4 SYSC TP 8.5.1R applies4 this chapter to certain claims management 4firms that are not SMCR firms.

This chapter is not limited to regulated activities or other specific types of activities.

One effect of SYSC 22.1.3R is that the obligation to provide a reference can apply even if the employee worked in an overseas office of the employer.

3An example of SYSC 22.2.8R is this. Say that P works at a firm (B) and leaves to become a firm and a sole trader. P appoints themselves to perform the compliance oversight function. P does not need to get a regulatory reference from B about themselves.

1. (1)

   3If a firm is appointing someone who was a sole trader to a position that would normally require a regulatory reference under SYSC 22.2.1R, it does not have to request a reference from the sole trader themselves. That is because SYSC 22.2.1R only requires a firm to request a reference from a previous employer and a sole trader is not their own employer.

2. (2)

   An example of (1) is this. Say that P was a firm and a sole trader and performed the compliance oversight function themselves. P goes to work for another firm (A). A does not need to request a regulatory reference from P about P.

1. (1)

   A firm (A) asking another firm (B) for a reference should give B sufficient information to let B know that the requirements in this chapter apply to the reference it is being asked to give and which requirements apply.

2. (2)

   As long as it complies with (1), A does not have to set out specifically the information this chapter requires it to obtain. This is because B should include that information even though B is not specifically asked to include it.

A firm asking for a reference under this chapter from a current or former employer that is not a firm will normally need to specify what information it would like.

1 SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms2 and disclosure requirements) has two purposes:

1. (1)

   to set out what information a firm3 should disclose under SYSC 22.2.2R(4); and

   2
2. (2)

   to provide a template that a firm3 should use when giving a reference under this chapter.

   2

A firm3 should use the template in SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms2 and disclosure requirements) even if the firm asking for the reference does not specifically ask it to.

1. (-1)

   3This chapter sets out minimum requirements for a reference. It does not prevent a firm from including more than is required by this chapter.

2. (1)

   Therefore3SYSC 22.4.2R does not stop a3firm including matters in the reference not required by the template in SYSC 22 Annex 1R.

3. (2)

   A3firm may include the material required by the template and additional material in the same document.

4. (3)

   Any additional material should not alter the scope of any of the questions in the templates.

3If a firm does disclose more than is required by this chapter the reference should still meet its duties under general law to its former employee and the recipient (see SYSC 22.5.3G to SYSC 22.5.5G).

3Nothing in this chapter prevents a firm from disclosing material outside the time limits under this chapter.

1. (1)

   For example, this chapter does not necessarily require a firm to include in a reference the fact that an ex-employee left while disciplinary proceedings were pending or had started. Including such information is likely to imply that there is cause for concern about the ex-employee but the firm may not have established that the ex-employee was actually responsible for misconduct.

2. (2)

   However, a firm may include such information in a reference if it wishes to (see SYSC 22.3.5G).

A firm should, when giving a reference under this chapter, provide as complete a picture of an employee’s conduct record as possible to new employers.

1. (1)

   A firm supplying a reference in accordance with this chapter owes a duty under the general law to its former employee and the recipient firm to exercise due skill and care in the preparation of the reference.

2. (2)

   The firm may give frank and honest views, but only after taking reasonable care both as to factual content, and as to the opinions expressed.

3. (3)

   References should be true, accurate, fair and based on documented fact.

1. (1)

   An example of the general duty described in SYSC 22.5.4G is that fairness will normally require a firm to have given an employee an opportunity to comment on information in a reference. The firm might do this through, for example, disciplinary proceedings.

2. (2)

   Paragraph (1) does not mean that the firm should provide an opportunity to comment on the reference itself, as opposed to the allegations on which it is based.

3. (3)

   A firm may have given the employee an opportunity to comment on allegations that are later included in a reference even though, at the time that the firm is giving that opportunity, no reference is being contemplated. That may mean that the firm gives the employee their opportunity to comment on the allegations some time before the reference is prepared.

4. (4)

   Paragraph (1) does not mean that a firm will be unable to include an allegation in a reference if it has offered the employee an opportunity to comment on the allegation but the employee has unreasonably refused to do so.

5. (5)

   Where a firm should have given an employee an opportunity to comment on an allegation if the allegation is to be included in a reference, this chapter requires the firm to give the employee that opportunity rather than merely to leave the allegation out of the reference.

6. (6)

   Paragraph (5) may mean that where the firm has not given its employee an opportunity to comment on a matter at the time it first arose, it will have to give the employee the opportunity around the time that the firm is preparing the reference.

7. (7)

   The obligation to give an employee an opportunity to comment 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).

8. (8)

   This chapter does not require the employee’s views to be included in the reference. Instead the firm should take those views into account so far as appropriate when deciding whether something should be disclosed and how the disclosure is drafted.

