STATEMENT OF GOOD PRACTICE 1 CERTIFICATION REGIME: …€¦ · Certification risks and issues In this document, a ‘certification risk’ is defined as a situation which, should

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STATEMENTOFGOODPRACTICE1

CERTIFICATIONREGIME:

FITNESSANDPROPRIETYASSESSMENTPRINCIPLES

28February2017

Fitness and Propriety Assessment Principles

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Aboutthisguidance

ThisStatementofGoodPracticeisintendedtohelpfirmsimplementtheCertificationRegime

effectively,byprovidingahigh-levelsetofprinciplesrelatingtotheassessmentoffitnessand

propriety(F&P).

ItshouldbereadinconjunctionwiththetheBankingStandardsBoard’s(BSB’s)SupportingGuidancetoStatementofGoodPractice1ontheCertificationRegime:FitnessandProprietyDefinitions,SourcesofInformationandAssessmentRecordTemplate,publishedalongsidethisdocument.

Statusofthisdocument

TheBSB’sStatementsofGoodPracticearelivingdocumentsandarekeptunderreview.Please

contactcertification@bankingstandardsboard.org.ukifyouhaveanycommentsorqueriesregarding

thisStatement.

BSBgoodpracticeguidanceallowsmemberfirmsandothersinthesectortoreferencetheirown

policiesandproceduresagainstastatementofwhat‘good’lookslike.Itisdevelopedinpartnership

withBSBmembersandrepresentsapoolingofknowledgeandexperience.Itdoesnotimposeany

legalorregulatoryobligationsonBSBmembers,nordoesitreplaceregulation.Intheeventof

inconsistency,applicablelaws,rulesandregulationsprevail.

TherearetwoelementstoBSBgoodpracticeguidance:anoverarchingStatementofGoodPractice

setsouthighlevelprinciplesofgoodpracticeforaparticulararea;andSupportingGuidancethen

explainsthesehighlevelprinciplesinmoredetail.

AsuiteofSupportingGuidanceisbeingdevelopedtositbeneaththisStatementofGoodPractice.

TheBSBplanstodevelopfurthergoodpracticeguidanceontopicsincluding:

• identifyingandevaluatingrisksandissuesrelatedtocertificationi.e.circumstanceswhich,

shouldtheymaterialise,couldcallintoquestionwhetheranindividualisfitandproperto

performtheirrole;

• assessingtheF&PofindividualsworkingoutsidetheUKormovingtotheUKfromoverseas;

and

• factorstoconsiderwhensharinginformationaboutcertifiedindividualswhentheymove

betweenfirms(linkedtorecentrequirementsforfirmstoprovide‘regulatoryreferences’).

Furthergoodpracticeguidanceisindevelopmentorwillbedevelopedindiscussionwithour

CertificationRegimeWorkingGroup(CRWG)andwillbepublishedonourwebsitewhenready.

Terminologyusedinthisguidance

Certificationrisksandissues

Inthisdocument,a‘certificationrisk’isdefinedasasituationwhich,shoulditmaterialise,couldcall

intoquestionanindividual’sF&P.

A‘certificationissue’isdefinedasasituationthathasmaterialisedandiscallingintoquestionan

individual’sF&P.


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Typesofassessment

IndevelopingourF&PAssessmentPrinciples,severaldifferentreasonsforundertakingan

assessmentofF&Pwereidentified.Wehavecharacterisedtheseas:

• toenableanindividualtotakeupacertifiedroleeitheronjoiningthefirmorfollowing

internaltransfer(‘Newroleassessment’);

• annuallyforthepurposesofreissuingacertificate(‘Annualassessment’);

• inresponsetoanothereventsuchastheoutcomeofadisciplinaryproceeding,that

generatesacertificationissue(‘Triggeredassessment’);and

• in-yeartomonitortheF&Pofanemployeeatashorterintervalthan12monthswherea

certificationriskorissuehasbeenidentified(‘In-yearassessment’).

OurSupportingGuidanceCertificationRegime:FitnessandProprietyDefinitions,SourcesofInformationandAssessmentRecordTemplatecontainsfurtherexplanationofthese.

Screeningchecks

Screeningchecks(sometimesreferredtoas‘vetting’)refertoinformationobtainedexternallyfrom

thefirmorindividual,suchasacreditreferencecheckorDisclosureandBarringService(DBS)

checks.OurSupportingGuidanceCertificationRegime:FitnessandProprietyDefinitions,SourcesofInformationandAssessmentRecordTemplatecontainsfurtherinformationonthese.


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FitnessandProprietyAssessmentPrinciples

Principle1:Newroleassessment

Afirmshould:

• carryoutarobustF&Passessmentofapersonnewtoacertifiedrole,usingappropriatesources

ofinformation,againsttheindividualelementsofF&P(i.e.honestyandintegrity,reputation,

competenceandcapability,andfinancialsoundness)asrequiredbytheCertificationRegime.

Thenewroleassessmentshouldbemanagedthrough:

- therecruitmentprocess,

- screeningchecks,

- regulatoryreferences,

- trainingandinductionprogrammes,and

- bothself-declaration(retrospective)andacommitmenttoupholdhighstandardsof

behaviourandcompetence(forwardlooking)bytheindividual;

• includepositiveaffirmation(i.e.thatgoodbehaviourhasbeendemonstrated)whenassessing

F&P,ratherthanfocussolelyontheavoidanceofnegativebehaviour(i.e.thatanindividualhas

avoidedanytransgressions);and

• considerthetimeandsupportneededforanindividualwhoisnewtoorreturningtoacertified

roletoattainfullcompetenceforthatrole,anddefinethewaysinwhichthecompetencecanbe

demonstrated.Thismayinvolveconsideringtheneedforanin-yearassessment.

