FSA reminds chief executives to closely vet candidates for influential roles

The Financial Services Authority (FSA) has written to the chief executives of 5,000 firms to remind them of their responsibilities when it comes to hiring top performers.

The letter reminds bosses in the financial services sector that the responsibility to assess whether a candidate is ‘fit and proper’ to carry out a role rests with the firm and they should have robust recruitment, referencing and due diligence processes.

The FSA has said it will undertake close vetting of appointments and will expect to interview candidates applying for ‘significant influence functions’ (SIFs) roles.

The tough new regime is one of the FSA’s responses to the financial crisis, which exposed governance and risk management shortcomings across numerous firms in roles such as chair, chief executive, and finance or risk director.

In the 12 months since October 2008, the FSA has conducted 172 SIF interviews, resulting in 18 candidates withdrawing their applications, showing there is considerable scope for some firms to be more robust in their own recruitment processes.

Firms are also urged to provide sufficient information with their applications (for example, head-hunter reports) and the rationale they have used to conclude that the candidate is fit and proper to perform the role.

Graeme Ashley-Fenn, FSA director of permissions, decisions and reporting, said: “The onus is on firms to ensure candidates applying for influential positions are fit and proper to perform the role. Our individually tailored approval interviews will help us assess whether the individual has the right experience and understanding but also whether they will enhance the overall management strength and insight of the firm.”

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