Notifying the FCA of conduct rule breaches and disciplinary action

It is now time to make the first annual report to the FCA on conduct rule breaches where disciplinary action was taken or commenced between 7 March and 3 August 2016. This must be done in the reporting window, which opened yesterday and closes on 31 October 2016. It is a mandatory obligation and must be submitted on Form H, which can be accessed via the FCA handbook. Where there have been no relevant breaches, Form H must still be completed indicating in Section 3 that it is a nil return. Credit unions are exempt from this nil return requirement. Form H can also be used to update previous notifications.

It is important that the Form H information is accurate and provides the necessary detail – completion of the form will therefore require coordination from all those involved in the operation of conduct rule breaches and resulting disciplinary action. To ensure this coordination, firms have already started to establish oversight panels (which include HR and compliance representatives) to oversee the assessment of any potential breaches and how these feed through to any HR actions.

One point to note when completing the form: details of any appeal will need to be included. Given that the disclosure window is a specific two-month period in each year, and that many conduct rule breaches will go towards fitness and propriety, lodging an appeal is likely to be used strategically by individuals to delay notification of the final determination to the FCA. For HR and compliance practitioners, the annual nature of the submission window will lead to natural conflicts with employees using tactics to delay the process.

This tension will need to be managed carefully, requiring HR and compliance to continue to work in tandem. There will be much to be learned from the first submission process, and I will therefore blog again on this point so that any practical solutions can be taken into the 2017 submission, which will cover a full year of conduct rule breaches.