Consultation Paper on Proposals to Mandate Reference Checks

The Monetary Authority of Singapore (MAS) has published a consultation outcome paper on a consultation that was launched back in 2021 on proposed requirements to perform and respond to mandatory reference checks for certain employees of a company (please see EventID 10912 for a detailed description of the consultation). The requirements would apply to a large number of supervised firms, including brokers, fund management companies, trustees of such, unit trusts, financial advisers, banks, insurance companies, and various others.
#### Background
To recall, in an effort to prevent that „bad employees“ move from one firm to another and to prevent risks to both individual firms and the market as a whole, MAS sought to require firms to perform reference checks on key employees looking back five years in the employment history of potential staff members. MAS also proposed to oblige firms to answer to the reference request of other firms within 21 days. In same context, MAS sought to require firms to keep records of all key employees so as to document employment history for purposes of such reference checks. A list of items to be tracked and recorded was included in the consultation. As far as the hiring of international staff members is concerned, MAS proposed to require all firms to make best efforts to check their backgrounds. Finally, MAS proposed to permit employees to view the references provided on or for them.
#### Responses and way forward
MAS received a large number of responses and most commenters strongly agreed with MAS‘ proposed requirements. There were mixed views, however, on some details of these requirements, e.g. as regards the scope of staff members the new reference check requirements should apply to, as regards the information that shall be included in references, and the right of employees to view provided references.
As a consequence, MAS will proceed as proposed with the following modifications:
– the requirements will only apply to employees that perform „functions relating to the handling of funds, risktaking, risk management and control, or critical system administration functions“ and in fact only to senior managers or material risk personnel;
– for now, MAS will not grant employees the right to view references due to potential legal issues as raised by the respondents; and
– the mandatory information to be included in reference checks will NOT include information on investigations that were intended, but not followed up on or ongoing investigations.
MAS will soon issue a notice which will outline and implement all requirements relating to reference checks. Once this notice is published, firms will have 12 months to comply with the provisions.
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Please ensure to review the entire conclusion paper form more detailed, comprehensive information.