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Job references in the financial sector


The Banking Standards Board have issued draft guidance on the
Certification Regime: Regulatory References [January 2019]. It discusses good practice when providing regulatory references, when receiving regulatory references and the type of information to include. It is not binding, and is currently under consultation.

Regulatory references

The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) require an employer to provide a job reference for Senior Managers, Certified Persons, and all Non-Executive Directors. The rules require that they be obtained to cover the past six years of an individual’s employment history.

The reference should be provided as soon as reasonably practicable for an approved person who performs a controlled function, and to provide all the necessary relevant information. An approved person is an employee who the FCA approves to carry out one or more activities for an authorised firm. These activities are called “controlled functions”. If the old employer does not send a reference in a timely manner, the FCA or PRA can take enforcement action against that employer. A firm providing a reference owes a duty of care to the former employee and the prospective employer. Details of what is required are laid out in FCA SUP 10A.15.1 – References and Accurate Information and PRA SUP 10B.13.1.- PRA Approved persons.
In providing the reference, the previous employer should give information about;

  • any outstanding liabilities of the individual for commission payments;
  • any relevant outstanding or upheld complaint against the individual;
  • anything relevant to section 5 of the relevant Form A: Application to perform controlled functions under the Approved Persons Regime (Approved persons – Applying for approval);
  • the requirements under the fit and proper test for approved persons (honesty, integrity and reputation, competence and capability, and financial soundness)
  • the persistency of any life policies sold by the individual if the firm is an insurer with permission to effect and carry out life policies or has permission to establish, operate or wind up a stakeholder pension scheme.

References where the role is not a controlled function

Normal employment law principles apply when a regulated employer receives a reference request for a former employee who was an approved person but would not be performing a controlled function in their new role. The employer does not have to provide the full details required by FCA SUP 10A.15.1 – References and Accurate Information and PRA SUP 10B.13.1.- PRA Approved persons

Accuracy of the reference

The regulatory reference rules do not supplant normal common law rules on referencing, and so references must continue to be true, accurate, and fair. Your employer should investigate any allegations before including them in a reference.

The FCA and PRA have agreed that fairness requires that an employee has had the opportunity to comment on the information included in a reference. Good practice should mean that there are no surprises for the individual, especially given the serious consequences of adverse references.

Settlement Agreements

A firm’s obligations to supply information to either the FCA or PRA under Form C: Notice of ceasing to perform controlled functions or to another firm (see References for approved persons) will apply notwithstanding any agreement such as a COT3 or settlement agreement. Firms are advised not to enter into any settlement agreements that could conflict with their obligations set out in the FCA Handbook. Failing to disclose relevant information to the FCA may be a criminal offence under S398 Financial Services and Markets Act 2000. Because of this some employers will refuse to give a standard reference within a settlement agreement, or including a clause in the agreement which limits a standard reference to a non-regulated role.

Companies also have an obligation to provide the FCA and PRA with information as to the fitness and propriety of approved persons. This means that companies must tell the FCA and PRA about the circumstances under which the employment terminated.

Updated: 13/03/2020

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