Understanding the requirements and how to stay compliant
In the UK’s regulated financial sector, ensuring that individuals in key roles are “fit and proper” is not just best practice, it’s a regulatory obligation under the Financial Conduct Authority’s (FCA) Senior Managers and Certification Regime (SM&CR). But what does “fit and proper” really mean? And how can your firm make sure it’s meeting expectations?
Let’s break it down.
What Is the FCA’s Fit and Proper Requirement?
The FCA requires firms to assess the fitness and propriety of senior managers and certified staff on an annual basis, at a minimum. This means ensuring that individuals have the honesty, integrity, competence, capability, and financial soundness to carry out their roles effectively and in the best interests of consumers and the market.
These assessments are especially important for roles that can significantly influence a firm’s conduct, risk, and compliance obligations.
The Three Core Criteria for ‘Fit and Proper’
According to the FCA Handbook (FIT), firms must evaluate individuals against the following areas:
1. Honesty, Integrity and Reputation
Does the individual demonstrate ethical behaviour and a track record free from misconduct, criminal offences, or regulatory breaches?
2. Competence and Capability
Are they qualified and experienced enough to carry out their role effectively? This includes having relevant certifications, training, and ongoing development.
3. Financial Soundness
Are there any financial concerns, like bankruptcy or poor financial management—that could impact their role?
What Should the Assessment Include?
- A self-declaration form completed by the individual
- An updated CV or role description
- Records of any training, qualifications, or CPD
- Disciplinary or complaints history, if applicable
- Internal or external criminal record checks, where appropriate
Firms should also ensure that assessment outcomes are documented clearly, with any concerns addressed and actions tracked.
What Happens If You Don’t Comply?
Failure to carry out proper assessments could lead to regulatory action, especially if an unfit individual contributes to customer harm, misconduct, or poor governance. In severe cases, firms may be investigated, fined, or publicly censured.
Even if no issues arise, not being able to evidence proper assessments could still lead to audit failures or negative outcomes in FCA supervision visits.
How My Compliance Consultant Can Help
Our team supports financial firms across the UK with Annual Fit and Proper Assessments, including:
- Templates and guidance for documentation
- Independent reviews of senior staff assessments
- Timetable management to ensure key deadlines aren’t missed
- Alignment with broader SM&CR requirements
With the right support, your firm can remain compliant, confident, and well-prepared for any FCA scrutiny.
Ready to streamline your Fit and Proper assessment process?
Contact us today to ensure your firm remains compliant with FCA expectations and supports a culture of responsible governance.