The requirements in this chapter for a firm (B) to give a firm (A) a reference also apply where A has outsourced the collection of that information to another (unregulated) third party, where B has been made aware that the unregulated third party is acting on behalf of A.

The obligation to give a reference for an employee or ex-employee applies however the employment ended or is going to end. For example, it applies whether it ended through resignation, redundancy, dismissal or fixed term work, a secondment or temporary work coming to an end.

1. (1)

   If a firm’s records do not cover the maximum periods contemplated by SYSC 22.2.2R or SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms2 and disclosure requirements), the firm should note that in the reference.

2. (2)

   A firm should not include a warning of the type described in (1) as a matter of routine. It should only be included if there is a genuine need to include it.

1. (1)

   In general there is a six year limit on what should be disclosed under SYSC 22.2.2R(1) to (3).

2. (2)

   Where the matter to be disclosed consists of a single course of conduct (such as market manipulation) the six year period does not begin until that course of conduct has come to an end. This means that individual events that occurred more than six years ago may still be within the six year limit.

3. (3)

   This guidance is also relevant to the six year time limits for updating references in SYSC 22.2.6R.

1. (1)

   SYSC 22.2.2R(1) to (3) normally has a six year time limit. SYSC 22.2.2R(3)(c) removes that time limit for serious matters. This paragraph (SYSC 22.5.10G) and SYSC 22.5.11G have guidance about this. This guidance is also relevant to the time limits for updating references in SYSC 22.2.6R.

2. (2)

   The removal of the time limit does not mean that the time that has elapsed since the matter occurred is irrelevant. The length of time that has elapsed is relevant to deciding whether the matter is serious. In general, the longer ago the matter occurred, the less likely it is still to be serious for these purposes.

3. (3)

   In determining whether something is serious for these purposes, the key question is how important the information still is for the requesting firm’s assessment of the employee’s fitness for the function that they are going to perform.

4. (4)

   In considering what is relevant, a firm should, in particular, have regard to SYSC 22.5.4G (Fairness).

5. (5)

   The table in SYSC 22.5.11G provides guidance on some of the factors which a firm should take into account when determining whether a matter is serious.

6. (6)

   The guidance in this paragraph and in the table in SYSC 22.5.11G is only designed for the purposes of this chapter. It does not, for example, apply for the purposes of SUP 15 (Notifications to the FCA), DEPP or EG.

SYSC 22.5.13R covers all types of agreements and arrangements. For example:

1. (1)

   it is not limited to an agreement or arrangement entered into when the employee leaves;

2. (2)

   it applies however the employment ends (see SYSC 22.5.7G); and

3. (3)

   it covers a “COT 3” Agreement settled by the Advisory, Conciliation and Arbitration Service (ACAS).

A firm should not give any undertakings to supress or omit relevant information in order to secure a negotiated release.

The obligation to supply information to another firm under this chapter will apply notwithstanding any agreement prohibited by SYSC 22.5.13R.

The FCA expects that normally a firm should issue a reference under this chapter within six weeks of being asked to.

1. (1)

   A firm should, wherever feasible, conclude investigative procedures before the employee departs.

2. (2)

   However, this chapter does not create a duty to investigate alleged misconduct by an employee or former employee.

3. (3)

   There are several reasons why a firm may find it appropriate to investigate potential misconduct by an employee or former employee, including:

   1. (a)

      assessing the actual and potential damage resulting from misconduct;

   2. (b)

      identifying other individuals potentially culpable or accountable for the breach;

   3. (c)

      satisfying itself that the SMF manager responsible for the areas where the misconduct occurred took reasonable steps to prevent or stop it; and

   4. (d)

      (where the employee has remuneration susceptible to malus or clawback) enabling it to consider whether any adjustments are justified.

A firm giving a reference need not include information from a criminal records check it has carried out under Part V of the Police Act 1997 (Certificates of Criminal Records, &2). The recruiting firm should carry out a criminal records check itself if necessary. The main FCA Handbook requirements on a recruiting firm to carry out a criminal records check are:3

1. (1)

   3SUP 10C.10.16R a firm should carry out such a check when appointing an SMF manager); and

2. (2)

   3SYSC 23.4 (Criminal record checks for certain directors).

1. (1)

   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.

2. (2)

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

1. (1)

   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.

2. (2)

   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.

1. (1)

   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).

2. (2)

   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).

3. (3)

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

4. (4)

   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 3firms. SYSC TP 5 and SYSC TP 7 set out those specified dates and other details.2

5. (5)

   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).

1. (1)

   SYSC 22.2.2R(1) to (3) may require a firm3 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).

   2
2. (2)

   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.

1. (1)

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

2. (2)

   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.

The Glossary definition of employer covers more than just a conventional employer and so it may not always be obvious who a person’semployer is. Therefore a firm3 appointing someone to a position that requires a reference may have to get the employee’s help in identifying their previous employers.

