These are some of the key considerations that companies need to consider when adopting SMCR codes of conduct across their organization. Of course, for single regulated companies and reference directors, the complexity of implementing the rules becomes even more complex as companies deal with the psychological and financial pressures of the COVID-19 pandemic and the environment it creates where individuals may be more vulnerable to cutbacks and rule violations. Companies that recognize this and seize the opportunity to embed the Code of Conduct in their purpose and culture will benefit as they navigate this period of uncertainty. “Rules of conduct are a crucial basis for corporate culture and individual behavior. It is important for employees to understand the rules and how they are applied to them. This includes the provision of appropriate training. The new regulations are a fundamental element of the executive and certification regime, which aims to reduce consumer harm by holding individuals more accountable for their conduct and skills. The senior management regime also entered into force for benchmark administrators on 7 December 2020 (the certification scheme does not apply to benchmark administrators, as they are subject to similar requirements under the Benchmarks Regulation). Benchmark administrators had until December 7, 2021 to train employees who are not senior managers on codes of conduct.

The broad range of the corporate population to which the rules apply (from entry-level employees to senior managers and directors) and the principles-based nature of codes of conduct require companies to carefully consider how to fit into organizational culture to promote good behaviours and standards. Prior to the introduction of the SMCR, some companies undertook a cultural shift to align their values with the Code of Conduct. While this is a step in the right direction, companies need to go further by linking their purpose to their culture and values before linking them to the Code of Conduct. Without this crucial link, companies will constantly disagree between the need to serve their purpose and the requirement for regulatory compliance. The SMCR was designed in the wake of the 2008 financial crisis and followed the publication of the UK Parliamentary Committee on Banking Standards (PCBS). The PCBS recommended a new approach to accountability in the banking sector, with a focus on executive behaviour. The concept of codes of conduct is not new. However, SMCR introduces stricter mandatory obligations for companies to train their employees as well as their NEDs on applicable regulations and to ensure that controls are in place to proactively monitor violations. In order to incorporate the required standards of professional conduct into your company, employees must be trained in the rules of conduct. Here are some concrete steps you can take to ensure the success of this program: Two levels of codes of conduct that apply to almost all employees and directors of companies covered by the plan are a key element of the SMCR: the Individual Code of Conduct, which is open to all employees and non-executive directors (NEDs), and the Code of Conduct for Executives.

which apply broadly to designated executives and NEDs. Together, these rules aim to improve corporate culture by increasing personal responsibility across the financial services industry. In response to the 2008 financial crisis and recent financial scandals, including the mis-selling of PUPs and the falsification of LIBOR, UK regulators introduced the Senior Management and Assurance Regime (SMCR) to “reduce consumer harm and strengthen market integrity by setting a new standard of conduct for all those working in the financial services sector”[1]. SMCR was therefore launched in 2016 for the banking sector, in 2018 for insurers, in 2019 for regulated companies alone and more recently for reference directors in 2020. However, the report also pointed out that there are significant weaknesses in the implementation of codes of conduct: “Many companies have often been unable to explain what a breach of conduct looks like in the context of their activities.”