What are Regulatory References?
Executives working in banking and insurance are now subject to the FCA’s new rules on Regulatory References.
This means that a new employer that is regulated by the FCA/PRA must now go through a process of certifying an individual’s fitness and propriety for a new role, including seeking references from previous employers going back at least 6 years (where at all possible) or longer if ‘serious misconduct’ was involved e.g. honesty and integrity issues. This could mean that a poor reference from a previous employer could have severe career-limiting consequences.
Former FCA/PRA regulated employers are now bound to give a reference containing “all relevant information of which it aware” and be open and honest about any relevant issues that they had cause to document concerning the prospective candidate or those issues that they have discovered since the employment ended. This could obviously have an adverse impact on you. They are bound to disclose information they deem relevant to assess your fitness and propriety, for example, previous ‘disciplinary action’. Disciplinary action has a wide definition and includes dismissal for misconduct, gross misconduct, warnings, suspension or where your variable compensation has been reduced or clawed back.
The previous employer is also required to provide other relevant information, which could include mitigating factors that explain why you behaved the way you did.
When do Regulatory References come into force?
The regulatory references are required from March 2017
Who is affected?
The need for FCA/PRA regulated firm to certify its employees as fit and proper in role, has been extended to a far greater population of employees, beyond those under the old ‘approved persons’ regime. So it now encompasses all staff employed by the firm in positions where they potentially pose a risk to the firm or its customers or they are significant risk takers. This means that most staff will be covered by the new regime, save those in positions of very low or no risk.
What rights do you have?
You have the right to have the reference-giver prepare the reference with due skill and care, and for the information given to be true and accurate, based on documented fact, and not be defamatory of you. FCA have stated that fairness will normally mean giving you a chance to comment on prejudicial information on you and the reference-giver must then take into account your comments, before sending it out. There is however no requirement on the reference-giver to disclose information that is not properly verified e.g. questions or doubts raised, but not verified. Likewise there is no obligation on the reference-giver to disclose existing or pending disciplinary investigations or suspension where no conclusion has been reached, but the can choose to do so.
Assistance with issues around Regulatory References
As an award winning team we have many years’ experience specialising in assisting executives working within the financial services sector. We advise on how to put yourself into the best position as regards any references and regulatory notifications, as well as claims you may be able to pursue if you are prevented from taking up a new position e.g. breach of contract, defamation or negligent misstatement a result of an unfair reference or challenging inappropriate disclosure e.g. of unconcluded disciplinary issues. Should you require assistance with this or any matter affecting your employment you can contact one of our senior executive team who will be able to give you the most practical advice in order to mitigate any potentially career-limiting consequences.