Financial Conduct Authority  

FCA puts ball in employers' court on financial job references

FCA puts ball in employers' court on financial job references

Rules on what information should be revealed when people move jobs in the sector have been clarified by the regulator, but fall short of tightening disclosure demands.

In a policy statement published today on obtaining employment references in financial services, the Financial Conduct Authority addressed what should be disclosed to a potential future employer.

Under its new rules, the requirement to reveal ‘all relevant information’ applies for the same time limit as required for mandatory disclosures, i.e. six years from the date of the reference request. 

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However the regulator largely hit the ball back into former employers’ court, stating they will need to exercise their own judgement on what is relevant to disclose to ensure a future employer can decide whether someone is fit and proper under the approved persons’ regime.

“We are not providing additional guidance on what ‘all relevant information’ means,” the paper stated.

“Firms will need to apply judgement on a case-by-case basis: for example, taking account of existing Handbook guidance that refers to the number of upheld complaints. 

“Firms will also be subject to the general obligation on employers that references are clear, fair and accurate, and need to consider other relevant legislation, such as those relating to the rehabilitation of offenders and spent convictions where appropriate.”

Part of the Financial Conduct Authority’s ongoing work to beef up its regulation of firms’ culture via its senior managers regime, the final rules do confirm that the obligation to provide a reference does not require a firm to disclose information that has not been properly verified.

Also the rules will remain the same for serious misconduct, in that there is no time limit for disclosure, even if it took place more than six years ago. 

In practice, this means that when responding to a reference request, firms will need to check to see if their records show any serious matters at any time beyond the past six years, and disclose it accordingly. 

The paper also referred to the FCA and the PRA’s joint guidance, which provides non-exhaustive examples of what might constitute ‘serious’ acts.

This guidance is relevant for the purposes of regulatory references only. The FCA stated it consider this necessary as there is often a delay between misconduct occurring and when it comes to light. 

In addition, the FCA believes it provides a meaningful incentive, as it makes it clear that serious matters are always likely to be relevant to the assessment of a person’s fitness and propriety.

The release of today’s policy paper marks six months on from the implementation of the senior managers regime across banks and insurers – with the read across to all financial firms due in 2018.

Commenting on the first six months of the rules, Andrew Bailey, chief executive of the FCA, said firms have made a “substantial effort” to “embrace the importance of the key principles underlying the senior managers and certification regime, namely responsibility and accountability”.