Regulatory references and settlement agreements
Why the reference clause in a financial-services settlement agreement cannot promise what it looks like it promises, and what you can realistically negotiate around it.
What is a regulatory reference?
A regulatory reference is the specific reference a UK bank, building society, insurer or PRA-designated investment firm must give when another such firm asks about a person applying for an FCA or PRA-approved role, or certain roles under the Senior Managers and Certification Regime. It is governed by the Financial Services and Markets Act 2000 framework and the FCA's SYSC 22 rules, not ordinary employment reference practice.
If you are also weighing the tax side of your exit alongside the reference question, see our tax guide.
SYSC 22 and the six-year lookback
SYSC 22 requires a firm giving a regulatory reference to disclose all information it reasonably considers relevant to whether the person is fit and proper, using a standard template covering matters such as conduct-rule breaches, disciplinary action, and any findings that affected the firm's assessment of fitness and propriety. The general disclosure period is six years, though where the underlying issue is a single course of conduct that ended more recently, the period is measured from when the conduct ended rather than when it started. Firms are also required to update a reference they have already given if materially relevant new information comes to light within that period, so a reference is not necessarily fixed at the point you leave.
Why an agreed-reference clause is constrained for SM&CR firms
Outside financial services, an agreed reference letter attached to a settlement agreement is a normal, enforceable way of controlling what a future employer is told. Inside an SM&CR-regulated firm, that agreed wording only ever covers the ordinary character reference a firm might give informally, not the separate regulatory reference the same firm is legally obliged to complete accurately if another regulated firm requests one. SYSC 22 specifically prevents a firm from entering into, or being bound by, any agreement, including an NDA or a settlement agreement term, that would limit its ability to give full and accurate information in a regulatory reference. A term that tries to do that is unenforceable to that extent, regardless of what both sides signed.
Conduct-rule breaches and what gets disclosed
If you have been found, or are being investigated, to have breached the FCA or PRA Conduct Rules, that is generally the kind of matter a regulatory reference is designed to surface, separately from anything your settlement agreement says about the reason for your departure. Whether a specific process outcome, such as a settled disciplinary matter or an unresolved allegation at the point you left, must be disclosed is fact-dependent and turns on the wording of SYSC 22 and your firm's own findings, so treat this as a question to put to your solicitor with your actual HR file in front of them, not something to assume either way from a general guide.
Can an employer give a bad reference in a settlement agreement?
Outside the regulatory reference context, an employer is generally under no obligation to give a reference at all, and a settlement agreement cannot force one where none is legally required. If a reference is given, whether under an agreed wording or not, it must be true, accurate and not create a misleading overall impression; giving a negligent or maliciously unfair reference that causes you loss can expose the employer to a claim. That protects you against dishonesty or carelessness, it does not entitle you to a flattering reference, and it does not override the separate SYSC 22 duty where a regulatory reference is what has actually been requested.
What to ask for: a clause-by-clause checklist
| Clause | Owed anyway, or negotiable? | What to ask for |
|---|---|---|
| Ordinary reference wording | Negotiable | An agreed form of words attached as a schedule, naming who at the firm will actually issue it. |
| Regulatory reference wording | Not negotiable if SYSC 22 applies | Clarity that the agreement does not purport to control the regulatory reference, so you are not relying on a promise that cannot be kept. |
| Description of the reason for leaving | Sometimes negotiable | A neutral, agreed description (for example "redundancy" or "mutual agreement") for internal and external use where the facts genuinely support it. |
| Confidentiality carve-out for regulatory disclosure | Owed anyway | An explicit carve-out confirming the confidentiality clause does not, and cannot, restrict regulatory references or reports to the FCA or PRA. |
A worked example: structure, not figures
Consider an employee at a bank leaving after a performance-related exit, with an agreed reference letter offered describing the departure as a mutual decision. The structural review a solicitor would run is: first, whether the employee's role and the receiving firm's request would in fact trigger a SYSC 22 regulatory reference rather than an ordinary character reference, since only the latter can be fully controlled by the agreed wording; second, whether anything in the employee's file could count as a conduct-rule matter that a regulatory reference would need to cover regardless of the agreed letter; and third, whether the confidentiality clause in the draft agreement contains the carve-out SYSC 22 requires, or wrongly implies a scope of protection the firm cannot lawfully give. Again, none of that depends on knowing figures in advance.
Law as at 26 August 2026. SYSC 22 and the wider SM&CR framework are periodically updated by the FCA and PRA; if this guide is more than a few months old when you read it, ask your solicitor to confirm the current rules.
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Get a same-day review →Regulatory references: frequently asked questions
Can an employer give a bad reference?
A reference does not have to be positive, but if an employer chooses to give one it must be true, accurate, and not misleading, and it must not create a false impression, whether by what it says or by what it deliberately leaves out. An employer who negligently or maliciously gives an unfair or inaccurate reference that causes you loss may be liable for it, but "bad" is not the same as "unlawful": an honest, accurate reference that is unflattering is not something a settlement agreement can prevent.
What is an agreed reference in a settlement agreement?
It is a form of words for a reference, usually attached as a schedule to the settlement agreement, that the employer commits to give if approached. Agreed references are common and generally enforceable as a matter of contract, but for a firm covered by SYSC 22 the agreed wording cannot override the separate regulatory duty to give an accurate, complete regulatory reference to another regulated firm.
Does a settlement agreement NDA stop a bad regulatory reference?
No, and a firm covered by SYSC 22 is specifically prohibited from entering into, or being bound by, an agreement that would limit its ability to give a full and accurate regulatory reference, including a settlement agreement confidentiality clause. Any such term is unenforceable to that extent, even if both sides signed it.
What counts as a conduct-rule breach on a regulatory reference?
Broadly, any finding that you breached the FCA or PRA Conduct Rules, or any dismissal, resignation or suspension connected to a fitness and propriety concern, within the lookback period. Whether a specific internal process outcome counts is fact-specific, so if you work in financial services and are unsure what is likely to be disclosed, that is a direct question to put to your solicitor before you sign.
Disclaimer
This guide provides general information only and is not legal or regulatory advice. Whether SYSC 22 applies, and what it requires on your facts, depends on your firm type and role. For advice on your own circumstances, speak to a qualified adviser.
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