Advice and representation for individuals
Financial Services Professionals
We made our name acting for senior executives in financial services. We have negotiated severances and handled employment litigation worth millions of pounds. We can advise you on negotiating your contracts of employment, including on how to get around post-termination restrictions. We are also experienced in defending career-defining allegations of gross misconduct or negligence and can help to preserve your professional and regulatory reputation.
We do not act for large UK-based financial institutions or bulge bracket investment banks to ensure we are conflict-free. This makes us the first choice for senior executives.
Among the banks we have acted against are the following:
- HSBC;
- UBS;
- Société Générale;
- Nomura;
- Barclays;
- Deutsche Bank;
- Citibank;
- BNP Paribas;
- Credit Suisse;
- JP Morgan;
- Bank of America Merrill Lynch;
- Standard Chartered;
- Goldman Sachs; and
- Investec.
Reviewing New Contracts and Statements of Responsibility
A well-drafted contract provides an insurance policy which can protect you against unexpected future developments. We will help you to achieve that peace of mind by negotiating out onerous terms and making sure that any key protections are present. If you have been promised something at the recruitment stage, we will insist that HR include it in your contract.
We can advise you on your remuneration terms (including the buyout of any forfeited stock or cash) and your post-termination restrictions to ensure that the package you are getting is at least “market”.
Many people, even senior hires, can feel reluctant to negotiate terms either because they do not want to deter their new employer by being pushy, or because they cannot envision there being a problem in the future. Remember, the very best time to negotiate favourable terms is when you are being hired; once you have signed on the dotted line, you will not have the leverage to go back and make large changes to your contract. We will help you to get sensible amendments added to your contract, even it means persuading your employer to go beyond their standard terms.
Some senior managers will also need to agree a new ‘Statement of Responsibilities’ with their employer, which imposes additional liabilities upon them. We have solid experience of negotiating these statements to ensure you are protected in the future. Find out more information about the Senior Managers Regime here.
Disciplinary/Regulatory Investigations
Disciplinary investigations in financial services can have devastating effects. We can advise you throughout the process and help to minimise the level of any disciplinary sanction that you will face.
We have helped a number of FCA regulated staff walk away with a “clean bill of health”, even in cases where the allegations relate to complex investigations into LIBOR and Forex.
If you are accused of improper conduct or required to participate in an investigatory probe, you do not need to face it alone – we have the experience and skill to protect you.
Negotiated Exits/Settlement Agreements
When it is time to leave your current employer, we will help you secure the best possible exit terms. We are experts in all types of deferred compensation and can use that knowledge to help you maximise your pay-out.
Remuneration packages for senior executives can be complicated. They are often made up of several components, including cash bonuses, LTIPS, restricted stock units, share options, carried interest entitlements, and co-investment schemes. We will keep on top of everything to ensure that you do not lose out.
We will ensure that you leave your firm on good terms, protecting your entitlements and avoiding the risk of any deferred compensation being forfeited.
Team Moves/Avoiding Post-Termination Restrictions
Moving from one firm to a competitor can be a legal minefield, especially when you are taking a team with you.
As a law firm formed out of a team move, we have a unique take on this particularly difficult area and know it is possible to achieve success.
Seeking advice early will help to ensure that you (and your team, if you are moving together) can progress to greener pastures without the threat of High Court litigation hanging over you.
High Stakes Employment Litigation
Litigation against big employers can be daunting, particularly as they typically have vast resources to fight a case. If you are taking your employer to court or the Employment Tribunal, you need a firm who will not be intimidated, and has a reputation for winning similar cases against large organisations.
Our lawyers are here to fight your corner. BDBF’s name is respected amongst our peers and opponents and our credibility and experience will lend extra weight to your case.
Our experienced lawyers level up the playing field when taking on big employers. You can trust us to give you the support and advice you need to make employment litigation less stressful, and be safe in the knowledge that we will do everything we can to get you the compensation you deserve. And crucially, you can rest assured that we are in control of matters on your behalf, giving you the time and space you need to get on with developing your career.
