Last week, the UK Financial Conduct Authority's new rules on obtaining and giving regulatory references came into force (see FCA Handbook SYSC 22). The rules will generally apply to all FCA-regulated firms, except where certain rules are specifically limited in application to firms within scope of the Senior Managers and Certification Regime (SMCR), including banks, building societies, credit unions, and dual-regulated investment banks (SMCR firms).

Under the new rules, FCA-authorised firms still operating under the Approved Persons Regime will be required to disclose, within six weeks of a request from an SMCR firm, all information relevant to a current or former (within the last six years) employee’s fitness and propriety in relation to their appointment as senior manager or certified person under the SMCR. Under the current Approved Person Regime, firms only have to provide a full regulatory reference for specific senior manager roles. However, as SMCR firms are required to self-assess fitness and propriety of all senior managers and certified persons, the FCA has sought to ensure that all such firms are able to access relevant information from all previous employers which are FCA-regulated.

Accordingly, if you receive a request for a regulatory reference (which should clearly state the purpose for the request and the applicable requirements), you are required to provide ‘relevant information’ going back six years before the date of the request (or longer in relation to serious misconduct, with no set timeframe). The FCA has not gone into detail on what is considered to be ‘relevant information’ – this will be a judgment call for firms, based on what will be relevant for the firm requesting the reference, to enable them to assess the individual’s fitness and propriety for the specific role. Overall, it is clear that firms not yet subject to SMCR already need to have in place updated internal processes and policies for providing regulatory references to meet the new requirements. Additional guidance for giving references for all firms can be found in the FCA Handbook at SYSC 22.5.

Under the new rules, SMCR firms will be under an obligation to update references given where information comes to light, within six years of termination, that would change the reference given and would be of significance to the current employer’s assessment of the fitness and propriety of the individual for the role for which the reference was given. Accordingly, asset managers will now receive updated references regarding the fitness and propriety of existing staff members, who were previously senior managers or certified persons in an SMCR firm.

The additional regulatory reference rules currently only applicable to SMCR firms are likely to be extended in some form to all firms, as part of the broader extension of the SMCR. The FCA has confirmed it will consult on the extension of the SMCR in Q2 2017. If members have any questions, please contact Adam Jacobs-Dean, Oliver Robinson or Adele Rentsch.