1. (1)

   SYSC 22.2.1R (Obligation 4to obtain a reference) applies even if the ex-employer is not a firm.

   2
2. (2)

   A firm3 should take all reasonable steps to try to obtain the reference in these circumstances. However, the FCA accepts that the previous employer may not be willing to give sufficient information.

   2

1. (1)

   SYSC 22.2.1R (Obligation to obtain references3) applies even if the employer has already got a reference for the employee. For example:

   2
   1. (a)

      a firm3 should have a reference whenever it renews the certificate of a certification employee; and

      2
   2. (b)

      changing jobs within the same firm3 may require a reference.

      2
2. (2)

   However, the firm3 does not necessarily need to obtain a new reference each time (a) or (b) above occurs. That is because an existing reference will very often still be appropriate for the purpose (see SYSC 22.7.6G to SYSC 22.7.8G).

   2

If a3firm (A):

1. (1)

   appoints someone (P) to a certification function2 position;

2. (2)

   obtains a reference from an ex-employer; and

3. (3)

   later wishes to renew P’s certificate under the certification regime;

it is unlikely that A will need to ask for another reference from that ex-employer or ask for it to be reissued unless there is a change in P’s role of the type described in SYSC 27.2.15G (major changes in role).

1. (1)

   If a3firm (A):

   2
   1. (a)

      appoints someone (P) to a certification function2 or an approved person position;

   2. (b)

      obtains a reference from an ex-employer (B); and

   3. (c)

      later wishes to:

      1. (i)

         appoint P to another certification function2 or approved person position; or

      2. (ii)

         keep P in the same certification function2 but make a change in P’s role of the type described in SYSC 27.2.15G (major changes in role), whether that change is made at a time when the certificate has not yet come up for renewal or at the time it is being reissued; or

      3. (iii)

         move P from a certification function2 to an approved person position or vice versa;

A should consider whether to ask B to reissue or amend its reference.

1. (2)

   A may decide that it is not necessary to ask B to reissue or amend its reference. For example, A may decide that:

   1. (a)

      the existing reference already covers everything necessary; or

   2. (b)

      (where B is not a firm) B will not give any further information.

If a3firm is unable to obtain a reference by the time in column two of the table in SYSC 22.2.3R, it should still try to obtain the reference as soon as possible afterwards.

1. (1)

   Where a3firm needs to fill a vacancy for a certification function2 which could not have reasonably been foreseen, the FCA recognises that it may not be reasonable to expect the firm to obtain references prior to issuing a certificate.

   22
2. (2)

   In such cases, the SMCR firm2 should take up the reference as soon as reasonably possible.

3. (3)

   If a reference obtained later raises concerns about the person’s fitness and propriety, the 3firm should revisit its decision to issue the person with a certificate.

   2

1. (1)

   Although this chapter (see SYSC 22.2.3R) only requires a3firm to try to get a reference for a person it is recruiting to perform an FCA controlled function or a PRA controlled function towards the end of the application process, the FCA would normally expect a firm to have obtained the reference before the application for approval is made.

   2
2. (2)

   The main examples of circumstances in which it would be reasonable for a firm to delay getting a reference are where asking for a reference earlier will create a serious risk of:

   1. (a)

      breaching the confidentiality of a wider commercial or corporate transaction;

   2. (b)

      prematurely triggering the need for a public announcement; or

   3. (c)

      the candidate not applying for the position in the first place because it would reveal to the candidate’s current employer the proposed move too soon.

3. (3)

   The FCA may consider that it needs to see the information in a reference before it reaches a decision. If so, it may formally ask for that information and extend the time period in which it has to make its decision until it gets the reference. SUP 10C.10.28G gives additional details about requests for further information and the effect they have on the period of time the FCA has to make a decision about an application.

4. (4)

   Firms3 are reminded that the Act itself requires a firm to be satisfied that a candidate is fit and proper before it makes an application for approval (see SUP 10C.10.14G for more detail). SYSC 22.7.11G(2) does not affect that obligation.

   2

1. (1)

   3SYSC 22.8.1R does not require a firm to create or keep records that are not required under SYSC 22.9.1R (General record keeping rules) or another rule.

2. (2)

   3(1) applies to a firm whether or not SYSC 22.9.1R applies to it.

One effect of SYSC 22.8.4R is that when an2appointed representative appoints an approved person under SUP 10A (FCA Approved Persons in Appointed Representatives)4 there is no requirement for the appointed representative or its principal to request a reference.2

3This chapter does not apply in relation to an appointed representative of a firm that is not an SMCR firm.

1. (1)

   A firm should ensure that its appointed representative gives a reference when another firm (or its appointed representative) asks that appointed representative to give a reference in accordance with this chapter.

