With insurers focussed on getting processes in place for certifying relevant staff and developing systems to manage the regulatory referencing regime, it can be easy to overlook (because the FCA doesn’t expressly require contracts to be amended) that the terms on which you currently employ staff may not be fit for purpose for the new regime. Nor may your recruitment process for certified employees be robust enough to ensure that you make appropriate judgements about who you hire into such roles.
Until now it has been the case that provided someone did well in the interview, you couldn’t find anything negative on a google search, and you had the go ahead from the FCA you could employ them into a controlled function without the firm troubling itself too much about their regulatory history. Now the burden of deciding whether someone is fit and proper to perform a certified role falls on you the employer and that means making significant changes to your hiring process. It also means that you need to ensure that your offer letters and contracts don’t give rise to unintended financial liabilities and give you adequate protection where regulatory misdemeanours occur.
Below are the key things that all insurers will need to think about when hiring and employing certified staff.
It’s much easier to make a judgement about an existing staff members’s fitness and propriety than it is for a new hire who you’ve never met before. Don’t forget you have to consider the three limbs of the fit and proper test for any candidate: their honesty, integrity and reputation; their competence and capability; and their financial soundness.
You will need to carry out appropriate due diligence to satisfy yourself that in each of these categories the candidate meets required standards. You need to consider what’s required and who will manage the due diligence process so all relevant data is available when the decision to certify is made.
New hires should be asked to self-certify that there is nothing that they are aware of that might impact on the assessment of their fitness and propriety. Other evidence might include:
You will also need to ensure that the person making the assessment of fitness and propriety is qualified to do so – they must themselves be certified or a Senior Manager – and that they properly record the basis on which the decision to certify has been made. As a minimum, employers will need an appropriate form and insist that it is completed properly for each hire. The assessor is likely to be in breach of Conduct Rule 2 if not.
Where there are concerns about what is on a regulatory reference, think about how your recruitment process will deal with this and who reviews decision making. Remember the SMCR is not a zero tolerance regime, so one-off minor breaches of Conduct Rules where there has been a failure to exercise due skill care and diligence should not in most cases bar the person from employment. Again, you need to insist that the basis of the decision made is recorded in case of future challenge or scrutiny.
You may well already have references to regulatory compliance within existing contracts, but have you got the following?
All the above will ensure that you are in the very best position where things go wrong to both take swift and decisive action and satisfy your regulators that you have made clear to your employee what standards they are expected to achieve.
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