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New rules on employment references in the Senior Managers Regime

07/03/17 Greg McHugh Partner

New rules regarding the references in the financial services industry come into force today (7th March 2017) as part of the Senior Managers Regime

Six months ago, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) published new whistleblowing rules as a part of the Senior Managers Regime – an initiative designed to improve culture and accountability in banks, building societies and other financial institutes.

With this framework, the FCA’s ongoing business plan for 2016/17 priorities improving culture and governance within the financial services sector. However, the onus will be on businesses themselves to lead this effort with the regulators taking a step back. For example, banks and insurers have been responsible for assessing and certifying the fitness and propriety of many finance and accountancy employees who required approval by the regulators themselves. These new rules will apply from tomorrow, requiring banks and insurers to obtain regulatory references when recruiting for senior manager jobs and executive jobs.

Currently, the obligation to obtain regulatory references only applies to banks and insurers, however it is envisaged that this will be extended to include all authorised financial firms. The obligation to provide regulatory references applies to all authorised firms and it is expected that firms should be able to provide references within six weeks of a request.

Regulatory references must be sought by a bank or insurer whenever they want to recruit an individual into various finance management jobs, senior analyst jobs and senior management jobs. This also includes ‘significant harm’ functions under the Certification Regime. References must be sought from all former employers for the past 6 years, regardless of whether or not the former employer is an authorised firm.

The FCA is due to extend its Senior Managers and Certification Regime to all financial services firms from 2018. Its scope includes incentives, remuneration and the steps firms take to address associated risks. Greg McHugh, Redline Executive Seach Partner discusses further: “Although the Senior Managers and Certification Regime, the replacement of the Approved Persons Regime (APER), is not being extended to intermediaries until 2018, we are urging finance companies to start taking steps to ensure that their culture and current processes are aligned to what we expect to see from the Financial Conduct Authority next year.”

“Here at Redline, our understanding is that the principles of the new regime will be based upon responsibility, accountability and governance. We encourage any companies hiring senior managers in the finance industry to start incorporating these principles into their culture, as this is not only good practice, but an essential part in the running of modern and compliant financial services business. Redline Group have reviewed their ‘on-boarding’ processes to make certain they are sufficiently rigorous to not only ensure that we have to right accountancy and finance professionals, but also to make sure that anyone new to the finance industry is aware of the potential personal responsibilities that this new scheme may place on more senior individuals such as a Finance Director or CFO (Chief Finance Officer).

For more information on 'C' and 'D' level or Senior Management Finance jobs , please contact Greg McHuch on 01582 878853 or GMcHugh@RedlineExecutive.com.