UK Financial Regulation – Regulated References and Other News

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Financial Conduct Authority

We have been waiting for the regulators to publish their rules around regulated references and extending the new regime to cover different roles (algorithmic traders and client-dealing functions).

They have published some updates but it will take a bit longer for us to know exactly what’s needed and implement everything following some recent updates from the regulators. Here is what we know at the moment:

Who’s now in scope of the SMR and Certified regime?

Algorithmic trading and client-dealing functions will be included. From the 7th September 2016 the Certified Regime will apply to people performing “client-dealing” functions and “algorithmic trading” functions. Firms have until this date to get everything ready, after that date people performing these roles will be included within the Certified Regime. This follows the regulators’ intention to really “embed a culture of personal responsibility within the banking sector” and widening the net of the regime.

What about lawyers?

It was unclear whether the head legal role should be included in the SMR. It wasn’t ever specifically named in the list of business activities but neither was it excluded. To resolve it the regulators will open up a consultation on this topic. Once the consultation and review period is completed the FCA will publish details of exactly what is required. We don’t yet know when this will be. Until the FCA’s position is resolved they are not expecting firms to change any decisions already taken in good faith on this matter.

Regulated references:

There is no template yet! We were eagerly waiting for the regulators to finalise their rules on regulated employment references following the consultation that ended in December 2015 but they need more time to review all the feedback and queries raised.

We won’t have any concrete information on the items below until the summer 2016:

  • New template for regulated references
  • An obligation for firms to update references within 6 years if new information comes to light.

Until then the rules around regulated references are outlined below, split between the PRA and FCA:

PRA Rules

  1. Firms are still required to provide a reference when requested to another regulated firm “as soon as reasonably practicable”
  2. The reference must contain all “relevant information” and this includes information relating to the fitness and propriety of the individual
  3. These rules already apply to PRA approved persons but will also apply to certain functions that won’t be subject to regulatory pre-approval after 7th March.
  4. Firms must take reasonable steps to get references (from current and previous employers) covering the last five years
  5. This includes references from organisations where the person served as a NED (non-executive director).

 

FCA Rules

  1. Firms are still required to provide a reference when requested to another regulated firm “as soon as reasonably practicable”
  2. The reference must contain all “relevant information” and this includes information relating to the fitness and propriety of the individual
  3. The interim rules are not extended to individuals performing a Significant Harm Function under the Certification Regime, during this interim stage they apply only to those going into FCA pre-approved roles.

See the full press release from the FCA.


The new SMR and Certified Regime went live on the 7th March. C
heck out our whitepaper walking you through the impact on background checks and what you need to do.

Ali Jarvis
Senior Product Manager 

HireRight

HireRight is here to help guide you through the biggest screening challenges so you can focus on what’s important to you; attracting top talent. HireRight provides employment background screening services to organisations of any size, in every industry, and nearly anywhere.

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The HireRight Blog is provided for informational purposes only and should not be construed as legal advice. Any statutes or laws cited in this article should be read in their entirety. If you or your customers have questions concerning compliance and obligations under United States or International laws or regulations, we suggest that you address these directly with your legal department or outside counsel.

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