2. (2)

   A firm is not responsible for its appointed representative’s giving references if another principal has accepted responsibility for this.

3. (3)

   3The appointed representative need not give the reference using the template in SYSC 22 Annex 1 (Template for regulatory references given by SMCR firms and disclosure requirements).

3If an appointed representative asks a firm for a reference, the firm should give one. The requirements of this chapter apply to the firm in the same way as they would if the appointed representative were a firm.

1. (1)

   3A firm should try to ensure that its appointed representative considers whether it needs to disclose a breach of individual conduct requirements (as defined in Part Two of SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms and disclosure requirements)) when giving a reference under this chapter.

2. (2)

   Therefore an example of information that may be relevant under SYSC 22.2.2R(1) to (3) is the fact that the employee has breached a requirement in APER, not just a requirement in COCON.

1. (1)

   1SYSC 22.8A.1R means that a firm recruiting someone from another member of its group is not required to request a reference from the other where the group has centralised records or alternative measures in place to ensure sharing of relevant information between its members.

2. (2)

   The recruiting firm should be satisfied that the centralised or alternative measures ensure relevant information is made available as part of the fit and proper assessment of the recruit.

1If:

1. (1)

   a firm (A) appoints someone (P) to a certification function or approved person position;

2. (2)

   A obtains a reference from an ex-employer (B);

3. (3)

   later P transfers to a certification function position or an approved person position with an SMCR firm in A’s group (C);

4. (4)

   B’s reference is:

   1. (a)

      addressed to all firms in A’s group; or

   2. (b)

      otherwise drafted so that it is clear that C may rely on it; and

5. (5)

   C does not need to ask for the reference to be reissued or amended, taking account of SYSC 22.7.6G and SYSC 22.7.7G;

C may be able to rely on that reference without asking B to give another one.

1If:

1. (1)

   a firm (A) is thinking of employing someone (P);

2. (2)

   P is employed by a group services company (D) that is not a firm;

3. (3)

   P (in their capacity as an employee of D) performs a function or service for a firm (B) in the same group as D such that P is also an employee of B; and

4. (4)

   A intends to appoint (P) to a position that entitles A to obtain a reference from B;

then:

1. (5)

   A should ask both B and D for a reference;

2. (6)

   B is obliged to give the reference if A asks it to;

3. (7)

   B should ask D to provide it with the information needed to provide a reference in accordance with this chapter;

4. (8)

   D may give a reference but (as it is not a firm) it is not obliged to; and

5. (9)

   D and B may give a single joint reference.

1 SYSC 22.8A.4G also applies where:

1. (1)

   D is not in the same group but has seconded P to B; and

2. (2)

   P (in their capacity as an employee of D) performed any function or services for B such that P was also an employee of B.

1If:

1. (1)

   a firm (A) is thinking of appointing someone (P) to a position that entitles A to obtain a reference from another firm (B); and

2. (2)

   P was an employee of other members of B’s group as well as of B;

then:

1. (3)

   A should ask all the group members that employed P for a reference;

2. (4)

   B should give a reference if A asks it to;

3. (5)

   P’s employers in that group (including any that are not firms) may give a single joint reference; and

4. (6)

   if the reference is being provided on a consolidated group basis, it should be clear what information is relevant to which employer within the group.

SYSC 22.9.1R does not have an express time limit for which a firm should retain the records as its effect is that those time limits are the same as the time limits in SYSC 22 Annex 1R (Template for regulatory references given by SMCR firms2 and disclosure requirements).

If a firm is asked to give a reference in circumstances where the record keeping requirements in SYSC 22.9.1R do not apply:

1. (1)

   it is still required to give the reference;

2. (2)

   it should give the reference based on the records it does have; and

3. (3)

   it will not breach the requirements of this chapter by failing to include information in a reference if the reason for this is that it does not have the necessary records, as long as it is not required to have those records by some other requirement in the Handbook outside this chapter or some other requirement of or under the regulatory system.

1. (1)

   SYSC 22.9.1R applies to keeping records created before the date this chapter came into force as well as ones created afterwards.

2. (2)

   A3firm does not breach the requirements of this chapter by failing to include something in a reference or by failing to have records2 because it destroyed the relevant records before the date this chapter came into force in accordance with the record keeping requirements applicable to it at the time of destruction.

   2
3. (3)

   (1) also applies to records created before this chapter (or the relevant provision of this chapter) first applied to the firm.2

4. (4)

   (2) also applies if the firm destroyed the records before this chapter (or the relevant provision of this chapter) first applied to it.2

3If a firm gives a reference after it becomes an SMCR firm, the requirements of this chapter apply even if the matters covered by the reference occurred before then.

3 SYSC 22.2.4R (Obligation to revise references) does not apply to a reference that a firm gave before it became an SMCR firm.