Case studies: applying for a senior management function

In this case, we would have questions about the candidate’s:

• Honesty, integrity and reputation (FIT2.1) in relation to non-financial misconduct.
• Competence and capability (FIT2.2) in their ability to carry out their responsibilities as a director.

To address potential concerns, we would expect to see extra due diligence in the firm’s application.

The application should include:  

• Evidence of a robust recruitment process which clearly identifies the candidate as the most appropriate individual for the role.
• Full details of the circumstances that led to the conviction for GBH.
• How the firm has taken account of the circumstances in its assessment, including any reputational risk.
• Evidence of an accountable senior manager within the firm appropriately challenging the issues identified.
• Any documents that help to evidence the steps taken to address these disclosures.
• In support of FIT 2:1, a statement from the candidate on lessons learnt following the conviction and how they have rehabilitated.

Where a firm has not satisfied itself through robust due diligence, then it should consider whether the candidate is the most suitable individual for this role.

From a firm with significant compliance issues, we would expect to see:  

• A robust recruitment process to show why the candidate is the most suitable person for this role.
• Identification of any skill gaps and how these will be addressed as soon as possible (including their understanding of market and firm issues).
• A clear learning and development plan, along with a comprehensive handover/induction in place.
• Extra support in place while the candidate is getting up to speed.

We expect the firm to confirm:

• How the candidate has kept current, or will build their understanding of, UK regulatory requirements.
• What monitoring and oversight arrangements will be in place.
• The candidate’s level of seniority and ability to challenge within the firm.
• To whom the candidate will report.

See SYSC chapters 6.1[1] and 3.2.6J[2]

Learn more about what we expect from compliance roles[3]

From a firm undergoing significant change, we would expect to see:  

• A robust recruitment process to show why the candidate is the most suitable person for this role (highlighting experience of strong governance, managing firm culture issues and of successful IT transformation).
• Identification of any skill gaps and how these will be addressed (including their understanding of the market in which the firm operates and firm issues).
• A clear learning and development plan, along with a comprehensive handover and induction plan.
• Extra support in place while the candidate is getting up to speed.

We expect the firm to confirm how:  

• The candidate will build their knowledge of UK regulatory requirements to carry out their SMF role effectively.
• The firm is satisfied the role can be carried out effectively overseas. 

(For example, the firm should indicate the potential time the candidate may spend carrying out the role in the UK, with thought to matters such as attendance of annual general meetings (AGMs) and board meetings.) 

Learn more about our approach to overseas candidates[4]

In this scenario, we would have questions around the candidate’s: 

• Financial soundness (FIT2.3) (creditor arrangements).
• Integrity (FIT2.1) given potential phoenixing issues.
• Capability to build a new business area for the applicant firm (FIT2:2).

We would expect the firm to have considered these matters in its fitness and propriety assessment of the candidate. It should be clear: 

• What risks and issues have been identified.
• How these have been (or will be) addressed.

We would expect the firm to evidence how it has satisfied itself: 

• The candidate has no outstanding liabilities which cannot be met.
• There are no conduct concerns impacting the fitness and propriety of the candidate from the facts disclosed.

We would also expect the candidate to give a full explanation that clearly articulates: 

• How they were involved in the previous companies.
• There was no consumer harm from the liquidation through their own action.
• Any lessons learnt.
• Potential risks from the new services offered by the firm (and the related expectations around consumer duty).

We may have questions around the appropriateness and robustness of the firm’s governance arrangements, so the consolidated firm maintains a high standard of governance fitting to its growing size and complexity. 

The firm needs to satisfy itself the candidate has capacity to perform the additional roles being applied for. 

This is particularly important if the firm already has weaknesses in its governance arrangements, and systems and controls, which could lead to harm to consumers and markets. These could be made worse if the candidate is overstretched.

In this case, we would expect the firm to detail how the individual will have appropriate time, support and resources to manage their increased responsibility. 

We would expect to see extra due diligence to show how the firm has considered ‘stretch’ for the candidate, given their increased oversight requirements.  

The firm should include evidence to show how it has considered whether the candidate:  

• Will have time to oversee the different entities.
• Needs any additional support to help integrate complex structures.
• Has any conflicts of interest, and how the firm will manage them.

It is best practice to provide specific information rather than just stating these issues have been considered.

Read our Dear CEO letter[5] for more on what we expect from consolidator firms.