Principle2:Frequencyandextentofreassessment

Afirmshould:

• determinehowfrequentlydifferentsourcesofinformationshouldbegatheredtoinformthe

differentF&Pelementsofannualassessments;

• ensuretheprocessforassessingF&Palignswithexistingprocesses(e.g.disciplinaryand

performancemanagement)andcanbothtakeaccountofandreflectinformationgeneratedby

theseprocessesinatimelyway;

• determinethecircumstancesthatmayleadtoarequirementforatriggeredorin-year

assessmentofF&Ptobeconducted;and

• useappropriatesourcesofinformationinconductingtriggeredandin-yearassessments.

Principle3:Firms’responsibility

Afirmshould:

• takeresponsibilityfortheverificationandassessmentoftheinformationobtainedaboutan

individual’sF&P,including:- identifyingthoseresponsibleforassessingF&Patdifferentstagesoftheprocess;- ensuringthoseresponsiblefortheF&Passessmentarecompetentandcapabletoassess

eachoftheF&Pelements;- ensuringthereareprocessesinplacetoenableinformationobtainedaboutan

individual’sF&Ptobeverifiedwherenecessary;and


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- ensuringthereisanappropriatelevelofsupervisionandsupportforthoseresponsible

fortheF&Passessmenttolimitbiasandavoidanypotentialconflictsofinterest.This

shouldincludedevelopingaprocessforreviewingevidenceresultingfroman

investigationintoanF&Pissue,toensurethatafairandreasonableapproachistakenin

evaluatingaparticularcase;

• takeresponsibilityforensuringthatindividualsareawareoftheneedtoprovide,asappropriate

andinatimelymanner,theinformationthatallowsafirmtoassessandverifytheirownF&P;

and

• takeresponsibilityforencouragingindividualstodemonstrateacommitmenttoupholdinghigh

standardsofbehaviourandcompetenceinsuchformasmayberequiredbythefirm.

Principle4:Establishingpass/failcriteria

Afirmshould:

• considerandbeclearonthetolerancesthatareacceptablewhenassessingF&Pincluding:

- identifyingpotentialindividualcharacteristicsorcircumstancesthatmaycallinto

questionanindividual’sF&P;

- identifyingwhethertherearecertainrolesorresponsibilitieswherethereisgreaterrisk

ofacertificationissueemerging;

- determiningwhatself-declarationsmayberequiredandwhen;and

- determiningwhatscreeningcheckswillbeappliedandwhen;

• developaroundedapproachusingarangeofdifferentsourcesofinformationtoconductanF&P

assessmentinlinewiththefirm’srisktolerance,codeofconductandotheremployeepolicies;

• haveaclearprocessforinvestigatingcertificationissues,sothatafairandreasonableapproach

istakentogatheringalloftheevidenceforaparticularcase,anddealingwiththecircumstances

wheresomeoneleavesthefirmwhileunderinvestigation(includingwhatinformationmayneed

toberecordedforaregulatoryreference);

• ensureastructuredframeworkand/oragreedpolicyisinplaceforindividualsforwhomtheF&P

assessmenthighlightsadevelopmentorremediationneed;and• ensurethereisaframeworkinplacetoevaluatethesignificanceofinformationthatmaycall

intoquestionanindividual’sF&P.

Principle5:EvidencingtheF&Passessment

Afirmshould:

• holdaconsolidatedrecordofthesourcesofinformationortoolsusedinanF&Passessment;

• ensurethattheresponsibleindividual(e.g.linemanager)adequatelyrecordshisorher

judgementofF&Patleastannuallyand(asrelevant)anypositiveorlessseriousnegative

behaviours(e.g.belowthelevelthatwouldindicateatriggeredorin-yearassessment)that

mightberelevanttosubsequentF&Passessments;and

• ensureithasanappropriatesystemforloggingandtrackingcertificationissuesatafirmlevel

andmaintainalearninglogtoinformthecontinuingdevelopmentofgoodpractice.


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Principle6:TrainingandcommunicationaroundtheF&Passessment

Afirmshould:

• considerthesupportrequiredbythoseassessingF&Pby:

- ensuringappropriatetrainingforthoseresponsiblefortheF&Passessment(including

theevaluationofthesignificanceofF&Pissuesthatreflectnegativelyontheindividual)

andensuringthatthistrainingisundertakenandrefreshedonaperiodicbasis;

- providingguidanceandtrainingforlinemanagersontheidentificationofcertification

risksandissuesaspartofperformancemanagement;and

- developingappropriatetrainingforlinemanagersondiscussingtheoutcomeofanF&P

assessmentwiththeindividualconcerned;

• considerthesupportrequiredbyindividualshavingtheirF&Passessed,by:

- developingappropriatetraining,guidanceandsupportinrelationtoanindividual’sself-

declarations,includingthetypeofinformationthatmayneedtobeself-disclosed;

- developingappropriatetrainingand/orcommunicationasanongoingreminderofan

individual’sresponsibilitiesaroundtheF&Passessment;and

- establishinganappropriateprocessforanindividualtodiscusstheoutcomeoftheirF&P

assessmentwithanindividualwhohasresponsibilityfortheassessment;

• establishappropriateguidanceandtrainingforallrelevantemployeestoenablethemtoidentify

andrecognisewhatconstitutesacertificationriskandissue,andtoraiseconcernswhere

appropriate;and

• considerwhetherthereisaneedfortailoredtrainingandguidanceinidentifyingcertification

risksorissuesandtoinitiatetheappropriateactionasnecessaryforparticularbusiness

functions(e.g.Compliance,HRorInternalAudit).

