SYSC 22.6 Giving and updating references: additional rules and guidance for SMCR firms

1A firm may have concluded that an employee is unfit or has breached COCON or APER (as described in questions (E) to (F) of Part One of SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms2 and disclosure requirements)). The firm may later become aware of facts or matters causing it to revise its original conclusions.

If so, the firm may decide not to disclose in a reference its conclusion or may qualify its conclusion with supplementary information.

A firm may have concluded that an employee is unfit or has breached COCON or APER (as described in questions (E) to (F) of Part One of SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms2 and disclosure requirements)). However the firm may consider that the disclosure is incomplete without including mitigating circumstances.

For example, if the firm is reporting a breach of COCON it may consider that the breach is very uncharacteristic of the employee and that they have had an exemplary record since then. In that case, the firm should include those views.

If a firm has taken disciplinary action of the type referred to in question (F) in Part One of SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms2 and disclosure requirements) against an employee and is asked to give a reference about that employee, the firm should (if it has not already done so) consider whether the basis on which it took that action amounts to a breach of any individual conduct requirements covered by question (F).

If the firm decides that the basis on which it took that action does amount to a breach of those requirements, it should include that disciplinary action in the reference under question (F).

Paragraph (2) applies even if the grounds of the disciplinary action did not include such a breach of individual conduct requirements.

The requirement in (1) is disapplied2 for disciplinary action taken before certain specified dates, where a firm’s2 records do not record whether previous conduct subject to disciplinary action amounted to a breach. The date differs between different types of SMCR firms. SYSC TP 5 and SYSC TP 7 set out those specified dates and other details.2

The obligation to consider whether there was a conduct breach does not mean that there is a wider duty to investigate whether there are facts that show that there has been a conduct breach (see SYSC 22.5.18G).

SYSC 22.2.2R(1) to (3) may require an SMCR firm2 to disclose information that goes beyond the mandatory minimum information in Part One of SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms2 and disclosure requirements).

This may mean, for instance, that a firm should in some cases disclose a conclusion that an employee or former employee has breached COCON or APER where that conclusion was reached outside the time limits in Part One of SYSC 22 Annex 1R.

SYSC 22.5.1R to SYSC 22.5.5G (Verification, accuracy and fairness) also apply to updating a reference under SYSC 22.2.4R.

Therefore fairness may require a firm to have given an employee an opportunity to comment on an allegation if it is included in an update to a reference.