Understanding the Individual Accountability Regime: What You Need to Know About Conduct Rules

Understanding the Individual Accountability Regime: What You Need to Know About Conduct Rules

Introduction

The Individual Accountability Regime (IAR) designates that certain persons, including senior managers and certified individuals, have responsibilities for the conduct and compliance of their firms. The regime’s implementation incorporates several features, including conduct rules. Conduct rules set the minimum level of behavior for those employed by authorized firms and are intended to enable standards of ethical behavior throughout firms. Violation of conduct rules can lead to punitive measures, such as penalties or disqualification from your role. This article provides a comprehensive understanding of the conduct rules under the Individual Accountability Regime and its implications.

What Are Conduct Rules?

Conduct rules provide a framework of ethical behavior for those who work in authorized firms. There are two categories of conduct rules: individual conduct rules and senior manager conduct rules. Individual conduct rules apply to anyone who operates in an authorized firm, regardless of seniority. Senior manager conduct rules apply only to senior managers, defined as those who perform the role of a significant influence function.

Some of the conduct rules require individuals to act with integrity, be diligent and careful, be open and cooperative with regulators, manage conflicts of interest appropriately, be fair with customers, and observe proper standards of market conduct. Managers must ensure a safe, consistent, and environmentally sound workplace, act ethically towards customers, promote individual development, and take reasonable steps to avoid undue risks.

Implications of Conduct Rules

Firms and senior managers are responsible for ensuring their employees understand the conduct rules and their importance. To support this, firms need to train their employees on the conduct rules and monitor their compliance. Senior managers must ensure that the culture of the company promotes the adoption of the proper conduct.

These rules have some potential implications. Violation of conduct rules could lead to:

• Public naming and shaming of the individual or the firm for breach of conduct rules
• Termination or suspension of individuals, or fines or disqualification for senior managers found to breach these rules
• Potential criminal charges imposed on individuals.

It’s worth nothing that although such measures cannot repel a statutory claim, they can provide a cause of action for the victim that might not exist otherwise – meaning the individual or firm would be facing a financial consequence even if the claim were unable to be realized.

Examples of Breaches and Sanctions

There have already been notable cases of conduct rules’ violations that have seen companies and individuals fined or reprimanded. For example, a senior executive of Barclays PLC was fined and suspended because he tried to identify a whistleblower and failed to act with integrity. A licensee from Wells Fargo Investments was also removed from the industry register by the Financial Industry Regulatory Authority because he also acted without integrity.

Another example of the implications of conduct rules was seen in the Volkswagen case. A key engineer was given a three-year prison sentence for his role in the cover-up of the company’s emissions irregularities. The executive was found to have breached the conduct rules, which must have been in effect at the company.

Conclusion

Conduct rules are a critical component of the Individual Accountability Regime. They provide a framework for ethical behavior within authorized firms and are intended to ensure that firms’ employees uphold the highest professional and ethical standards. These rules can have significant implications for individuals, as well as severe consequences for the firms where they work. Understanding the conduct rules is vital to ensuring that authorized firms’ employees behave in a professional and ethical manner, therefore avoiding potential breaches and repercussions. This understanding can ultimately help firms promote their reputation, increase investor confidence, and boost career development for their employees.

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