Principle7:AppealingtheoutcomeofanF&Passessmentandthewithdrawalofacertificate

Afirmshould:

• establishaprocessfortheindependentreviewoftheoutcomeofanF&Passessment;

• developaclearappealsprocessagainsttheconclusionoftheF&Passessment;• ensurethatanyappealagainsttheconclusionoftheF&Passessmentisalignedwithother

relevantbusinessprocesses(e.g.anappealagainstadisciplinaryfindingorperformance

managementprocess);and

• considerwhatprocess,controloroversightimprovementsmightneedtobeinplacewherean

F&Pissueisidentifiedandhowanybroaderlearningsarecommunicatedaroundthefirm.

Principle8:AssessingF&Paspartofaglobalgroup

Afirmshould:

• aimtohavehighandconsistentstandardsacrosstheglobalgroupforassessinganindividual’s

F&P;


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• developanapproachforconductingF&Passessmentsofrelevantindividualsoverseasthat

reflectswhatispermittedbylocaljurisdictions;

• identifyanduseappropriateoverseasequivalentsourcesofinformationforeachelementof

F&P,asrequiredbytheCertificationRegime;and

• developappropriateprocessesforassessingtheF&Pofinternationallymobileindividuals.

Principle9:Fosteringacultureofopenness,challengeandsupport

Afirmshould:

• promoteanenvironmentinwhichindividualsareconfidenttospeakupandactivelychallenge

thebehaviourofcolleagues;

• ensurethatSeniorManagersleadbyexampleinfosteringandsupportingacultureofopenness,

challengeandsupport;

• developappropriateprocedurestosupportindividualsandencouragethemtodiscloseany

issuesinatimelymanner;and

• developandimplementaperformancemanagementprocessthatassessesabroadrangeof

dimensions,consistentwiththefirm’spurposeandvalues,andwithhighstandardsofbehaviour

andcompetence.

Principle10:Promotinggreatercollaborationbetweenfirms

Firmsshould:

• identifyopportunitiestocollaborateinordertodevelopacommonapproachtocertification;

and• worktogethertodevelopaconsistentapproachtotheassessment,reporting,recordingand

communicationofF&P,sothateachfirmcanrecogniseandhaveconfidenceinanother’s

assessment.

Principle11:Promotinghighprofessionalstandardsacrosstheindustry

Afirmshould:

• investinthepersonaldevelopmentof:

- staffincertifiedroles;

- staffwhohavethepotentialtooccupycertifiedrolesinthefuture;and

- staffsupportingthecertificationprocess;

• ensurethatstaffmaintaintheirownContinuousProfessionalDevelopment(CPD)andthat

developmentissupportedoutsidetheirday-to-dayrolethrough,asappropriate:

- skills-basedtraining;

- role-basedknowledgetraining;

- knowledgeofthebankingandbroaderfinancialservicessectors;and

- ethicsawarenessandtraining.

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ANNEX Backgroundto thedevelopmentof theF&PAssessmentPr inc ip les

Principle1:Newroleassessment

Principle Backgroundtodevelopment

Afirmshould:• carryoutarobustF&Passessmentofapersonnewtoa

certifiedrole,usingappropriatesourcesofinformation,againsttheindividualelementsofF&P(i.e.honestyandintegrity,reputation,competenceandcapability,andfinancialsoundness)asrequiredbytheCertificationRegime.Thenewroleassessmentshouldbemanagedthrough:

- therecruitmentprocess;- screeningchecks;- regulatoryreferences;- trainingandinductionprogrammes;and- bothself-declaration(retrospective)anda

commitmenttoupholdhighstandardsofbehaviourandcompetence(forwardlooking)bytheindividual;

FromdiscussionswithintheCertificationRegimeWorkingGroup(CRWG)andresponsestotheconsultationitbecameclearthatthereisnota‘onesizefitsall’solutiontoundertakinganassessment.Rather,thetypesofinformationthatwillbeusedinanassessmentwillvaryaccordingtothereasonfortheassessment(i.e.newroleassessment,annualassessment,triggeredassessmentorin-yearassessment).

TheCRWGrecognisedthatfirmswillneedtoadapttheirassessmenttothegivencircumstances.As,however,allindividualswillbesubjecttoanewroleassessmentupontakingupanewcertifiedrole,anumberofbroadsourcesofinformationwereidentifiedforthistypeofassessment:

• therecruitmentprocess(e.g.theuseofinterviewnotes,assessmentresultsandrationaleforhiring);

• screeningchecks(e.g.criminalrecordchecks,creditchecksandqualificationvalidation);

• regulatoryreference,whereanindividualmovesfromaroleinonefirmtoacertifiedroleinanotherfirm;

• trainingandinductionprogrammesrelevanttotherequirementsoftheroles(e.g.experiencedrecruitswhoarerequiredtocompletecoursesbeforecertification);and

• self-declarations(retrospectiveandforwardlooking)thathelptoengagetheindividualwithintheprocess,provideanopportunityfordisclosureofpertinentinformation(e.g.financialdifficultiesorarelevantinternalrelationship)andthatengageandmaintainawarenessoftheconceptofF&P.


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• includepositiveaffirmation(i.e.thatgoodbehaviourhasbeendemonstrated)whenassessingF&P,ratherthanfocussolelyontheavoidanceofnegativebehaviour(i.e.thatanindividualhasavoidedanytransgressions);and

TheCRWGdiscussionsreinforcedthevalueofpositiveaffirmationwhenassessingF&P(recognisingwhereanindividualhasdemonstratedgoodbehaviourratherthansolelyfocusingontheavoidanceofnegativebehaviour).

