On Tuesday 7 March, 2017, the full Financial Conduct Authority/Prudential Regulation Authority (FCA/PRA) came into effect.
The regulatory reference regime was introduced to underpin the Senior Managers and Certification Regime, which came into force in March 2016. It is hoped that the regulatory reference regime will eventually eradicate the ability for employees with poor conduct records to make frequent moves between different financial institutions.
The regulatory reference regime applies to banks, building societies, credit unions, larger investment banks regulated by the PRA, and branches of foreign banks operating in the UK. This regime should be used on people being employed in the following roles:
Senior manager functions (SMFs aka SMRs)
Senior Insurance Management functions (SIMFs)
FCA controlled functions (CFs)
Significant harm functions (SHFs aka Certification roles)
By mid-2018, it is expected that this regime will be rolled out to all other FCA/PRA regulated firms.
The regulatory reference regime introduced two elements that affect what we do as a screening business. First, a template Reference Request Form that runs into several pages. Second, a turnaround time for the provision of references of up to 6 weeks.
At this point, it is too early for us to comment on the impact of the new regime. However, what we could see are; firms opting to take the full 6 week period to respond to a reference request, firms getting frustrated that the regime is impacting their ‘time to hire’, and candidate’s becoming concerned that the employee screening activity is taking too long.
Another confusing issue, is regulated firms, who are caught under the Regulatory Reference Regime, requesting references from regulated firms who are not. Many firms are not yet required to adopt the Regulatory Reference Regime. We wait to see what challenges this brings. Over the last month, we have begun to see a number of our financial service clients, who are not yet subject to this regime, adopting these new rules.