Tag Archives: fitness and probity laws

From top: The Central Bank in Dublin; Opening page of a letter from the Central Bank to the heads of financial institutions in Ireland

Yesterday.

The Central Bank wrote a seven-page letter to the CEOs of financial institutions in Ireland about their obligations under the Fitness and Probity Regime introduced by the Central Bank under legislation in 2010.

Essentially, the letter reminds the CEOs that their responsibility to ensure staff adhere to fitness and probity laws does not stop after they hire a person – but that they must ensure staff adhere to these rules “on an ongoing basis”.

The letter states that while the obligations of individuals within the industry appear to be “well known”, firms appear to have a “less understanding” of these obligations.

The authors of the letter – Director General of Financial Conduct at the Central Bank Derville Rowland and Deputy Governor of Prudential Regulation at the Central Bank Ed Sibley – say that one issue of “particular concern” is due diligence on an “ongoing basis” in respect of certain employees who have a “controlled function” [CF].

The letter states:

“We have seen instances where serious issues have arisen which should have prompted a firm to ask itself if a particular person in a CF role was still ‘fit and proper’.

In one example, an individual had a significant judgment registered against them, such that questions arose over that individual’s financial soundness, but the firm failed to take any steps to satisfy itself that the individual still complied with the standards.

“Similarly, we have seen examples where individuals have been criticised publicly by other regulators and/or the courts for past actions. However, their current firms have failed to take any steps to assess whether those individuals are still fit and proper, and it has been left to the Central Bank to intervene.”

In addition, the letter raises concerns about institutions not informing the Central Bank about individuals who’ve been dismissed for fraud.

It states:

“We also see instances where Firms have identified fitness and probity concerns about an individual and have taken steps to address these, but have failed to
report those concerns to the Central Bank.

In some cases, the firms have gone so far as to suspend or dismiss the individuals for fraud but have neglected to report this to the Central Bank.

“In that scenario, the Central Bank is unable to consider an individual’s misconduct, in particular in respect of any future PCF [pre-approval controlled function] application that an individual might submit.

“To be clear therefore, where your Firm has any fitness and probity concerns regarding a person who is performing a CF role, and takes action on foot of those concerns, you must notify the Central Bank without delay.”

The letter also states that the Central Bank, under its ‘gatekeeper’ remit, is supposed to approve the promotion of people to certain senior positions in writing – after this approval is sought by the firm.

But, the letter states, some firms have not sought the Central Bank’s approval and, in certain cases, the individuals who were promoted “have been those roles for a considerable time“.

The letter adds:

“You, your board and any relevant committees play a critical role in ensuring that the right people are proposed as PCFs. It is crucial that you ask not merely whether a given candidate is competent, but also whether the individual acts with integrity at all times.”

The letter can be read in full here

Earlier: Nothing To See Here Ever

Thanks Breda