Senior Managers and Certification Regime in Financial Services
After the financial crisis in the last decade, successive governments have been keen to encourage greater accountability in the financial sector (banks, insurers and FICC market participants in particular). Following the Parliamentary Commission on Banking Standards’ report in 2013, the response to this was the establishment of the Senior Managers and Certification Regime (SMCR).
The regime, which is now in force, aims to allocate clear responsibilities to named individuals, and has a far wider scope than the previous rules. The rules allow enforcement action to be taken against individuals working in banks and financial institutions. It is therefore essential for senior managers to understand the extent of the regime, the responsibilities they have been allocated, the penalties they may face and the new referencing requirements. Ultimately by truly understanding your obligations under the regime, you can then ensure that you remain within the boundaries of the rules.
Who is affected?
Senior managers, including those one level below board level (in large institutions only). This includes the Chairman, a senior independent director and executive directors. It can also include certain non-executive directors if they have a specific delegated responsibility, such as being chair of a committee (such as risk, audit or nomination committees).
It may also include General Counsel or the Head of Legal.
A separate regime has been introduced for insurance managers – the Senior Insurance Managers Regime, or SIMR.
What responsibilities will I have under the SMCR?
Some responsibilities are inherent to certain roles. Other ‘prescribed responsibilities’ will be allocated by the firm to Senior Managers through a Statement of Responsibility (SOR). The SOR has to be agreed with the Senior Manager; this is likely to be fertile ground for negotiations, either at the start of an appointment or once significant changes are made to an existing role.
The content of the SOR is critical because it is a written record of the extent to which you are personally liable. Therefore, any Senior Manager who is asked to agree to an SOR should seek independent legal advice before doing so, to protect their best interests and ensure they understand the obligations being committed to. There is a lot to think about, not simply regarding the allocation of responsibilities but also in terms of resources, indemnities and insurance cover.
Individuals with senior management functions must be pre-approved by the firm, which must conduct its own fitness and propriety check and then seek approval from the regulator.
What are the Conduct Rules?
What used to be the Statement of Principles for Approved Persons will be replaced by the new Conduct Rules. Firms will essentially become mini-regulators; it will be their responsibility to monitor adherence to the Conduct Rules and, if it suspects they have been breached, to notify the FCA/PRA within seven days. It is also now the firms’ duty to certify Senior Managers’ fitness and propriety each year.
Any role which is considered to pose a risk of ‘significant harm’ to the firm or any of its customers (in relation to a regulated activity) is covered by the Conduct Rules. The ‘Certified Persons’ category is much wider than its predecessor of ‘Approved Persons’. As opposed to naming roles to which the rules apply, the FCA has simply said it applies to everyone except some specific categories of workers. These will be the most junior staff, such as receptionists and post room workers.
The Conduct Rules require that:
- you must take customers’ interests into account and treat them fairly
- if you delegate any duty for which you are responsible, you must take reasonable steps to ensure that the person to whom you have delegated is appropriate (and you still need to oversee their work)
- if you work in insurance, you need to pay due regard to policyholders’ interests (including any potential future policyholders) and make sure that their insured benefits are properly protected
What is the duty of responsibility?
The SMCR places a duty of responsibility on all Senior Managers to take reasonable steps to prevent regulatory breaches in the areas of the firm for which they are responsible.
This means that if there is a failure by a firm in an area for which a Senior Manager is responsible within their Statement of Responsibility, the Senior Manager will have to explain to the regulator that they took reasonable steps to prevent, stop or remedy the regulatory breach. What the FCA or PRA will consider to be a reasonable step will depend on the relevant circumstances but could include: (i) pre-emptive action to avoid a breach; (ii) investigating or reviewing responsibilities; or (iii) implementing, policing and reviewing appropriate policies. Further guidance will be required as to what constitutes ‘reasonable steps’.
The individual may face tough questions from a regulator to assess whether they have taken reasonable steps.
