12 February 2008
Sydney, 12 February 2008: Financial services businesses should act now to introduce new reference-checking practices or risk becoming a dumping ground for 'bad apples', according to compliance expert and Clayton Utz partner Randal Dennings.
Mr Dennings said it was critical for HR directors and others involved in recruitment in the financial services industry to start implementing a new industry-wide reference-checking framework - which has been endorsed by most of the major financial services industry bodies, and supported by the Australian Securities and Investments Commission (ASIC) - or put their businesses at risk of continuing to employ unethical, incompetent, or dishonest people.
Together with Clayton Utz senior associate Andrew Cardell-Ree, Mr Dennings devised the reference-checking framework as a solution to the growing problem of financial services businesses discovering they had employed 'bad apples' - individuals who pose a compliance risk to a business by not following sound processes and procedures - and being unable to do anything about it, including warn other businesses.
The centrepiece of the framework is a standard industry wide form which a new employee signs, directing and authorising their new employer to conduct reference checks. It also releases employers for sharing limited relevant factual information, in good faith, about the individual's performance and fitness to perform an entrusted role (such as giving financial services advice), and relieves employers from confidentiality obligations that might impede their ability to do so.
Mr Dennings said the form had been well received by the industry, but it was up to individual businesses to take the necessary steps to start incorporating the form into their standard recruitment practices.
"In a tight labour market, it is understandable that a financial services entity might unintentionally undertake perfunctory reference checks on employees and then have to deal with the consequences later on," Mr Cardell-Ree said.
"This new framework is a form of upfront due diligence. It aims to give prospective, past and current employers the ability to discuss, in good faith, details of an employee's dishonest, incompetent or unethical behaviour and at the same time, offer some protection to individual job applicants. It's a good defensive strategy to ensure that if something goes wrong, the interests of the business are protected and bad apples can be weeded out."
The new reference-checking framework is contained in a new ASIC handbook, Reference Checking in the Financial Services Industry, which was jointly launched by ASIC chairman Tony D'Aloisio and Standards Australia chief executive John Tucker in December.