TheuseofpositiveaffirmationisconsistentwithfirmsfocusingnotsimplyonmeetingtheminimumrequirementsoftheCertificationRegime,butonidentifyinggoodpracticetosupporthighstandardsacrosstheindustry.

BoththeCRWGandconsultationresponsesnotedthatpositiveaffirmationisrelevantwhenlookingathonestyandintegrity,reputation,andcompetenceandcapability.

Positiveaffirmationisnot,however,asrelevantwhenassessingfinancialsoundness,giventhatthefocusofthisareaisonensuringthatanindividual’sfinancialsituationdoesnotleadthemtocompromisetheirprofessionaland/orethicalconduct.

Theconsultationresponsesalsonotedthatwherethereisanabsenceofpositiveinformation(onhonestyandintegrity,reputation,andcompetenceandcapability),thisdidnotmeanthattheconclusioncouldbedrawnthatapersonisnotfitandproperfortherole.


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• considerthetimeandsupportneededforanindividualwhoisnewtoorreturningtoacertifiedroletoattainfullcompetenceforthatrole,anddefinethewaysinwhichthecompetencecanbedemonstrated.Thismayinvolveconsideringtheneedforanin-yearassessment.

TheCRWGhighlightedtheimportanceofensuringadequatetimetoassessappropriatelyindividualswhowereneworreturningtocertifiedrolesfollowingaperiodofabsence.

Therewas,forexample,aconcernaboutassessingF&Pifanindividualhadnothadenoughexposuretoaparticulartypeofwork,orexposuretoasufficientvarietyofwork,intheirfirstsixmonthstodemonstratetheircompetencefully.

Ultimatelythecertificationdecisionisabinaryone;anindividualiseithercertifiedornot.TheprocessusedtoassessF&Pis,however,onethatentailsmorediscretion.Theremaybeinstanceswhereafirmcertifiesanindividual,butalsoinitiatesmeasurestoremedyanyrequiredshortfalls.InthisinstancethefirmmaylooktocertifyanindividualandplacethemonaPerformanceImprovementPlan(PIP),involvingclosersupervisionandpotentiallyasubsequentin-yearassessment.ThetopicofongoingmonitoringisexploredinmoredetailinPrinciple2.

TheCRWGalsodiscussedthecircumstancesofanindividualreturningtoarolefromlong-termabsence,(e.g.long-termsickleave,maternity/paternityleaveorasabbatical).Intheseinstances,itisimportantthatafirm:

• doesnotunfairlyquestionanindividual’sF&Pduetoalegitimateabsence;

• ensuresanyprocessestoreassessanindividualareinlinewithemploymentlaw;and

• providesreturningindividualswithappropriatetimeandsupport,asrequired.


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Principle2:Frequencyandextentofreassessment


Afirmshould:• determinehowfrequentlydifferentsourcesofinformation

shouldbegatheredtoinformthedifferentF&Pelementsofannualassessments;

Firmsarerequiredtocompleteanassessmentofindividualsincertifiedrolesatleastannually.Beyondthis,andsimilarlytoPrinciple1,thereisnotadefinitiveruleastohowfrequentlydifferentsourcesofinformationshouldbegathered.Anumberofkeyconsiderationsemerged,however,fromdiscussionswiththeCRWGandtheconsultationresponses.

Thefrequencyandextentofreassessmentshouldbebespoketothefirm’sriskappetite,logisticalconstraints(e.g.resource)andtheindividualinthecertifiedrole–inrelationtofinancialsoundness,forexample,somefirmssaidthattheyrequiredaself-declarationannuallyandrepeatedexternalchecks,suchascreditchecks,everythreeyears.Suchcheckscouldbeundertakenmorefrequentlyforspecificrolessuchas,thosewithcloseproximitytotransactiondecisions,privilegedinformationorcashandsettlementoperations.

TheCRWGalsodiscussedtheroleofongoingmonitoringaspartoftheF&Passessment.Itwasnotedthatlinemanagerscouldobserveandrecordactivitythroughouttheyear,whichmightprovideevidenceofoneormoreelementsofF&P.Itcould,however,bedisproportionatelycostlyforfirmstoundertakeexternalchecks,suchascriminalrecordchecks,onamoreregularbasis.

• ensuretheprocessforassessingF&Palignswithexistingprocesses(e.g.disciplinaryandperformancemanagement)andcanbothtakeaccountofandreflectinformationgeneratedbytheseprocessesinatimelyway;

TheCRWGdiscussedthevalueofaligningtheF&Passessmentprocesswithexistingprocesses.Memberswereclearabouttheneedtoensurethataconsistentapproachwastakenacrossthefirmandthattheprocesseswerefairtotheindividual.Therecouldalsobeapotentialoperationalefficiencybyensuringthatduplicationofeffortisminimised.

Firmsshouldapproachthisinawaythatisappropriatetotheirorganisationbutmaywishtoconsider,wherepossible,aligningthetimingoftheannualappraisalprocess(oroftheoutcomeofadisciplinaryprocess)withthatofanF&Passessment.


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• determinethecircumstancesthatmayleadtoarequirementforatriggeredorin-yearassessmentofF&Ptobeconducted;and

• useappropriatesourcesofinformationinconductingtriggeredandin-yearassessments.

Unforeseeneventsmaynecessitatereactiveassessmentssuchastriggeredassessments(inresponsetoanotherevent,suchasfollowingadisciplinaryoutcome)orin-yearassessments(whereacertificationriskhasbeenidentified,e.g.followingtheidentificationofatrainingrequirement).

