FCA announces recognition of first unregulated markets conduct codes
The Financial Conduct Authority has confirmed that, following a consultation exercise, it is recognising two major voluntary market codes of best practice under its codes recognition scheme.
First is the FX Global Code, which is maintained and updated by the Global Foreign Exchange Committee. This code the FCA said, sets global principles of good practice standards in the foreign exchange market, promoting the integrity and effective functioning of the wholesale FX market.
Second is the UK Money Markets Code, This is maintained and updated by the Money Markets Committee, which sets standards and best practice expected from participants in the deposit, repo and securities lending markets in the United Kingdom.
Both these codes have been written and are owned by the industry and reflect their views of best practice.
The FCA established its codes recognition scheme last year for recognising industry codes for unregulated financial markets and activities. The FX and MM codes are the first codes to be recognised by the FCA.
Individuals subject to the Senior Managers and Certification Regime (SM&CR) need to meet the requirements for market conduct, for both regulated and unregulated activities, the FCA said.
Behaviour that is in line with an FCA recognised code, such as the FX and MM Codes, will tend to indicate a person subject to the SM&CR is meeting their obligation to observe ‘proper standards of market conduct’, the regulator said.
The FCA consulted on recognition of the codes in December 2018. The consultation responses all agreed that they met the recognition criteria and that the FCA should recognise both.
The FCA’s SM&CR rules have not changed as a result of our code recognition scheme, nor has its powers or the circumstances in which it supervises or enforces its SM&CR rules.
Firms and their Senior Managers, under the SM&CR, are expected to train, monitor and where necessary, discipline their staff in relation to the Individual Conduct Rules.
Following recognition, the FCA will not supervise firms or individuals directly against these codes in unregulated markets.
The FCA said its role is to make sure that firms meet their governance and systems and control obligations, including under the SM&CR.
The FCA expects firms and individuals to consider both the spirit and letter of code provisions to make sure they fully meet ‘proper standards of market conduct’.
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