For Reference Purposes

March 22, 2017

Dear Clients and Friends,
Though the original proposals were easy to miss, as they were buried deep within FCA Policy Statement PS16/22, earlier in March the regulator progressed with implementing its proposals to change the requirements on regulated firms when providing regulatory references.
What has the FCA said?
Firms have long been required to provide a regulatory reference for a former employee when asked by another regulated firm and include all relevant information as reasonably determined by the firm. The FCA has now updated its application of those rules to coincide with changes brought about through implementation of the Senior Managers and Certification Regime:

  • The FCA has provided some guidance on what it would expect firms to consider including as “relevant information” in a new section added to the Senior Management Arrangements, Systems and Controls sourcebook (SYSC 22.5). Specifically, the FCA has stated that an individual’s breach of any of the rules contained in the Statements of Principle and Code of Practice for Approved Persons sourcebook (APER) should be considered by a firm for inclusion in a regulatory reference.  
  • Additionally, “relevant information” to be included in the regulatory reference must now go back six years as opposed to five and there is no time limit if the relevant information relates to “serious matters”.
  • The FCA has also provided some factors firms should consider in determining whether conduct of the former employee would constitute a “serious matter” to be considered for inclusion in a regulatory reference. Examples include: whether the conduct was deliberate or reckless, whether it caused the firm to be in breach of regulatory requirements, and the length of time that has passed since the misconduct.

What now?
In summary, firms now have an extended time-frame and some specified factors to consider when requested to provide a regulatory reference. Accordingly, clients are reminded to carefully consider the above, in consultation with their legal advisors, in the event they are asked to provide a regulatory reference. The provision and content of the reference provided can have legal and regulatory consequences.
If you wish to discuss this alert further, please contact Adil Khan or your regular ACA consultants.
Kind Regards,
ACA Compliance (Europe) Limited