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How to handle an updated regulatory reference

How should we handle an update to a regulatory reference for a current employee that has been received from a previous employer?


Regulatory references are proving to be a significant challenge for firms and one aspect that is fraught with risk is the handling of updated regulatory references.


Updating a reference for an ex-employee may sound rare but according to SMCR research carried out by UK Finance some 27 per cent of governance function respondents indicated that they have had to update regulatory references they had previously given.


This means that, over time, it is likely that your firm will receive an update to a regulatory reference for one of your current employees. Clearly, it is difficult to predict what form that update might take and how serious the newly discovered misconduct might be.



Practical steps


So, what steps can you take to make sure that you handle an updated regulatory reference in a way that leaves your firm compliant with SMCR and treats your employee fairly and within the bounds of employment law?

  • Act quickly but avoid hasty decisions that are not supported by clear evidence. Remember that you may not need to take any action, just because the previous employer sees the situation as a fit and proper issue does not necessarily mean that you will.

  • Gather all relevant information – it may be helpful to talk to the previous employer to get further context.

  • Assess the updated information that you have been given against your firm’s fit and proper tolerances – this is vital because you need to be able to demonstrate consistency and fairness in the way that you handle all regulatory references.

  • You may want to seek expert legal advice – particularly if the situation looks serious for the employee and may affect their career.

  • Inform and involve the employee – you should give the employee concerned the opportunity to respond and to be involved in the process.

  • Accurately record all your decisions and collate the supporting evidence – this will go a long way towards demonstrating that you have taken reasonable steps throughout the process.

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