This means that Senior Managers will have a greater likelihood of being: sanctioned; named and shamed publicly by the regulator; and are at risk of financial penalties and legal costs. They may also face having their approval withdrawn or, in the case of more serious breaches, being banned or restricted from holding a regulated position in future.
Senior Managers in UK banks could also face charges of a new criminal offence of reckless mismanagement. This criminalises Senior Managers’ behaviour in circumstances where: (i) they are aware of a risk that a decision will cause a bank to fail; (ii) their conduct falls short of what is reasonably expected; and (iii) the bank does indeed fail.
When did these changes come into force?
The Conduct Rules came into force for Certified Persons and Senior Managers on 7 March 2016.
The certification of Senior Managers then became a requirement on 7 March 2017. This was also the date when Conduct Rules became applicable to other employees.
Whistleblowing champions were required to be appointed from 7 March 2016 and firms have had to comply with the new whistleblowing rules since 7 September 2016.
The FCA published its final rules on regulatory referencing in late 2016. Firms are now required to seek regulatory references going back five years prior to appointment.
Regulatory References
Following the global financial crisis, regulators have placed greater regulatory scrutiny on the conduct of individuals. Many of our banking and insurance clients are subject to the FCA’s individual conduct regimes. So as such, we are heavily focused on limiting clients’ reputational exposure and doing everything possible to secure a ‘clean’ bill of health, whether that is in a Form C or under the new regulatory referencing rules under the Senior Managers Regimes.
Regulatory references under the Senior Managers Regime
From March many senior executives working in banking and insurance will come within the scope of the FCA’s new rules on regulatory references. Forming part of the Senior Managers Regimes in those 2017, sectors, the new rules are extremely important within the new regulatory landscape. These references are key tools in a prospective employer’s ability to assess an individual’s fitness and propriety during the hiring process.
The new rules on references are one of the regulators’ methods of responding to the global financial crisis, and the perceived need to clamp down on the ‘rolling bad apple’ – i.e. the individual who avoids the consequences of their past misconduct by moving from employer to employer.
While that is the aim, the rules also have potentially career-limiting consequences for those working (or wanting to work) in relevant roles. Clearly, a great deal hinges on what is said in the reference, and how it is said. A negative regulatory reference may have the effect of an offer of employment being revoked, or not being made in the first place.
When is a regulatory reference necessary?
A hiring firm must seek regulatory references for candidates being recruited into various functions in the business. The references must cover the individual’s employment history for the past six years, covering the current employer and all former employers of the candidate where the person carried out a relevant function.
Some roles, such as those that are controlled functions, will still need pre-approval of the regulator before the hiring firm can offer them, but regulatory references will also have to be obtained.
What is included in the reference?
The firm giving the reference must include information regarding any ‘disciplinary action’ taken against the individual. This may relate to something they did or failed to do that amounts to a breach of individual conduct rules.
‘Disciplinary action’ has a wide meaning. It includes the obvious matters, such as: dismissal for misconduct or gross misconduct; formal written warnings; and clawback or reduction of the individual’s variable compensation due to a conduct breach. However, it can also include suspension (except where the investigation is still pending).
The old employer is also required to provide all other information relevant to the prospective employer’s assessment of whether the candidate is fit and proper. This would include, for example, if there is any information about mitigating circumstances that go some, or all, of the way to explaining why a person behaved as they did.
What rights does an employee have?
Many of our individual clients do not trust their current or former employer to present alleged conduct issues in a balanced way in a reference. It is often true that firms have their own reputations to protect in a misconduct situation, and their own agendas to keep.
However, there are often levers that can be pulled in any given scenario and we can help individuals to do that.
For example, the individual has the right for the reference to be prepared with due skill and care, and for the information in it to be true, accurate and fair, based on documented fact, and not be defamatory.
The regulators have also identified that fairness will normally mean giving the individual a chance to comment on (but not edit) prejudicial information in the reference before it is sent out. The reference-giver must then take the individual’s comments into account when considering whether something should be disclosed in the reference, and if so, how it is worded.
