The FCA proposes to extend the application of the Code of Conduct sourcebook to standard NEDs.

On 28 September the FCA published a Consultation Paper (CP16/27) setting out its intention to apply individual rules of conduct to all directors, irrespective of whether they perform a senior manager role or other controlled function. The FCA was given the power to do this under the Bank of England and Financial Services Act 2016 the FCA.

The proposal will see the code of conduct rules (also referred to as COCON) apply to standard NEDs in relevant authorised persons (RAPs) (that is, banks, building societies, credit unions and dual regulated investment firms) and insurance firms (that is, firms defined as Solvency II firms in the FCA Glossary). For the purpose of CP16/27, "standard NEDs" means those NEDs who are not subject to regulatory pre-approval under the senior managers regime for RAPs, or the PRA's senior insurance managers regime and the FCA-revised approved persons regime for insurance firms.

The FCA has stated that "Applying COCON to standard NEDs will help raise standards of conduct for these individuals and, by placing additional duties on them, aims to reduce the risk of future misconduct and mis-selling." This commentary is quite significant because it touches on the new Rule 4, which requires staff to "pay due regard to the interests of customers and treat them fairly". Rule 4 is one of the most significant differences between the new Code of Conduct and the previous Statements of Principle and Code of Practice for Approved Persons.

If, as seems likely, the FCA goes ahead with this proposal, standard NEDs will find themselves tackling the same issues facing NEDs who are already within the regime; how do you discharge your duties under these new more customer-centric conduct rules?

The deadline for comments is 9 January 2017.