Disclosure of criminal convictions to the FCA in financial services roles
Disclosure of Criminal Convictions
There is often uncertainty over what individuals need to disclose to the regulators about criminal convictions when applying for new roles in financial services. Financial services firms may also be unclear about the type of checks they are strictly entitled to obtain for different types of staff in this area. We consider the position here both in view of the implementation of the Senior Managers & Certification Regime for FCA solo-regulated firms on 9 December 2019 and changes to the filtering rules in November 2020.
What is the position on convictions – when are they considered spent?
The Rehabilitation of Offenders Act 1974 supports the rehabilitation into employment of reformed offenders. Under the Act, cautions and convictions may become spent after a specified period which varies according to the sentence passed. The offender is then regarded as rehabilitated. For most purposes, the Act treats a rehabilitated person as if they had never committed, been charged with, prosecuted for, convicted of, or sentenced for the offence. As a result, the individual is not required to declare their spent caution(s) or conviction(s) when applying for most jobs. However, some sentences are exempt from the Act and can never become spent. These include sentences of imprisonment for life and public protection sentences for specified sexual and violent offences. In addition, when applying for certain jobs, it is necessary to disclose both spent and unspent convictions.
What is filtering?
Filtering is the term used to describe the process that identifies which criminal records will be disclosed on a Standard or Enhanced DBS certificate.
The filtering rules were updated on 28th November 2020 meaning:
- Warnings, reprimands, and youth cautions will no longer automatically be disclosed on a DBS certificate
- The multiple conviction rule has been removed. This required that a where a person had more than one conviction, all convictions had to be disclosed, regardless of the offence type or time passed. Removal of the rule means that each conviction will be considered against the remaining rules individually, rather than all convictions being automatically disclosed
What is a protected conviction or caution?
Certain old or minor offences may not be disclosed on DBS certificates. These are known as ‘protected’ offences.
For individuals over 18, a protected caution is protected from disclosure six years after the offender accepted it.
For individuals over 18, a protected conviction is protected from disclosure after 11 years. A conviction will only be protected if the offender received a non-custodial sentence and has no other convictions.
A caution or conviction will not be protected if it is for a listed offence under the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 (the Exceptions Order). Listed offences include serious violent and sexual offences.
What needs to be disclosed to the Financial Conduct Authority?
The FCA’s stated position in the guidance on their website is that individuals working in financial services must disclose to the FCA:
- Spent and unspent criminal convictions (other than a protected conviction) and
- Spent and unspent cautions (other than a protected caution)
The FCA confirms individuals should disclose a conviction if any of the following apply:
- It is a listed offence which includes serious violent and sexual offences
- The individual received a custodial sentence or sentence of service detention
- The individual has been convicted of other offences in addition to those that do not fit the above circumstances
- The individual was under 18 at the time of conviction and less than five years and six months have passed or
- The individual was over 18 at the time of conviction and less than 11 years have passed
The FCA also confirms the individual should disclose a caution if any of the following apply:
- It was a listed offence
- The individual was under 18 at the time of the caution and less than two years have passed since the caution date or
- The individual was over eighteen at the time of the caution and less than six years have passed.
The FCA guidance has not however been updated since 2016 and therefore does not reflect the changes to the filtering rules in relation to warnings, reprimands and youth cautions made on 28 November 2020.
How does this disclosure work in practice?
Under the Approved Persons Regime, which still applies to a limited extent, for example to Appointed Representatives, the FCA assesses and approves individuals to perform one or more activities - 'controlled functions' - for an authorised firm.
In order to obtain FCA approval, individuals need to:
- Meet the requirements of the 'fit and proper' test and follow its principles
- Comply with the FCA Statements of Principle and Code of Practice (these explain the behaviour the FCA expects) and
- Report anything that could affect their ongoing suitability to the FCA and the authorised firm (via Form D)
By virtue of the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975, the candidate must disclose to the FCA both spent and unspent convictions and cautions (other than a protected conviction or caution).
Changes brought about by the Senior Managers & Certification Regime
Under the Senior Managers & Certification Regime the position changed considerably. For Senior Manager Functions (SMFs), which represent only the most senior positions in regulated firms, the position remains the same as under the Approved Persons Regime. Firms must seek approval from the FCA for that individual to carry out the role in question and may rely on the FCA exemption to require disclosure of spent convictions and cautions. Firms and candidates for SMFs need to declare if a candidate has a criminal record (to the maximum extent allowed by law). Firms must also undertake a criminal records check as part of each Senior Manager application for approval. This requirement also applies to NEDs who are not Senior Managers.
For certified staff however, who will make up the majority of staff within FCA regulated firms, there is no requirement to be approved by the FCA. Instead, the firm needs to certify staff on appointment and annually thereafter as fit and proper to perform their role. As the FCA guidance confirms, criminal records checks will not be mandatory for Certification Functions, but firms may choose to conduct these checks for other staff where they are legally allowed to do so – this is for firms to decide. Firms cannot however rely on the Exceptions Order for these roles and would not be entitled to ask about spent convictions.
What criminal records checks can an employer request from prospective and/or current employees?
Firms therefore need to exercise caution when carrying out checks on their staff. Firms are only eligible to request a standard or enhanced disclosure certificate, containing information on both unprotected spent and unspent convictions, if the individual is engaged in an activity listed in the Exceptions Order. For financial services, this covers chartered and certified accountants, actuaries, and all senior positions for which the Financial Conduct Authority is entitled to ask exempted questions to fulfil its obligations under the Financial Services and Markets Act 2000. In the case of enhanced criminal record certificates, the activity or position must also be included in the Regulations made under the Police Act 1997. Employers also need to be mindful of strict data protection requirements when processing sensitive personal data.
If you are unsure whether such a certificate can be requested, you can contact the Disclosure and Barring Service.
Doyle Clayton’s combination of leading employment lawyers and regulatory expertise means we are well placed to support our clients. Please contact Charlie Herbert or your usual Doyle Clayton contact to discuss how we can help you in this area.
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