Fit and proper requirements: honesty and integrity, competence, operational ability and financial soundness
The four pillars
Fit and proper is the gateway to licensing and authorisation. For an FSP, the four pillars are honesty and integrity, competence, operational ability and financial soundness. For representatives, the focus is mainly on honesty and integrity and competence, although the FSP must ensure the representative is properly appointed and supervised. Competence includes qualifications, experience, regulatory examinations and continuing professional development where applicable.
Continuous, not once-off
Fit and proper status is not a once-off test at appointment. It must be maintained. An FSP must monitor its own position and that of its representatives. A later dishonesty offence, debarment, insolvency or failure to meet CPD can affect fitness. The requirements are also category-specific: the competence needed for one product category may not be enough for another.
Traps
A frequent trap is reducing fit and proper to “passed the regulatory exam”. Examinations are only part of competence. Another trap is assuming representatives must always meet the same financial soundness test as FSPs; financial soundness is primarily an FSP pillar. A third trap is treating fit and proper as a permanent status once achieved.
Worked example
A representative has ten years’ experience but has not completed the required regulatory examination and has no approved exemption. Experience alone does not satisfy competence. The FSP must not authorise independent rendering of the service until the competence gap is closed or a permitted supervision arrangement applies.
Rule of thumb: current, category-specific and documented - check all applicable pillars, not just the most obvious one.