The regulatory references regime (as set out in FCA PS16/22 and PRA PS27/16) comes in force today, 7 March 2017. Also coming into effect today is the application of the Conduct Rules to a wider range of employees (i.e. those not within the Senior Managers or Certification regimes, with exceptions for ancillary employees). It is also the deadline for issuing fit and proper certificates under the Certification Regime.
The regulatory references rules have generated much commentary and the final rules were delayed to enable the regulators to address a number of issues raised during consultation. Once the Senior Managers and Certification Regimes have been extended to all FSMA authorised firms (consultation is to take place during 2017) the regulators will consider whether to extend the full regulatory reference rules to authorised firms. Firms to whom the rules do not yet apply should watch carefully to see what issues arise during implementation of the rules. Treading a path between the regulators’ requirements and an employer’s duties to both the subject and recipient of the reference will not be easy and it is essential that you have proper process and systems in place to limit your exposure. It is advisable to maintain a live reference document with supporting records that are kept updated to facilitate the giving of a reference.
Firms are already grappling with matters such as: what should be included in a reference if an employee resigns before a disciplinary is completed; how should assessments be made in relation to fitness and propriety and Conduct Rules breaches; how should a firm go about investigating matters that arise after the employee has left; should ‘disclaimers’ be used; how should agreed exits be dealt with?
Read our recent briefing on the new regulatory references regime: The regulatory reference regime: final rules
Read about issues arising out of the implementation of the Senior Managers and Certification regime: Senior managers and certification regime
Firms will also welcome good practice guidance published by the Banking Standards Board on 28 February 2017 for banks and building societies putting in place procedures to assess the fitness and propriety of staff: BSB F&P guidance
The BSB intends to publish further statements of good practice and practical guidance during 2017 on matters including evaluating risks/issues related to certification; assessing the fitness and propriety of overseas staff and regulatory references.