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Regulatory references in the spotlight after JP Morgan ruling

Jon Fisher tells HRNews about Jones v JP Morgan and an additional risk to consider on exits of certified staff and senior managers


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  • Transcript

    Firms in the FS sector terminating someone’s employment on conduct grounds should take note of a tribunal ruling which, although unusual on its facts, sends an important message about the content of any reference that may come at the end of the process. The case is Jones v JP Morgan – we’ll take a look.

    It was covered by Daily Mail and concerns a cash equities trader called Bradley Jones who worked for an associated company of JP Morgan based in Hong Kong. A London tribunal has ruled he was unfairly dismissed for alleged historic market abuse going back to 2016. He has been awarded £1.6million in lost earnings and reinstated to his previous role. 

    The tribunal held that when Jones was dismissed, his employer did not have a genuine belief in misconduct at the time. Jones, who was at the firm for nine years, faced a probe over trades that saw him enter and delete two sell orders in quick succession, known as ‘spoofing’, designed to give other traders a false impression of demand. In 2016 after an investigation JP Morgan took no further action against him. However, in January 2020 he was dismissed for alleged gross misconduct over the 2016 trades. Employment tribunal judge Stephen Knight ruled the bank 'radically altered' its approach to Jones' actions and that Jones had not engaged in spoofing.

    At the end of the process JP Morgan also gave Jones a negative reference stating that it did not consider the claimant to be a fit and proper person. It is that negative reference that we want to flag in this programme because, in a regulated sector like FS, that potentially has career-ending consequences for the individual. So, let’s get a view on this case and its implications. Jon Fisher works extensively in the FS sector advising clients in circumstances just like this where disciplinary proceedings, possible termination and the giving of a reference are all on the table. Jon joined me by phone from Leeds: 

    Jon Fisher: “So clients in the financial services sector will be well aware that where they're regulated by the Senior Managers and Certification Regime their certified staff, their senior managers, or people applying for those roles, need to get what's called a ‘regulated reference’ and that person has left a financial services firm, that firm is obliged to give a reference in a specific form. So, this is over and above the normal rules, which say, if you do give a reference you've got to give it carefully and you can't be negligent in the provision of a detail, you got to try and take reasonable care to make sure it is accurate. This is an obligation to give the reference, whereas employers in other sectors may just say we're not going to give one, and the reference has to be in a very specific form. One of the questions on the forum is, do you have any reason to doubt this person is ‘fit and proper’ to carry out their duties? That becomes a major issue when people are looking at disciplinary measures with people in the financial services because if you were giving a qualified reference and had to say you had reason to doubt that person's fitness and propriety, that may mean that that person can literally never work again in the financial services sector and for people who are highly specialists, that may mean that effectively they are unemployable in the future. So, these things become incredibly important and that's really well illustrated by this case.”

    Joe Glavina: “What does the guidance around this have to say about giving a fair reference, Jon?”

    Jon Fisher: “When the employer is giving a regulated reference, the guidance is pretty clear that they have to give fair weight to the employee's point of view, and they have to take reasonable care to make sure that reference is accurate. Now, in this particular case, the person was dismissed for gross misconduct and the tribunal found that there be no genuine belief in the misconduct. So, it wasn't just a procedural error, they found, actually, the employee hadn't even believed that the person was guilty of misconduct. Nevertheless, the employer insisted and said, we are still going to qualify this reference and we're still going to say this person is not fit and proper to carry out their duties. They would have been advised to have revisited that conclusion, in the light of the clear findings of this particular tribunal, that there had been no genuine belief in the misconduct. It doesn't necessarily mean that the tribunals view trumped their own view, they still owe the duty to their regulator and is independent of the tribunal’s decision but, clearly, that particular finding did conflict with what they put on the reference, and they would have to be doubly sure that what they're putting on the reference was fair and accurate.”

    Joe Glavina: “A negative reference in a case like this could end someone’s career so you’d expect some sort of appeal process. Does that exist? 

    Jon Fisher: “There is no current right of appeal against a regulated reference. Again, the guidance from the regulator suggests that the employer should fully engage with their former employee in terms of what goes on the reference, take due account of anything that they have to say, and those representations, but then the employer decides what is on the reference and there is no current mechanism for the employee to appeal that to the regulator and for there to be some kind of formal finding. They could try to litigate over the reference, but there is no formal right of appeal and be given the particularly drastic consequences of some of these references, effectively, that the person may well be unemployable, it is perhaps unusual that there is such right of appeal. I think that could be actually a great help to employers, and employees, because so much care is taken over these references and if there was that safety net, if you'd like, of the right of appeal, I think it would actually help all parties in being able to settle appropriate text knowing that there was at least a fallback option where somebody could intervene and take a view.”

    Joe Glavina: “So what’s your key message to HR, in-house legal?”

    Jon Fisher: “It just highlights, again, to anybody in the financial services sector, as soon as you are contemplating disciplinary action, the reference that may result at the end of that process needs to be front and foremost in your mind. As bizarre as it sounds, that reference could govern the entire way in which you conduct the process, the stage at which you start the process, the stage at which you stop the process. In cases like this, for high earners who are specialists within the financial services sector, the reference will often trump all other concerns, which is highly unusual, highly specific to this sector. But nevertheless, something people really need to bear mind and, in our experience, still, despite this regime being pretty old now, it is still something which is not given as much weight as it should be when devising the processes.”

    That case of Bradley Jones v JP Morgan was heard by the London East Hearing Centre – it was a video hearing due to Covid restrictions. If you want to read the case for yourself, you can – we’ve put a link to judgment in the transcript of this programme. 

    - Link to judgment: Jones v JP Morgan Securities plc

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