Certification for solo-regulated firms: What do you need to do before 31 March 2021?

2020 was an unprecedented year during which firms have, understandably, focused on responding to COVID-19.  In recognition of this the FCA delayed the deadline for solo-regulated firms to undertake the first fitness and propriety assessment of their certified staff from 9 December 2020 until 31 March 2021.  This new deadline is fast approaching and firms should take steps to complete the certification process now before time runs out.

What do you need to do?

By 31 March 2021 all solo-regulated firms will need to certify that each member of staff who performs a certification function is fit and proper to perform their function with regard to the following FCA FIT requirements:

1. Competence and capability
2. Integrity
3. Financial soundness.

Certifying staff as fit and proper is not a tick box exercise and will require a careful assessment of each employee performing a certification function with reference to the requirements of their particular function, their track record, disciplinary history, qualifications and training, and the results of appropriate background checks.  There may be tough decisions to make if high achievers have a poor compliance record or haven’t undertaken required training.

This can be a time-consuming process and it requires firms to devise and implement a robust approach to certification which meets the FCA’s requirements and creates an appropriate record of decision-making. 

The regulatory implications of getting certification wrong can be very serious both for the firm and for the Senior Manager with ultimate responsibility for implementing the Senior Manager & Certification Regime.  It is therefore very important that firms devote time and care to getting their certification process right. 

How do you implement an appropriate certification process?

There is no one-size-fits- all approach to certification and much will depend on the nature and complexity of each firm. However,  there are certain steps which we advise all firms to follow, including:

1. Create and follow a policy that works for your firm and which meets the FCA’s requirements.
2. Train your managers so that they can properly and robustly assess fitness and propriety and understand that this is different to how they assess employer requirements such as financial performance.
3. Carry out the appropriate HR/compliance due diligence in good time before the deadline.  Be aware that background checks are taking longer than usual to process in the current climate.
4. Meet with certified staff to assess fitness and propriety – potentially at the same time as or in conjunction with an annual appraisal.
5. Create and keep a record of what you have done.

How can we help?

Our employment and financial services teams have extensive experience advising clients on the implementation of certification including:

1. Advising on an appropriate approach to certification including assessment frameworks  
2. Drafting certification policies and ancillary documents for firms
3. Drafting guidance for managers on assessing fitness and propriety
4. Delivering training to managers on assessing fitness and propriety.

Contact us

For further advice and to discuss how we can help you, please contact Joanna Chatterton, David Murphy or Daisy Jones.