TheCRWGdidnotdrawupalistofcircumstancesthatcouldleadtoatriggeredorin-yearassessment,asitwasfeltthiscouldbetooprescriptiveandwouldnotcovereveryeventuality.Firmsshoulddeterminewhatcircumstancesandsourcesofinformationarerelevantbasedontheorganisationalriskappetiteandtheindividualinquestion.

FurtherguidanceonhowtoundertakethesetypesofassessmentcanbefoundinourSupportingGuidanceCertificationRegime:FitnessandProprietyDefinitions,SourcesofInformationandAssessmentRecordTemplate.


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Principle3:Firms’responsibility


Afirmshould:

• takeresponsibilityfortheverificationandassessmentoftheinformationobtainedaboutanindividual’sF&P,including:

- identifyingthoseresponsibleforassessingF&Patdifferentstagesoftheprocess;

- ensuringthoseresponsiblefortheF&PassessmentarecompetentandcapabletoassesseachoftheF&Pelements;

- ensuringthereareprocessesinplacetoenableinformationobtainedaboutanindividual’sF&Ptobeverifiedwherenecessary;and

- ensuringthereisanappropriatelevelofsupervisionandsupportforthoseresponsiblefortheF&Passessmenttolimitbiasandavoidanypotentialconflictsofinterest.ThisshouldincludedevelopingaprocessforreviewingevidenceresultingfromaninvestigationintoanF&Pissue,toensurethatafairandreasonableapproachistakeninevaluatingaparticularcase;

MembersoftheCRWGnotedthattheindividualsresponsibleforassessingF&Pwillvaryacrossdifferentfirmsandmayinclude(butwillnotbelimitedto)linemanagers,HR,ComplianceoreventhosewithSeniorManagerFunctionsforultimateapproval.

Itisimportantthatthefirmdetermineswhothesepeopleare,theirspecificrolesorresponsibilitieswithintheassessmentand,mostimportantly,thattheyarecompetentandcapabletoundertakeanF&Passessment.ThisisnecessaryinordertoensureafairandconsistentapproachforallindividualswithintheCertificationRegimeandtominimisetheriskofinconsistenciesorerror.TrainingiscoveredfurtherinPrinciple6.

TheCRWGalsonotedthatthestepsanddecisionstakenbytheassessorshouldbeclearlydocumentedandthatthisshouldbeappropriatelyreviewedtolimitthelevelofbiasandanypotentialconflictsofinterest.DocumentationandindependentreviewarecoveredfurtherinPrinciples5and7respectively.


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• takeresponsibilityforensuringthatindividualsareawareoftheneedtoprovide,asappropriateandinatimelymanner,theinformationthatallowsafirmtoassessandverifytheirownF&P;and

• takeresponsibilityforencouragingindividualstodemonstrateacommitmenttoupholdinghighstandardsofbehaviourandcompetenceinsuchformasmayberequiredbythefirm.

TheCRWGhighlightedtheimportanceofthefirmsupportingandengagingwiththeindividualbeingassessed.Firmsshouldensureindividualsareawareoftheneedtoproviderelevantinformationinamannerthatsupportsanefficientprocess.Self-declarationisaparticularlyimportanttoolinthiscontextasitallowsindividualstodemonstratethattheyare‘boughtin’totheprocessandtodiscloseinformationthatmaybepertinenttotheoverallassessment.Italsoservesasareminderoftheindividual’sresponsibilityasacertifiedpersontotheirfirm,colleagues,customersandsociety.


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Principle4:Establishingpass/failcriteria


Afirmshould:

• considerandbeclearonthetolerancesthatareacceptablewhenassessingF&Pincluding:

- identifyingpotentialindividualcharacteristicsorcircumstancesthatmaycallintoquestionanindividual’sF&P;

- identifyingwhethertherearecertainrolesorresponsibilitieswherethereisgreaterriskofacertificationissueemerging;

- determiningwhatself-declarationsmayberequiredandwhen;and

- determiningwhatscreeningcheckswillbeappliedandwhen;

ThetopicofacceptabletolerancelevelswhenassessingF&P,andthedevelopmentofstandardisedguidanceonthis,wasofparticularimportancetotheCRWGandrespondentstotheconsultation.

Thereisnoruleforwhatconstitutesanacceptabletolerancelevel.InlinewithotherBSBPrinciples,firmswillneedtoidentifyandstandardisetheirtolerancelevelsinlinewiththeirownriskappetitesandexistingpolicies.

TheCRWGdiscussedthetypesofsituationsthatcouldleadtoquestionsaboutanindividual’sF&P(e.g.ifanindividualfoundthemselvesinfinancialdifficultyorwasplacedonaPIP,whataffectwould/shouldthathaveontheirF&Passessment?).TheCRWGalsoconsideredtolerancelevelsaroundtheunintentionalfailuretodiscloseanymatterrelevanttoF&P,orfailingtocompleteanattestationwithintherequiredtimeframe.

InlinewithPrinciples3and6,thereisalsoarequirementtoensurethatassessorsaresufficientlycompetenttorecognisecertificationrisksand/orissuesrelatedtotolerances.Firmsmaywishtoprovidetraininginthisregardtoensuretheconsistentapplicationandinterpretationofguidanceandprocess.

Itisourintentiontolookfurtherintocertificationrisksandissuesandtoproduceguidanceinthisarea.Considerationwillalsoneedtobegiventopotentialcomplexitiesandissuesrelatingtoemploymentlaw.


