Are you an FCA/PRA regulated employer?

Navigating employment law disciplinary processes can be complicated at the best of times.

Below is an overview of our guidance and key pointers.

Dual obligations

As well as complying with the ACAS code of conduct for disciplinaries, those employing staff in this regulated sector must also fulfil their notification and reporting obligations to the Financial Conduct Authority (FCA) and/or Prudential regulation Authority (PRA). You will be familiar with the new SM&CR regime which prescribes the interplay between the two minefields. This regime re-iterates the importance of managing a disciplinary process fairly as the consequence of not doing so could fall back on your own management team.

All financial services staff (including Senior Managers) are governed by the 6 conduct rules and there are four supplementary Conduct Rules for Senior Managers. All these rules require basic standards of individual conduct, for which all staff are accountable.

Rule 1: You must act with integrity.

Rule 2: You must act with due skill, care and diligence.

Rule 3: You must be open and cooperative with the FCA, the PRA and other regulators.

Rule 4: You must pay due regard to the interests of customers and treat them fairly.

Rule 5: You must observe proper standards of market conduct.

Rule 6: You must act to deliver good outcomes for retail customers.

SC1: You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.

SC2: You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system.

SC3: You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively.

SC4: You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice

Amongst other obligations, firms must notify the regulators when disciplinary action has been taken against a person for a breach of the Conduct Rules. For Senior Managers, firms are required to submit the notification within seven business days of concluding disciplinary action. For other individuals, firms are required to report on this annually using form REP008.

It is therefore important to take advice from a legal professional who understands both employment law and the financial sectors.

FCA regulated firms need to understand what type of misconduct might trigger a regulatory reporting obligation (not all do), how and when to conduct a disciplinary meeting and how to manage agreed exits and regulatory references.

References

An FCA regulated business should secure references for regulated employee’s going back 6 years. This could mean requesting references from more than one employer regardless of whether the previous employer is regulated or outside the UK.

Unlike many other sectors a regulated business cannot simply offer a standard ‘factual reference’ and must provide:

• details of any certification function, SMF, notified NED or credit union NED role performed by the individual, and summary of what the role involved;
• details of any other roles performed at the firm or at any firms within the same group, in the last six years;
• where the firm has concluded at any point in the six years prior to a reference request that the candidate breached any of the FCA or PRA conduct rules, or a conduct standard that they were required to observe, and the facts that led the firm to that conclusion;
• confirmation if the individual was held not fit and proper to perform a function and the facts that led the firm to that conclusion; and
• details of the basis and outcome of any disciplinary action as a result of the previous two points.

If you would like further assistance or advice about the contents of this article, please contact me on 01904 716050 or by email at Kalpesh.nakeshree@warekay.co.uk.

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