FCA and PRA Consult on Changes to Regulatory References

3 mins

Posted on 12 Oct 2015

The FCA and PRA have issued a joint consultation setting out proposed changes to the way firms seek and provide references for candidates in certain regulated roles.

The following proposals apply to banks, building societies, credit unions and PRA investment firms (collectively referred to relevant authorised persons “RAPs”) and to insurers. The proposals require these firms to:

• request regulatory references from former employers (irrespective of whether they are authorised entities) going back six years for candidates applying for senior management functions, certification functions in RAPS and senior insurance management functions at insurers and for candidates applying for a key function holder, notified NED or credit union NED role. This obligation will apply equally where a firm is recruiting an individual from within their own firm, or from another group company, when the individual has employment history at other organisations within the past six years;

• include concluded breaches of the conduct requirements of the FCA conduct rules, PRA conduct rules or conduct standards and Statements of Principle and Code of Practice for Approved Persons going back six years;

• make disclosures in a standard format, including confirming where there is no relevant information to disclose. A template reference is included in the consultation;

• update previous references given in the past six years, where they become aware of matters that would cause them to draft the reference differently if drafting it now. This will not apply to references provided before 7 March 2016; and

• modify certain prescribed responsibilities for senior managers to ensure compliance with the regulatory reference rules.

In addition, the consultation contains proposals applicable to all authorised firms, including:

• clarifying by way of a specific rule that a firm must not enter into any arrangements or agreements that limit their ability to disclose relevant information. The rule will apply to resignations as well as terminations; and

• enhancing systems and control requirements relating to the retention of records and the policies and procedures for both requesting and providing regulatory references. Firms will be required to retain records of ex-employees’ conduct and fit and proper information for a period of six years following their termination or resignation. Firms will also be required to establish and maintain adequate policies and procedures to comply with regulatory reference requirements.

The existing requirement for firms to disclose all relevant information in references will remain. The FCA also proposes that the requirements to provide and to obtain a reference will be actionable in damages.

The FCA and PRA will consider in due course whether the specific proposals for RAPS and insurers should be extended to all authorised firms.

Responses to “Strengthening accountability in banking and insurance: regulatory references” are required by 7 December 2015. The final rules will be published in a policy statement in early 2016.

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