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• developaroundedapproachusingarangeofdifferentsourcesofinformationtoconductanF&Passessmentinlinewiththefirm’srisktolerance,codeofconductandotheremployeepolicies;

• haveaclearprocessforinvestigatingcertificationissues,sothatafairandreasonableapproachistakentogatheringalloftheevidenceforaparticularcase,anddealingwiththecircumstanceswheresomeoneleavesthefirmwhileunderinvestigation(includingwhatinformationmayneedtoberecordedforaregulatoryreference);

• ensureastructuredframeworkand/oragreedpolicyisinplaceforindividualsforwhomtheF&Passessmenthighlightsadevelopmentorremediationneed;and

• ensurethereisaframeworkinplacetoevaluatethesignificanceofinformationthatmaycallintoquestionanindividual’sF&P.

AsnotedinPrinciple1,theCRWGdiscussedtheimportanceofafirmtakingintoaccountarangeoffactorswhenassessingF&P.

Firmswillneedtoensurethatthoseundertakinganassessmenthavesufficientcompetenceandcapabilitytoenablethemtoidentifyandrecognisecertificationrisksand/orissuesinafairandconsistentmanner,whiledrawingonrelevantandappropriatesourcesofinformation.

TheCRWGsuggestedthatfirmsshoulddothisinlinewiththeirrisktolerance,codeofconductandotheremployeepolicies.FirmsshouldnotusetheF&PassessmentprocessasanopportunitytoundermineordismissindividualsforreasonsthatarenotrelatedtotheirF&P.

TheCRWGalsodiscussedtheimportanceofestablishingtheunderlyingcauseofanissueinordertoensureeffectiveresolution.Thefirmshouldconsiderwhethertheunderlyingcauselaywiththeindividual(e.g.theindividualdidnothavesufficientcompetenceorcapability)and/orwhethertherewerebroaderorganisationalissues(e.g.thelackofadequatecontrols).

Firmsshouldconsiderwhetherremedialandpreventativeactionscouldbetakentohelptheindividualmeetthestandardsinthefutureandpreventtheissuesrecurringorescalatingtoamoreseriouslevel.Whereanindividual,forexample,fallsshortoftheexpectedstandards(suchaswhereanindividual’sperformanceisinadequatebuttheirF&Pisnotcalledintoquestion)afirmmightinthefirstinstancewishtoplacethemonaPIPratherthanwithdrawthecertificate.Wherebroaderorganisationalissuesareidentified,afirmmaywishtoconsideraddressingpolicyandprocessweaknesses.

TheCRWGproposedthat,whereshortcomingsinanindividual’sperformanceorbehaviourareconsiderednon-significantforthepurposesofF&P,afirmshouldattempttoresolvethesethroughalternativemeanstoformaldisciplinaryprocedures(e.g.constructivefeedbackortraining).


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Principle5:EvidencingtheF&Passessment


Afirmshould:

• holdaconsolidatedrecordofthesourcesofinformationortoolsusedinanF&Passessment;

• ensurethattheresponsibleindividual(e.g.linemanager)adequatelyrecordshisorherjudgementofF&Patleastannuallyand(asrelevant)anypositiveorlessseriousnegativebehaviours(e.g.belowthelevelthatwouldindicateatriggeredorin-yearassessment)thatmightberelevanttosubsequentF&Passessments;and

• ensureithasanappropriatesystemforloggingandtrackingcertificationissuesatafirmlevelandmaintainalearninglogtoinformthecontinuingdevelopmentofgoodpractice.

TheCRWGdiscussedtheneedtodocumenttheF&Passessmentinordertoevidencetherequisiteparts,suchassourcesofinformationandoutcome.Itwasagreedthatgoodpracticeinthisregardwouldencompass:

• thesourcesofinformationusedandthefrequencyoftheiruseinanygivenF&Passessment;

• aconsolidatedrecordofallsourcesofinformationthathadbeenusedintheassessment;• trackingandmonitoringinformationonanongoingbasis;• recordsofanyissuesthatcalledintoquestionthefitnessandproprietyofanindividual;• detailsoftherelevantpartieswhohadbeenconsultedaspartoftheassessmentprocess

(e.g.Legal,Compliance,Risk);and• therationalefortheassessor’sjudgementinreachingthecertificationdecision.

BasedonthediscussionswiththeCRWG,aninitialAssessmentRecordTemplatewascreatedandsharedaspartoftheconsultation.Respondentsnotedthat,whileitwouldbeusefultohaveastandardisedmethodforconductinganddocumentingtheassessment,firmsfacedchallengesindoingsoduetotheconstraintsoflegacysystems.

Whilerecognisingtheconstraints,neverthelessitisconsideredtobegoodpracticeforfirmstobeabletoaccessallinformationrelevantforanF&Passessmenttoensureconsistencyofapproach,provideanaudittrailandevidenceofoutcomes.ItwillbeparticularlyimportanttorecordanygapsintheinformationandtheAssessmentRecordTemplatenowincludesaboxtorecordthis,seeSupportingGuidanceCertificationRegime:FitnessandProprietyDefinitions,SourcesofInformationandAssessmentRecordTemplateforfurtherinformation.


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Principle6:TrainingandcommunicationaroundtheF&Passessment


Afirmshould:

• considerthesupportrequiredbythoseassessingF&Pby:- ensuringappropriatetrainingforthoseresponsible

fortheF&Passessment(includingtheevaluationofthesignificanceofF&Pissuesthatreflectnegativelyontheindividual)andensuringthatthistrainingisundertakenandrefreshedonaperiodicbasis;

- providingguidanceandtrainingforlinemanagersontheidentificationofcertificationrisksandissuesaspartofperformancemanagement;and

- developingappropriatetrainingforlinemanagersondiscussingtheoutcomeofanF&Passessmentwiththeindividualconcerned;

AsreferencedinPrinciples3and4,theCRWGconsideredtheneedtoprovideappropriatesupportforthoseconductingtheF&Passessment(e.g.thoseresponsibleforassessingthecompetenceandcapabilityofanindividualaspartoftheperformanceappraisal).

