In a consultation paper published today, the regulator outlines proposals to extend the approved persons regime and sets out how the FSA is enhancing its scrutiny of senior management competence.
The FSA’s proposals include extending the definition of the existing director and non-executive director controlled functions to include certain individuals in parent companies.
The regulator is also looking to clarify the role of non-executive directors to reinforce that it will look at non-executives more closely where it believes they should have intervened more actively with a firm’s management.
The proposals also seek to extend the definition of the CF29, significant management function, to include all proprietary traders where they can exert a significant influence over a firm.
The FSA says it will also amend the application of the approved persons regime to UK branches of overseas firms based outside the EEA.
As part of this work, the FSA says it has already started to interview more applicants for “significant influence” posts at high impact firms. Once in post, where individuals fail to meet the required standards the FSA says it will consider enforcement action.
Director of permissions, decisions and reporting division Graeme Ashley-Fenn says: “It is critical not just for the firm but for market confidence that our major institutions are soundly run by individuals who have clearly demonstrated that they have the necessary skills, experience and integrity.
“Our vetting process is not intended to be a substitute for a firm undertaking proper due diligence itself – responsibility for this still lies with a firm’s senior management. These proposals align with a shift in FSA focus: where a significant influence holder shows incompetence or dishonesty, we will consider enforcement action against him or her.”
The consultation period closes on March 31. The FSA says it will finalise the proposals and publish revised rules in a policy statement during the second quarter of 2009.