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BSB guidance on the certification regime: the fitness and propriety assessment

  • United Kingdom
  • Employment law
  • Financial institutions

21-02-2018

The Banking Standards Board has published its latest non-mandatory good practice guidance on dealing with the risks and issues that may arise when assessing the fitness and propriety (F&P) of certified staff. The guidance sets out a ‘good practice framework’ to help firms and individuals making certification decisions.

The BSB has previously published a statement of good practice on certification: F&P assessment principles, which this guidance supports.

While the guidance contains illustrative examples the BSB emphasises that the challenges that firms face will be unique to each firm and they will need to exercise their own judgement.

The BSB emphasises that demonstrating F&P is not a one-off annual event but an on-going commitment on both sides. Equally important is the opportunity afforded by the assessment to recognise good behaviours and achievements.

Structure of the F&P assessment

The BSB recommends that the F&P assessment should follow three stages:

• Sourcing and evaluating evidence (via annual assessment or where there is new information)

• Deciding whether to issue a certificate and taking action to mitigate risks or remediate an issue where necessary

• Recording the outcome (also of relevance to regulatory references).

F&P assessments must be carried out annually as part of the annual certification process but can also be triggered at any point in response to a particular event (such as a disciplinary process). Firms may also choose to certify for periods less than 12 months to facilitate the continued supervision or monitoring of certain staff.

Sourcing evidence

The BSB notes that most of the evidence sourced will result from a firm’s other processes such as performance evaluation, disciplinary procedures etc. Any information put forward must be current.

Importantly, the actions taken as part of one process (e.g. a disciplinary process) must be consistent with the F&P assessment. This means that firms should at all times during different processes have in mind the impact on a F&P assessment. The BSB acknowledges that many firms find that the clearest way to ensure that the different processes are joined up is to consider the impact on F&P alongside the decision made in the related process. It recognises the two decisions need not necessarily be simultaneous. In our experience, this would be consistent with the approach taken by a number of firms who will have a separate committee assess F&P alongside following the outcome of a disciplinary process (rather than make a single decision on both processes through the disciplinary). However, the BSB also provide the example of appraisal processes where the impact of an appraisal rating on F&P (if any) may, for example, be considered at the same time as the rating is awarded.

Whilst firms assess certified staff’s F&P, it is for individuals to also build and maintain evidence demonstrating their F&P and for carrying out mitigating or remedial steps. The BSB urges firms to ensure that their culture supports their employees in acting in a way that is fit and proper.

Evaluating evidence

The key point to bear in mind is that a F&P assessment is not like a disciplinary process although there may be some common factors.

Firms are required to reach a view on the information before them on whether the regulators’ requirements for F&P have been met, namely:

  • Honesty integrity and reputation
  • Competence and capability, and
  • Financial soundness

When evaluating evidence, a firm must ask: what are the issues? Why are they relevant for the individual’s F&P? Approaches may differ between firms but all firms must articulate the element of F&P to which any evidence relates and why it is relevant.

Firms should put in place a framework to help those persons carrying out the assessment to evaluate information consistently. The BSB sets out a non-exhaustive list of relevant factors to consider when assessing the significance of information and examples of how a firm might apply these factors.

Actions following assessment

Maintaining F&P

Where there is a newly-certified population, firms may consider – in addition to mandatory training – investing in additional training or support.

Mitigating a risk

Firms should consider putting in place steps to mitigate risks. For example, where there is a perceived conflict of interest, ensure that the individual does not work on matters relating to that client, together with additional controls.

Remediating an issue

Firms should consider supervision and other actions to ensure that an individual is able to improve to the required standard, where possible. Consider action plans agreed with the individual and remember that a certificate can be issued for less than a year, allowing for a further in-year assessment.

Where the issue cannot be remediated

If an issue cannot be remediated – for example, there are serious issues concerning the individual’s honesty which cannot be resolved, the individual cannot be certified as fit and proper.

Next guidance

The BSB is now working on further guidance on assessing the F&P of individuals working outside the UK/ moving to the UK from overseas and on factors to consider when sharing information about certified individuals when they move between firms.

Firms may find it helpful to review their current processes for making decisions against the BSB’s new guidance and consider incorporating some of the worked examples in the guidance into their own internal training procedures.

Read the BSB guidance.

For more information contact

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