Itwasagreedthatafirmshouldreview,atregularintervals,thequalityandeffectivenessofthetrainingprovidedtothoseinvolvedwiththeF&Passessment.Thisreviewshouldincludethetake-upandcompletionoftraining,toensuretheprocessremainsfairandconsistentinitsapplicationacrossallindividuals.


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• considerthesupportrequiredbyindividualshavingtheirF&Passessed,by:

- developingappropriatetraining,guidanceandsupportinrelationtoanindividual’sself-declarations,includingthetypeofinformationthatmayneedtobeself-disclosed;

- developingappropriatetrainingand/orcommunicationasanongoingreminderofanindividual’sresponsibilitiesaroundtheF&Passessment;and

- establishinganappropriateprocessforanindividualtodiscusstheoutcomeoftheirF&Passessmentwithanindividualwhohasresponsibilityfortheassessment;

TheCRWGconsideredthewayinwhichF&Pwasdiscussedwithandcommunicatedtoemployees.Considerationwasgiventothedifferentcircumstanceswhenanassessmentwouldberequired,asperthediscussioninPrinciples1and2(e.g.firmsmaywishtomakeuseofinductionprogrammesand/orworkshopstointroducestafftotherequirementsoftheCertificationRegime).

PeriodictrainingmightalsobeusedtoaddresstheF&Passessment,includingsuchaspectsastheroleoftheindividualinself-declaration,theConductRulesandstepsthefirmistakingtopromoteacultureofindividualaccountabilityandopenness,includingescalationofconcernsandany‘speakup’policyandprocedures(inlinewithPrinciple9).

TheCRWGalsodiscussedtheavailabilityoftraining,guidanceandsupportforindividualsinrelationtotheirownF&Pandwhatmightconstituteanappropriatelevelofself-declarationforthepurposeoftheassessment(e.g.thefactorsthatmightneedtobetakenintoaccountindecidingwhetheritisrelevanttodisclosearelationshipwithacolleague,suchasthenatureoftherelationship,thenatureoftheroleandtheproximityoftheroletotransactiondecisions,privilegedinformationorcashandsettlementoperations).

Inparticular,theCRWGnotedtheimportanceofindividualsbeingawareof,andboughtinto,theoverallprocessofassessingF&P.TheF&Passessor(s)shoulddiscusstheoutcomeoftheassessmentwiththeindividualtoensurethatheorsheunderstandsthedecisionandhowitwasreached,andcanincorporateanyfeedbackintopersonaldevelopment.


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• establishappropriateguidanceandtrainingforallrelevantemployeestoenablethemtoidentifyandrecognisewhatconstitutesacertificationriskandissue,andtoraiseconcernswhereappropriate;and

• considerwhetherthereisaneedfortailoredtrainingandguidanceinidentifyingcertificationrisksorissuesandtoinitiatetheappropriateactionasnecessaryforparticularbusinessfunctions(e.g.Compliance,HRorInternalAudit).

AsraisedinPrinciple4,theCRWGdiscussedtheimportanceofidentifyingandrecognisingcertificationrisksandissuesinordertofacilitatetheresolutionofapotentialorrealisedsituationattheearliestpossiblepoint.

Firmsshouldproviderelevantindividualswithappropriateguidanceandtrainingtoensurethatafairandconsistentapproachtoidentifyingcertificationrisksandissuesistakenacrossallbusinessareas.


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Principle7:AppealingtheoutcomeofanF&Passessmentandthewithdrawalofacertificate


Afirmshould:

• establishaprocessfortheindependentreviewoftheoutcomeofanF&Passessment;

TheCRWGandresponsestotheconsultationbothnotedtheimportanceofhavinganindependentreviewmechanismofF&Passessmentoutcomes.ThenatureoftheCertificationRegimemeansitisunlikelythattheassessor(s)willbecompletelyindependentoftheindividualwhoisbeingassessed(e.g.itmaybethelinemanagerwhoundertakestheassessment).

TheCRWGfeltthatfirmsshouldconsiderhowtomitigatetherisksassociatedwiththisby,forexample:

• havingapolicyandproceduretoreviewmarginaldecisions;• auditinganumberofF&Passessmentsfromeachdivisionacrossthefirmtoensure

consistency;and• establishingapanelorcommitteetoreviewanindividual’sappealagainstanadverse

assessmentoutcome,chairedbyanindependentpractitioner(e.g.non-executivedirectororapractitionerfromadifferentpartofthebusiness).

• developaclearappealsprocessagainsttheconclusionoftheF&Passessment;

TheCRWGnotedtheimportanceofhavinganappealsmechanismtoallowanemployeetocontestthewithdrawalofthecertificate,andconsideredthetimingofsuchanappealsprocess.

Respondentstotheconsultationwereclearthatgiventhesignificanceofsuchanoutcome,anindividualshouldbegiventheopportunitytochallengeanydecisionleadingtothewithdrawalofacertificatebeforethecertificateiswithdrawn.

• ensurethatanyappealagainsttheconclusionoftheF&Passessmentisalignedwithotherrelevantbusinessprocesses(e.g.anappealagainstadisciplinaryfindingorperformancemanagementprocess);and

AsreferencedinPrinciple2,theCRWGdiscussedthevalueoftheF&Passessmentprocessbeingalignedwithexistingprocesses.Memberswereclearabouttheneedtoensurethataconsistentapproachwastakenacrossthefirm,processeswerefairfortheindividualconcerned,andthatdueprocesswasrespected.


