Fit And Proper Update - October 2012

Author:Ms Breeda Cunningham and Matthew Ryan
Profession:Dillon Eustace
 
FREE EXCERPT

As you will be well aware, the Central Bank's Fitness and Probity Standards (the 'Standards') have applied to all persons performing Pre-Approval Controlled Functions ('PCFs') since December 1, 2011 and to all persons newly appointed to Controlled Functions ('CFs') from March 1, 2012.

The implementation of the final phase of the Standards is fast approaching in that as of December 1, 2012 they will apply to all persons performing CFs prior to March 1, 2012.

Consequently, regulated entities (other than Credit Unions) will need to take measures to ensure that all persons performing CFs within their organisation are in compliance with the Standards.

The Fitness and Probity Standards

Under the Standards, persons performing CFs (and PCFs) in regulated entities are required to possess a level of fitness (i.e. competence and capability) and probity (i.e. honesty, ethical judgment and integrity, together with financial soundness) befitting the relevant role.

In determining whether an individual is performing a CF, regulated entities must assess the role and functions of each individual in line with the definitions prescribed by the Central Bank Reform Act 2010 (Sections 20 and 22) Regulations 2011 (as amended) (that is, the list of CFs as set out at Appendix I).

Where a CF is outsourced to a regulated entity, details of the outsourced entity's regulatory status will need to be ascertained. Where the function is outsourced to a non-regulated entity, a letter must be obtained from the outsourced entity confirming that the requisite Fitness and Probity checks have been carried out.

For all other CF roles (i.e. those not outsourced), the regulated entity will need to consider the responsibilities of the CF and determine the specific competencies and the level of probity expected of a person performing that CF. This assessment should be documented.

Regulated entities must satisfy themselves 'on reasonable grounds' that persons performing the CF role in their organisation comply with the Standards. In order to do so, the regulated entity must conduct an appropriate level of due diligence on the individual concerned.

It should be noted that the roles of CF-1 and CF-2 will attract a greater level of due diligence than the roles of CF 3-11.

Assessing fitness

The fitness of an individual to hold a particular CF will be considered subjectively and will be dependent upon the function to be performed – its complexity, the risks attached to it etc.

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