Fitness and Propriety

1.1

Unless otherwise stated, this Part applies to every firm that is:

1. (1) a CRR firm;
2. (2) a credit union; or
3. (3) a third country CRR firm in relation to the activities of its establishment in the UK.

1.2

The matters referred to in 2 are relevant to the PRA’s determination of whether a person to whom a senior management application relates is fit and proper.

1.3

In this Part, the following definitions shall apply:

continued approval

has the meaning in Senior Managers Regime – Transitional Provisions 1.2.

senior management application

means an application for the PRA’s approval under section 59 of FSMA.

2.1

A firm must not make a senior management application in relation to a person unless it is satisfied that person is fit and proper to perform the PRA senior management function to which the application relates.

2.2

A firm must not issue a certificate in relation to a person, unless it is satisfied that person is fit and proper to perform the certification function to which the certificate relates.

2.3

A firm must not appoint a person as a notified non-executive director or credit union non-executive director, unless it is satisfied that person is fit and proper to perform that non-executive director role.

2.4

A firm other than a third country CRR firm must ensure that each member of its management body is at all times fit and proper.

[Article 91(1) CRD IV]

2.5

A third country CRR firm must ensure that each person who performs a PRA senior management function in relation to its UK establishment is at all times fit and proper.

2.6

In deciding whether a person is fit and proper, a firm must be satisfied that the person:

1. (a) has the personal characteristics (including being of good repute and integrity);
2. (b) possesses the level of competence, knowledge and experience;
3. (c) has the qualifications; and
4. (d) has undergone or is undergoing all training,

required to enable such person to perform his or her function effectively and in accordance with any relevant regulatory requirements, including those under the regulatory system, and to enable sound and prudent management of the firm.

2.7

Before deciding whether a person is fit and proper, a firm must take reasonable steps to obtain appropriate references covering at least the past 5 years from that person’s current and previous employers, and from organisations at which that person served as, or is currently, a non-executive director.

2.8

In deciding whether a person (P) is fit and proper in connection with a senior management application or on appointment as a notified non-executive director or credit union non-executive director, a firm must:

1. (a) obtain P’s consent for the firm to request the fullest information in relation to P that it is lawfully able to request under the Police Act 1997 (Certificates of Criminal records, etc) and related subordinated legislation of the UK or any part of the UK;
2. (b) if P has lived or worked outside the UK for a material time in the previous five years, obtain P’s consent for the firm to request the fullest information in relation to P that it is lawfully able to request under equivalent overseas legislation; and
3. (c) request, and have regard to, such information.

2.9

If a firm engages a person for a continuous period of time it is only required to comply with 2.7 and 2.8 the first time it determines that person is fit and proper in relation to a senior management function, non-executive director function or certification function.

3.1

A firm must contractually require any PRA approved person, notified non-executive director or credit union non-executive director to:

1. (a) act with integrity;
2. (b) act with due skill, care and diligence;
3. (c) be open and co-operative with the FCA, the PRA and other regulators; and
4. (d) disclose appropriately any information to the FCA or PRA which they would reasonably expect notice.

3.2

A firm must contractually require any PRA approved person to:

1. (a) take reasonable steps to ensure that the business of the firm for which they are responsible is controlled effectively;
2. (b) take reasonable steps to ensure that the business of the firm for which they are responsible complies with relevant requirements and standards of the regulatory system; and
3. (c) take reasonable steps to ensure that any delegation of their responsibilities is to an appropriate person and that they oversee the discharge of the delegated responsibility effectively.

4.1

This chapter applies to CRR firms only.

4.2

A firm must notify the PRA when a person becomes a notified non-executive director and shall provide the PRA with all of the information needed to assess whether that person is fit and proper.

4.3

If the notification referred to in 4.2 is in respect of a person who, on becoming a notified non-executive director, ceases to perform a PRA senior management function or an FCA designated senior management function, the firm is not required to provide information needed to assess the fitness and propriety of that person unless there has been a change in the information provided in respect of that person regarding fitness and propriety provided to the PRA or the FCA at the time the application for the approval for performance of the PRA senior management function or the FCA designated senior management function was made.

4.4

If a firm becomes aware of information which would reasonably be material to the assessment of a current or former notified non-executive director’s fitness and propriety under this Part, it must inform the PRA in writing as soon as practicable.

4.5

Where a firm replaces a notified non-executive director because the firm considers that person no longer fulfils the requirements of 2.4, the firm must notify the PRA as soon as reasonably practicable.

4.6

Where a notified non-executive director assumes a new role with the firm or ceases to be a director of the firm, the firm must notify the PRA in writing as soon as reasonably practicable.

5.1

If any PRA-authorised person (A):

1. (1) is considering issuing a certificate to, making a senior management application in respect of, or appointing as a senior insurance management function holder, a key function holder, a non-executive director, a notified non-executive director or a credit union non-executive director, a person (P);
2. (2) makes a request for a reference or other information in respect of P from a firm to which this Part applies (B), in B’s capacity as:
1. (a) P’s current or former employer; or
2. (b) an organisation at which P is or was a member of the governing body;
3. (3) indicates to B the purpose of the request,

B must, as soon as reasonably practicable, provide a reference and disclose to A in the reference all information of which B is aware that is relevant to A’s assessment of whether P is fit and proper.

6.1

The requirement to obtain regulatory references in accordance with 2.7 does not apply to a firm in respect of any person to the extent that:

1. (a) the firm is deciding whether the person is fit and proper for the purpose of issuing a certificate;
2. (b) the person will be performing a certification function from 7 March 2016; and
3. (c) immediately prior to 7 March 2016, the person performed the same function for the firm.

6.2

The requirement to obtain regulatory references in accordance with 2.7 does not apply to a firm in respect of any person who has continued approval.

6.3

The requirements of 2.3, 2.7, 2.8 and 4.2 do not apply to a director who, in relation to the firm:

1. (a) on 7 March 2016 is a notified non-executive director or credit union non-executive director; and
2. (b) immediately prior 7 March 2016, was approved as a non-executive director or credit union non-executive director.

6.4

A CRR firm must notify the PRA before 7 March 2016 of any director who, in relation to the firm, will be a notified non-executive director on 7 March 2016 and who immediately prior to 7 March 2016 was approved as a non-executive director.