Checks, References and Approved Persons
By Jonathan Cartledge, Senior Associate, Operational Policy Team FSA
Appropriate checks and references for candidates for approved persons status form an important part of both firms' and our assessment of the fitness and propriety of candidates. In her July 2007 article 'Fit and Proper?' Rachel Donaldson gave an overview of our approved persons regime in relation to assessing fitness and propriety.
When applying for FSA approval for an individual, you must declare, based on your own enquiry, that the candidate is a fit and proper person to perform the functions you ask for. Responsibility here lies with the firm making the application.
One of your challenges in assessing fitness and propriety is deciding what checks to carry out and what references to get. We expect senior management to assess, using a risk-based approach, which combination of checks is right for a particular role – including credit references, references from previous employees and criminal records checks.
References may come in several forms; for example, verbally; through appraisal documents; formally in response to specific criteria; or through checks carried out by government organisations such as the Criminal Records Bureau. The form of the reference is less important than whether, based on the relevant criteria, it gives you as the assessor assurance the individual candidate is fit and proper (see our Supervision Manual (SUP) rules SUP 10.12.9G (SUP 10.12)).
For candidates working with customers, we recognise the particular importance of getting thorough references from previous employers in good time. You may be considering appointing a person to perform activities under the customer function (CF30). If you are, and you ask the former employer for a reference or some other information, our rules state the former employer must give all relevant information it is aware of as soon as it can. In SUP 10.13.12R (2) we set out the criteria the former employer must meet – including the main assessment criteria of our Fit and Proper test for Approved Persons (FIT).
We encourage all firms to give thorough references in good time. When you are preparing a reference, you owe a duty to your former employees and other firms to exercise due skill and care. You should make sure references are accurate and based on documented fact. You may give frank and honest views, but only after taking reasonable care over the factual content, and the opinions you express, and after checking the information you base your views on.
If you are unable to get a reference for a candidate, whether because a former employer is not forthcoming, or because the candidate does not help in the process, a risk-based approach means you must take this into account in your assessment of the candidate's suitability. Similarly, where a compromise agreement between a candidate and their previous employer means you cannot get all the information you need for your assessment, you should consider fully the risk this presents before you declare that candidate to be fit and proper. The implications of compromise agreements that prevent candidates from giving information relevant to an assessment of fitness and propriety should be carefully considered by firms and employees.
Giving misleading information, including not disclosing criminal records, is an offence under Section 398 of the Financial Services and Markets Act 2000 and we have the power to prosecute this offence. Changes to the Exceptions Order to the Rehabilitation of Offenders Act mean that financial services firms who are already authorised, or applying for authorisation, can now ask about and take into account all spent convictions when recruiting for posts where the holder will require our approval. In the past you could only consider certain spent offences.
We will not automatically refuse applications for the approval of individuals who have criminal convictions. However, if you are applying for approved persons status, you should understand the importance of establishing an open and honest relationship with us from the outset.
References and checks are an important tool that you can use in assessing the fitness and propriety of candidates for approved persons status. The appropriate application of a risk based approach to the assessment of a candidate, and to the determination of which references and checks to obtain, should ensure you have all the information necessary to declare that candidate fit and proper.
January 2008
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HOT OFF THE PRESS - FSA QUARTERLY CONSULTATION 08/01
Chapter 4 - Notification of changes in application details for approved persons
This chapter explains a proposed amendment to the rules requiring notification of changes in application details for approved persons. The amendments will provide greater flexibility in how firms are able to notify us of these changes while we are considering an application.
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