The Financial Services Authority (FSA) has written to the CEOs of 5,000 regulated firms to reinforce how its intensive regulatory approach applies to approving and supervising senior personnel performing significant influence functions (SIFs).
The letter reminds CEOs that the responsibility to assess whether a candidate is fit and proper to carry out a role rests with the firm and that firms should, therefore, have robust recruitment, referencing and due diligence processes in place.
As part of the SIF approval regime, the FSA has said it will undertake close vetting of appointments and will expect to interview candidates applying for SIF roles. Therefore, firms are being encouraged to engage with the FSA early in the recruitment process and for major firms, this should be at the point of drawing up a shortlist rather than waiting until the preferred candidate stage.
Firms are also urged to provide sufficient information with their applications (including supporting documents – for example head-hunter reports) and the rationale they have used to conclude that the candidate is fit to proper to perform the role. Applications must be made in a timely manner and any failure to engage promptly with the FSA may impede a firm’s plans to publicly announce a new appointment.
The enhanced SIF regime is one of the FSA’s responses to the financial crisis, which exposed governance and risk management shortcomings across numerous firms in roles such as chair, ceo, and finance or risk director. In the 12 months since October 2008 the FSA has conducted 172 SIF interviews, resulting in 18 candidates withdrawing their applications which shows there is considerable scope for some firms to be more robust in their own recruitment processes.
Graeme Ashley-Fenn, FSA director of permissions, decisions and reporting, said:
“It is crucial, that at a time when effective governance has never been more important, candidates have the right levels of competence and capability to perform these senior roles and that they are fully aware of their responsibilities.
“The onus is on firms to ensure candidates applying for influential positions are fit and proper to perform the role. Our individually tailored approval interviews will help us assess whether the individual has the right experience and understanding but also whether they will enhance the overall management strength and insight of the firm.”
