The Central Bank has written to the management of all regulated financial services firms reminding them of their legal obligations under the Fitness and Probity (F&P) regime.
- The Fitness and Probity regime is critical to protecting public interest and ensuring confidence in the financial system
- The Central Bank reminds firms of legal obligations to ensure individuals working in regulated firms meet the highest standard of competence, integrity and honesty
- The Central Bank expects firms to review their own fitness and probity policies, procedures and practices and address any shortcomings
The regime was introduced in 2010 to ensure that individuals who work in regulated firms meet the highest standard of competence, integrity and honesty. The Central Bank sees the F&P regime as central to its role as a gatekeeper for the financial system, ensuring that it can fully assess whether the most senior people working in the financial services industry are fit and proper.
"Firms are the first line of responsibility to ensure that people working in key roles are fit and proper to hold those positions. This responsibility does not end when staff are hired to a position; firms must ensure that staff are fit and proper on an ongoing basis. Staff must be competent, but must also act with integrity at all times. Where we see evidence that firms are falling short in their obligations, we will take appropriate action, including removing individuals from those roles."
The Central Bank expects "that firms review the issues set out in the letter and, together with their boards, review their own fitness and probity policies, procedures and practices and address any shortcomings. Firms should be able to demonstrate how the issues we have raised have been considered, and to explain and evidence any remedial actions taken. We expect to see a demonstrable change in how firms and individuals engage with the process over the coming period."
The letter details specific issues that have arisen which firms must address to ensure they comply with the requirements. These include:
- Firms have ongoing obligations to ensure that they do not allow a person to perform a controlled function role unless they are 'satisfied on reasonable grounds' that the person complies with the Central Bank's F&P requirements. The Central Bank has taken enforcement action against firms for failing to put in place, or failing to follow, proper systems and controls to ensure compliance with the F&P regime.
- Firms must conduct due diligence on an ongoing basis to ensure employees in controlled functions continue to comply with the requirements. In one case, an individual had a significant judgment registered against them, leading to questions over that individual's financial soundness, but the firm failed to take any steps to satisfy itself that the individual still complied with the requirements.
- There is evidence that some firms have identified F&P concerns about an individual and have taken steps to address these, including suspension for dismissal, but have failed to report those concerns, or the steps taken by the firm, to the Central Bank.
- The Central Bank observed a number of instances where individuals have not provided material information on their applications to the Central Bank for approval to senior roles. On occasion applicants have failed to disclose material facts which are either known to proposing firms, or would have been known if proper due diligence of their proposed candidates had been conducted.
