What’s going in your Form H?

Form H is the Notification of Disciplinary Action relating to conduct rules staff (other than SMF managers) in SMCR firms which is soon to become REP008 in GABRIEL. Your breach report must cover breaches from 1 September 2019 to 31 August 2020 and must be submitted to FCA within two months; that means no later than Friday, 30 October 2020. You must tell FCA if you have no breaches to report.

When the Conduct Rules breach reporting was first introduced there was the usual wide variance of approach in what firms chose to report. This ranged from the firms who gave a nil return through to those who submitted long lists of breaches some of which were perhaps of too low order. This variance of approach is gradually narrowing particularly as FCA has been giving examples of the types of breaches they expect to be notified including that non-financial misconduct is very much in scope of what should be reported.

Firms are also learning from each other by looking at what they would expect to be notified about and what they are told in a regulatory reference. Examples of which range from petty theft of property from other personnel right through to the more egregious cases of various forms of harassment, and from omitting information in the job application process through to deliberate misrepresentation of facts.

It is now increasingly common for firms to have enhanced what was an HR disciplinary process to become a clearer two-stage process of independent investigation then disciplinary hearing. The former has been turned into a positive by being clear to the individual(s) under investigation that they will be treated fairly with the investigators being from the business that are independent of the process owners who are often HR with heavy support from legal and compliance. Some firms use the investigation process to provide opportunities for high performers to lead investigations.

This first stage of the process also allows you to build up your near-miss log. A near miss log provides evidence that you are monitoring compliance with the Conduct Rules. This protects your firm in the event that you have little or no breaches to report as you can point to the cases you did investigate even if they did not conclude there was any breach.

Most firms have by now put in place a range of consequences of breaching conduct rules which are closely aligned with employment law. These are usually carefully communicated to their people as part of training on the firms desired culture and code of conduct, which are aligned with the Conduct Rules.

Remember that what you report in your Form H needs to also be reflected in what you provide in regulatory references, so HR needs to be constantly in the loop, if they are not running both processes.

I should note that if you are an SMCR extension firm the FCA proposes in CP20/10 which closes on Friday (14 August 2020) that the conduct rules won’t apply to SMCR extension firms until 31 March 2021. If you are an SMCR extension firm, then your first breach report will only cover five months of 2021 and will fall due no later than end October 2021 as FCA is not proposing any extension to the breach reporting deadline. You will no doubt be getting ready for next year so be sure to include planning for your conduct governance forum and associated processes, and most importantly give this as much transparency to your staff as you can as they need to understand the consequences of poor behaviour.