In this article, Liz Hornby, Principal Consultant at LEO GRC, discusses the development of Conduct Rules training under the Senior Managers and Certification Regime (SMCR), focusing on five best-practice trends.
What Are the SMCR Conduct Rules Training Requirements?
Since the first roll-out of the SMCR in 2016, there has been a regulatory training requirement.
Specifically, the Financial Conduct Authority (FCA) requires firms to:
- “Notify” staff of the Conduct Rules that apply to them (see COCON 2.3.1)
- “Take all reasonable steps to ensure that they understand them” (see COCON 2.3.1)
- Establish a specific requirement to provide “suitable training” that includes a “deeper understanding of the practical application” of the Conduct Rules “relevant to their work”, citing Conduct Rule 4 in relation to those in customer-facing roles and Conduct Rule 5 in relation to market-facing roles (see COCON 2.3.2)
Below are five best-practice trends for SMCR training.
1. Evolving Content
The guidance produced by the FCA on the Conduct Rules, and the wider SMCR in which they operate, is developing and maturing. Two new training topics stand out.
The role of line managers
The first considers the role of line managers. Here, content should cover such topics as:
- How line managers model and embed behaviors within their teams
- Appropriate delegation
- Oversight and management
- How to conduct fit and proper assessments
- How and when to escalate potential breaches
Non-financial misconduct
The second considers the FCA’s evolving position on non-financial misconduct. So far, the only disciplinary action for non-financial misconduct to date addresses extreme cases of such misconduct outside the workplace. However, the FCA has made it clear that serious non-financial misconduct in the workplace, like bullying and harassment, is relevant when assessing whether staff are fit and proper under the SMCR and is, potentially, a breach of Conduct Rule 1 (acting with integrity).
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2. Holistic Approaches
As Conduct Rules training matures, there’s also increasing recognition that the best approach is a holistic one. One that does not simply rely on a single annual course but also seeks to incorporate the standards set by the Conduct Rules into everyday conversations and across a firm’s regulatory training program.
For example, the detailed practical application of Conduct Rule 4 and Conduct Rule 5 does not have to be covered in a specific Conduct Rules course. They can be incorporated into modules on, for example, Treating Customers Fairly (Conduct Rule 4) and Market Conduct (Conduct Rule 5). This enables these messages to be delivered consistently, enabling staff to see the big picture rather than receiving training in separate topic silos.
Holistic approaches also help to join the dots between the Conduct Rules and the firm’s own values or internal code of conduct. This linkage is particularly important for topics such as non-financial misconduct.
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3. Learning Through Real Life
When the Conduct Rules were first introduced, the training scenarios were typically extreme and very clear-cut. This was driven by the need to be clear to staff at a time when there was little regulatory guidance on how the rules should be applied in practice.
Over time, firms have developed their own in-house ‘case law’ through handling reports of breaches and holding disciplinary hearings. This ‘case law’ (anonymized, of course) provides highly effective learning material for scenarios that are ‘real’ and nuanced. This enables staff to explore and better understand the standards set by the Conduct Rules and the factors taken into account by the firm (and potentially a regulator) when determining whether an individual was personally culpable.
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4. Blended Learning Delivery
Although an annual course is a baseline for all staff, learning can be extended through a range of other delivery methods.
The best fit will depend on the firm, but options include campaigns and other spaced learning approaches as well as small group face-to-face (or virtual face-to-face) sessions delivered by line managers or business leaders. The latter enables participants to discuss and explore scenarios that speak directly to the participants’ day-to-day experience.
Blended learning comes with a range of benefits for learning engagement, information retention, and transfer of knowledge into the workplace. While governance, regulatory, and compliance training may have a reputation for typically being delivered through a single touchpoint (yearly in-person training or annual compulsory eLearning), a blended approach can make a huge difference.
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5. Using Adaptive and Microlearning Techniques
As Conduct Rules training becomes an established part of a firm’s annual training program, adaptive and microlearning techniques are being increasingly adopted.
Adaptive approaches, such as pre-tests that assess learners’ understanding at the start of the course, can work well for digital courses that are delivered annually. This is particularly the case alongside the holistic and blended training approaches discussed above. A note of caution here, however. In order to meet the regulatory learning requirements, learners who score well, and are therefore not required to complete the full course, should still receive summary content and review the key messages.
Microlearning modules that deliver key messages in a succinct and highly engaging way are also well-suited for Conduct Rules refresher training or as part of a blended training program.
If you want to improve and streamline your Conduct Rules training, take a look at our five-minute microlearning course, Take 5: Market Conduct Rules.
Liz Hornby, Compliance Expert
Liz joined LEO GRC in 2010 and works as an in-house Subject Matter Expert. Since joining LEO GRC, Liz has completed a Masters Degree in International Business Ethics and Corporate Governance from the University of London and recently completed a PhD on whistleblowing in the UK banking industry.
After studying at Nottingham and Cambridge Universities, Liz qualified as a barrister and went on to work for both the London Stock Exchange and The Securities Association (a predecessor of the Financial Conduct Authority). She then moved into compliance, working for Nomura International plc and Goldman Sachs, before becoming a compliance consultant in 1994. As a consultant, she advised and worked with a broad range of financial services firms.
Liz was Deputy Chairman of the Compliance Forum Committee of the Chartered Institute for Securities and Investments (CISI) for many years and is a part-time lecturer in Corporate Governance and Ethics at the University of London.