); and
3. (3) the conduct is within the territorial scope of COCON (section 4 of COCON 1 Annex 2 deals with this).

In this Annex:

1. (1) ‘P’ means the person whose conduct is in question;
2. (2) ‘F’ means the firm P works for;
3. (3) the ‘consumer duty rule’ means Rule 6 in COCON 2.1; and   
4. (4) the ‘harassment rule’ means COCON 1.1.7FR.