Whenever they wish to recruit individuals to certain senior roles, bank and insurers have been required to request regulatory references since 2017. Now, with the Senior Managers & Certification Regime (SMCR) set to be rolled-out from 9 December 2019, the regulatory referencing regime is about to be extended to all solo FCA regulated firms - warn Oliver Woodhouse and Joseph Hill.
What is required of firms?
Regulatory references are intended to help you make better informed decisions about your candidates.
References need to be requested from all past employers for the last 6 years for all new hires, where individuals will be subject to the Senior Manager and/or Certification aspect of the SMCR, as well as Non-Executive Directors.
However, regulatory references aren’t required for promotions or other internal hires within regulated firms.
To ensure you are able to comply with these requirements, it’s important that arrangements between business and individual – such as non-disclosure agreements – don’t conflict with these referencing obligations.
The requirements to request and/or provide regulatory references are also part of the FCA’s Prescribed Responsibilities under the SMCR. These must be allocated to Senior Managers in all “core” and “enhanced” firms.
References must also follow a set form. The FCA handbook includes a template, available here.
What should a reference include?
The reference requirements build on existing obligations to provide all information relevant to the fit and proper assessment of the hiring firm.
Regulatory references must disclose certain information for this 6-year period, such as details of disciplinary action taken due to breaches of FCA, or information relating to an individual’s fitness and probity, including upheld complaints. You should therefore keep records of any conduct information for this period.
It’s important to remember that there are exemptions – not all firms are required to provide references. For example, sole traders and non-approved board directors in limited scope firms are exempt from referencing requirements.
When does it start to apply?
You shouldn’t worry if no you haven’t provided references before the SMCR starts. Applications that are in progress at commencement won’t require a reference either. This also applies for existing employees performing a role within scope of the Senior Managers regime or Certification regime on commencement.
After 9 December however, if your firm is concerned by the SCMR, you should make sure you have internal arrangements in place to meet the regulatory referencing requirements.
If you have any queries regarding the FCA’s regulatory referencing, the application of the SMCR to your firm or are generally looking for some sensible advice, please contact Oliver Woodhouse (firstname.lastname@example.org).