As part of the Fitness and Probity regime regulated financial service providers (RFSP’s) will soon have to certify that anyone performing a controlled function (CF) complies with the Code issued under Section 50 of the Central Bank Reform Act 2010 (the Act).

The Fitness & Probity Regime

A key requirement of the fitness and probity regime is ensuring compliance with the Standards. In order to comply with the standards a person performing a controlled function must act honestly and ethically and with integrity. But what does this actually mean as far as the Code is concerned?

“Conduct to be honest and ethical and to act with integrity” (S.2.2(b) of the Act):

Let’s look at specific conduct that may point to a lack of honesty, integrity and ethics as contained in the Code:

  1. Where a person has been refused, prohibited, restricted or suspended from the right to carry on business.
  2. Where the person has been the subject of any complaint made to a regulatory body such as the Central Bank.
  3. Where the person is or has been subject to any disciplinary proceedings or a warning, reprimand or other administrative sanction.
  4. Where the person has been dismissed, or asked to resign and did resign.
  5. Where the person has been a director of a company that was struck off the register of companies on an involuntary basis.
  6. Where the person has been disqualified or restricted from acting as a director or in managerial capacity.
  7. Where the person has been convicted of an offence which could be relevant to that person’s ability to perform a CF such as money laundering or terrorist financing.
  8. Where the person has a finding, judgment or order made against him/her involving fraud, misrepresentation, dishonesty or breach of trust.
  9. Where the person has been the subject of any civil penalty enforcement.
  10. In dealings with the Central Bank or other regulatory body where the person has been untruthful or provided false or misleading information or been uncooperative or has been or is being investigated, disciplined, censured, suspended or criticised or has been found to have perpetrated or participated in any negligent, deceitful or otherwise discreditable business or professional practice.

Where any of the above apply to a person performing a controlled function they must be able to demonstrate that their ability to perform that function is not adversely affected to a material degree.

In certain instances a person may be able to self-certify that they meet the requirements but given the serious risk factors at stake as outlined above carrying out focused due diligence checks is a prudent course to adopt to rule out any potential infringements.

Most of the above situations apply to sanctions both in this jurisdiction and in any other jurisdiction where the person may have operated and have been censured by any other regulatory or professional body, authority, clearing house, court, tribunal or any government body.  The investigations or sanctions may have been public or private but will often fall within scope.

What is key for RFSP’s to consider is whether the action, complaint, sanction or penalty adversely affects the person’s ability to carry out a relevant Function, and consideration must be given to the outcome of any such inquiry or investigation in those cases.  Ultimately RFSP’s must check that the person can demonstrate that their role is not adversely affected to a material degree by the fact that any of the above scenarios apply to them now or in the past.

Given these specific risk factors, appropriate and focused due diligence checks will be required to ensure that individuals performing CF’s comply with the Standards.  Particular care should be taken when conducting fitness and probity checks as sometimes critical information that might evidence non-compliance will not show up if due diligence checks are not carried out correctly.

Orion Risk has been conducting fitness and probity risk reports for our clients in the Financial Services Provider industry for over 30 years and is well placed to help with your fitness and probity regulatory requirements. Please do not hesitate to contact us for a free consultation and we can discuss how Orion Risk reports can help you.

DISCLAIMER: This document is for information purposes only and does not constitute any legal advice.

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