Following the recent changes from the Financial Conduct Authority (FCA) starting 7th March 2016, Firms have had to make several changes to the way in which they define regulated roles, ensure the continued assessment of the ‘fitness and propriety’ of their employees and the way in which they perform their background screening checks on applicants.
Two of the key changes made in the new rules, included the division of the formally Approved Persons Regime to the Senior Managers Regime and the Certification Regime.
Here’s a summary of the new rules’ position terms:
- The Senior Managers Regime focuses on the most senior employees and those who hold key roles. It focuses on a narrow group of employees, those performing Significant Influence Functions (SIF) or who hold key roles and hold overall responsibility for whole areas within the Firm. This group will still be required to undergo FCA approval in order to perform their roles.
- The Certification Regime applies to all individuals in roles which have been deemed by the regulators as capable of posing significant risk or harm to the Firms and/or its customers. Moreover, these individuals will no longer require approval from the FCA to perform their role/function. This regime places the onus on to the Firm’s themselves to effectively self-regulate, reducing the burden on the regulator enabling Firms to make continued and effective changes to enforce desired behaviour and performance from all employees.
There are several factors that are used to assess the fitness and propriety of individual candidates. The FCA focuses on the individual’s honesty, trustworthiness, integrity and reputation when making their considerations.
Criminal Record checking has, therefore, always been an integral part of this process. In particular, crimes where an individual has acted with dishonesty, even when those convictions are ‘spent’ are taken into consideration.
In the UK, there are three main types of criminal record disclosure available in the UK; Basic, Standard and Enhanced.
Only certain roles are eligible for a Standard or Enhanced disclosure, whereas a Basic disclosure is permissible for all roles. The following table summarizes the key information available from the different types of disclosure:
For the FCA, the requirement to understand the honesty and integrity of applicant’s means that the FCA have been given specific exemption under the Rehabilitation of Offenders Act 1974, which means performing a Standard Disclosure is permissible for this type of role.
Under new regulations the term ‘Approved Person’ is no longer in use. Instead Senior Managers which will still be regulated and approved by the FCA will still be eligible under the Rehabilitation of Offenders Act (ROA) 1974 (Exceptions) Order 1975.
It is less clear whether those applicants who fall under the new Certification Regime will also remain eligible for a Standard Disclosure under the new guidance as they will no longer be approved externally by the FCA.
While this may be an oversight within the new guidance at this time Financial Clients are currently undertaking their own reviews to assess the permissibility of conducting Standard disclosures on this pool of candidates, with differing opinions.
If you are a financial services client in the UK and wish to discuss your package set up or changes to your client requirements, please contact your Account Manager for further information.