Criteria for F&P Assessment
A review of various F&P Policies and Laws within member states reveals that the criteria for assessing F&P is very similar across jurisdictions, with a few differences in wordings. It is important for member states to have a common understanding of what each criterion means to ensure consistency of approach in assessing F&P. The rest of this section will therefore provide guidance on consistent criteria for assessing F&P in the hope that each member state will apply this consistently.
In essence, the main criteria used are:
- Honesty, Integrity and Reputation
- Competence and Capability
- Financial Soundness
Honesty, Integrity and Reputation
In assessing a person’s or individual’s honesty, integrity and reputation, member states should consider the following, amongst other things, irrespective of whether these have happened within the jurisdiction or elsewhere:
- Criminal offence convictions – this may include any offences of dishonesty, fraud, financial crime or other offences relating to financial services or financial entities.
- Adverse findings or any settlement in civil proceedings, especially in connection with financial services or financial business, misconduct, fraud or the formation or management of a body corporate.
- Been the subject of, been interviewed, in the course of, and existing or previous investigation or disciplinary proceedings, by the regulator of the member state, any other regulator, professional body, government bodies or agencies.
- Been the subject of any proceedings of a disciplinary or criminal nature, or has been notified of any potential proceedings or any investigation, which might lead to such proceedings.
- Any contraventions of the member state’s regulatory requirements, rules, regulations, statements of principle or code of practice; including clearing houses and exchanges, professional bodies, or government bodies or agencies.
- Been the subject of any justified complaint relating to regulated activities in the member state or in any other jurisdiction.
- Been involved with a company, partnership or other organization that has been refused registration, authorization, membership or a licence to carry out a trade, business or profession, or has had such registration, authorization, membership or licence revoked, withdrawn or terminated, or has been expelled by a regulatory body or government body.
- Been refused the right to carry on a trade, business or profession requiring a licence, registration or other authority; as a result of the removal of the relevant licence.
- Been an individual in a controlled function, of a business that has gone into insolvency, liquidation or administration while the individual has been connected with the organization, or within 12 months of such connection.
- Been investigated, disciplined, censured or suspended by a regulatory body, a Court or Tribunal, whether publicly or privately; as an individual or any business in which the person has been involved.
- Been dismissed, asked to resign and resigned, from employment of from a position of trust, fiduciary appointment or similar.
- Ever been disqualified from acting in a controlled function.
- Been candid and truthful, in the past, in all his/her dealings with any regulatory body and whether the individual demonstrates a readiness and willingness to comply with the member state’s regulatory requirements and with other legal, regulatory and professional obligations and ethical standards.
- Been convicted of money laundering, fraud, theft other financial crime or crime involving dishonesty.
When assessing these above factors, member states should consider the seriousness of the offence, the restitution, the circumstances surrounding the offence, the explanation offered by the person/individual, passage of time, and other relevant factors. Member states should encourage individuals/persons to be open and transparent, and fully frank with the regulatory body. Any material changes to F&P information provided should be brought to the regulatory body’s attention promptly. Where a licensee or applicant is in doubt, they should be encouraged to declare such information for the regulator to decide whether it is material or not.
Competence and Capability
When deciding whether a person has the competence to perform a controlled function, competence should be assessed in terms of skills, knowledge and experience to perform the role in question. Skills could be directly related or transferable. For example, management skills may also have transferable coaching and mentoring skills as coaching and mentoring do form part of management and leadership. Knowledge is mainly gained through training, academic and professional qualifications and memberships of professional bodies, while experience relates to experience gained on the job. All these three elements determine competence.
Capability is closely linked to competence, as in most cases you will need to have the competence to perform a role in order to have the capability to perform the role. However, capability is more than just the ability to perform a role. It takes into consideration the physical aspects such as having the time and resources to perform the role. For example, an individual might have the competence to perform a Compliance Officer role but because he/she is also Money Laundering Reporting Officer and Risk Officer he/she might not be capable of adding Compliance Officer to existing roles.
Member states should take into consideration the type of regulated activity conducted; the nature, complexity and volume of business; the jurisdiction in which products and services will be offered; the level of responsibility and the collective competence and experience of those who will govern the licensee when assessing whether a person is competent and capable of performing a controlled function. Other matters that member states should consider when assessing the competence and capability of an individual/person will include, but not limited to, the following:
- The knowledge to carry out the controlled function or role being proposed for approval. Academic and professional qualifications will be relevant, as well as memberships of professional bodies.
- Demonstration of experience through years of employment, and positions held that the individual is able, or will be able, if approved to perform the role.
- Ability and technical skills required to perform the function/role, gained through appropriate training.
In addition to the above, individuals performing a controlled function, or function requiring regulatory approval, should have an understanding of the regulatory and legal environment pertinent to the role and be knowledgeable about the business of the licensee, the industry and products of the licensee.
Determining whether an individual can meet his/her personal liabilities when they become due and mitigating financial risks on an ongoing basis is key to the assessment of financial soundness. In the case of shareholders, member states should consider their financial strength and their ability to inject additional capital into a licensee, if and when required. In determining an individual’s prudent management of financial matters, member states should consider matters including, but not limited to:
- Satisfactory evidence of how financial relationships have been maintained via a financial reference or other means.
- Whether the individual has made any arrangements with his/her creditors, filed for bankruptcy, been adjudged bankrupt, had assets confiscated, or been involved in proceedings related to personal solvency and that of any company in which they had a controlling interest.
- Whether the individual has been the subject of any judgement of debt that remained outstanding for over a period of 12 months or is currently outstanding.
- Whether the person/individual met capital and/or solvency requirements applicable to it.
- Whether the individual was able to manage previous business dealings in a sound and prudent way.
Ongoing Obligations of Individuals
The F&P assessment is not just an initial assessment, but an ongoing one as long as the individual/person remains in a controlled function or key function requiring regulatory approval. Member states should therefore also consider whether the individual continues to be F&P on an ongoing basis. Considerations for this ongoing obligation will include, amongst other things:
- The member state becomes aware or has been notified of any material changes affecting responses given to probity questions as part of the F&P assessment
- The direction and management of a licensee’s business has not been conducted in a fit and proper manner.
- The individual has been subject to or has been involved in any other legal matters that might call into question his/her F&P.