We use cookies to improve our site and your experience.

By continuing to browse on this website you accept the use of cookies.

Privacy Notice

Are we coming to the end of an era of neutral references in the financial services sector?

Are we coming to the end of an era of neutral references in the financial services sector?

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have launched a consultation which is called “Strengthening accountability in banking and insurance”. In their consultation paper (FVA CP15/31 and PRA CP36/15) they set out the following proposals for Relevant Authorised Persons and Insurers:

  • Requiring theses firms to request regulatory references from former employers of candidates applying for Senior Management Functions, and certification functions in Relevant Authorised Persons along with Senior Insurance Management Regime Functions at insurers, going back six years
  • The PRA propose a similar requirement for Relevant Authorised Persons and insurers in respect of candidates applying for Key Function Holder roles, notified Non Executive Director or credit union Non Executive Director roles
  • Modifying certain prescribed responsibilities for Senior Managers in Relevant Authorised Persons and insurers to include compliance with the regulatory reference rules
  • Mandating the inclusion of concluded breaches of the conduct requirements of FCA Conduct Rules, PRA Conduct Rules of Conduct Standards  and Statements of Principle and Code of Practice for Approved Persons going back six years
  • Requiring disclosures by Relevant Authorised Persons and insurers in a standard format, including the need to confirm where there is no relevant information to disclose
  • Requiring Relevant Authorised Persons and insurers to update previous references given in the pas six years, where they become aware of matters that would cause them to draft that reference differently if they were drafting it now

The proposals applicable to all authorised firms are summarised as:

  • Clarifying that a firm must not enter into any arrangements or agreements that limit their ability to disclose relevant information.
  • Enhancing systems and control requirements relating to the retention of records and the policies and procedures for both requesting and providing regulatory references.

The existing requirement for firms to disclose all relevant information in references remains. Currently, the requirement to provide a reference on request under chapter 10A of the Supervision manual (SUP) can give a liability for damages. Consistent with that approach, the FCA proposes that the requirement to provide a reference and the new requirement to obtain a reference under the FCA's rules could also potentially give rise to claims for damages..

The closing date for comments is 7 December 2015. The FCA and the PRA intend to publish the final rules in a policy statement in early 2016.

The FCA will consider, in due course alongside any wider reform of the approved persons regime, whether the specific proposals for Relevant Authorised Persons and insurers should be extended to all authorised firms.

It very much looks like the provision of references in the future is going to get whole lot more prescriptive.