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• considerwhatprocess,controloroversightimprovementsmightneedtobeinplacewhereanF&Pissueisidentifiedandhowanybroaderlearningsarecommunicatedaroundthefirm.

InlinewithPrinciple4,theCRWGdiscussedtheimportanceofidentifyingtheunderlyingcauseofanissue.Whereissuesweretheresultofbroaderorganisationalfactors,suchasalackofadequatecontrols,afirmshouldconsidertakingstepstoaddresstherelevantpolicyandprocessweaknesses.


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Principle8:AssessingF&Paspartofaglobalgroup


Afirmshould:

• aimtohavehighandconsistentstandardsacrosstheglobalgroupforassessinganindividual’sF&P;

• developanapproachforconductingF&Passessmentsofrelevantindividualsoverseasthatreflectswhatispermittedbylocaljurisdictions;

• identifyanduseappropriateoverseasequivalentsourcesofinformationforeachelementofF&P,asrequiredbytheCertificationRegime;and

TheCRWGandconsultationrespondentsnotedthatoneofthemostoperationallychallengingaspectsoftheCertificationRegimewasfacedbyglobalgroupsinthecontextofemployeesmovingtotheUKfromoverseasandin-scopeemployeeswhoarebasedoverseas.

Itisimportanttoensurethatanyassessmentofanoverseasindividual,whetherbasedtherepermanentlyormovingtotheUK,isasrobustastheprocessundertakenforUK-basedstaff.

TheCRWGnotedthatthechallengeforfirmscomesintheformoflegallimitationsinothercountries(e.g.onemembercommentedthatcreditcheckswerenotpermittedinFranceforemploymentpurposes,eventhoughtheywouldformastandardpartofscreeningchecksintheUK).

Firmsneedtobeflexibleindevelopingtheirapproachtoallowforvariationsintheinformationavailableandpermissibleindifferentcountries.Theyshouldalso,however,beconsistentintermsofthestandardstheyaretryingtoreachandtheoutcomestheyareseekingtoachieve.Wherepossible,globalfirmsshouldseektousethebreadthoftheirorganisationforsupportandgoodpractice.

TheFCAandPRA’sPolicyStatementsandFinalRulesonregulatoryreferencesstatedthat,wherefirmsfacedifficultiesinobtainingareferencefromanoverseas-basedfirm,theymustdemonstratethattheyhavetakenreasonablestepstoobtaininformationsufficienttoenabletheassessmentoftheindividual’sF&P.Formoredetailsonregulatoryreferencesseethefollowinglinks:

http://www.bankofengland.co.uk/pra/Pages/publications/ps/2016/ps2716.aspx

ItisourintentiontoexploretheinternationalchallengesoftheCertificationRegimefurtherandtoproduceguidance,wherehelpful,inthisarea.


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• developappropriateprocessesforassessingtheF&Pofinternationallymobileindividuals.

TheCRWGdiscussedtheneedtodeveloporupdateexistingmobilityprocessestoensurethatF&Passessmentsarecarriedoutforinternationallymobileindividualspriortotheirtakingupcertifiedroles.Anincomingemployeetotheregimemightnot,forexample,bepermittedtostarttheirroleuntilrelevantbackgroundchecks,aself-declarationandtherelevantmobilityapprovalformswerecompleted.


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Principle9:Fosteringacultureofopenness,challengeandsupport


Afirmshould:

• promoteanenvironmentinwhichindividualsareconfidenttospeakupandactivelychallengethebehaviourofcolleagues;

• ensurethatSeniorManagersleadbyexampleinfosteringandsupportingacultureofopenness,challengeandsupport;

• developappropriateprocedurestosupportindividualsandencouragethemtodiscloseanyissuesinatimelymanner;and

• developandimplementaperformancemanagementprocessthatassessesabroadrangeofdimensions,consistentwiththefirm’spurposeandvaluesandwithhighstandardsofbehaviourandcompetence.

Fosteringacultureofopenness,challengeandsupportisapriorityformanyfirmsandencompassesarangeofissues,notonlyconfidenceinthefirm’swhistleblowingarrangementsbutalsoabouttheextenttowhichbadbehaviourischallengedanddiversityofthoughtandapproachisencouraged.

TheCRWGandconsultationrespondentshighlightedtheimportanceofsuchaculturetoaneffectiveCertificationRegime.TheyalsonotedtheneedforSeniorManagers(asdefinedbytheFCAandPRA’sSeniorManagersRegimeseehttps://www.fca.org.uk/firms/senior-managers-certification-regime)activelytosupportthisPrinciplethroughleadingbyexample.

ThereisaninherentrequirementintheCertificationRegimefortheindividualtodiscloserelevantinformationaspartoftheassessmentprocess.Anindividualneedstohaveconfidencethattheycandosowithoutfearofrepercussions.Anindividualshouldalsonotbedissuadedfromaccessinganyin-housesupportofferedbyafirm,attheriskofdoingsoraisingaquestionabouttheirownfinancialsoundness.

Furthertotheirregulatoryobligationsregardingwhistleblowingrules,firmsmayalsowishtoconsiderputtinginplacearangeofavenuesthatenableindividualstoraiseconcernsconfidentiallyordiscloseanycertificationrisksorissuesaboutthoseundergoinganassessment.Goodpracticeheremayincludethedisclosureofmatterstoanappropriatepointofcontact(e.g.abusinessconductofficer)andtheuseofasecureandindependentchannelforindividualstoraiseconcernstoseekadviceaboutcertificationrisksandissues(e.g.ahotlineorhelpdesk).Formoredetailsonwhistleblowingrulesseethefollowinglinks:

https://www.fca.org.uk/firms/whistleblowing

http://www.bankofengland.co.uk/pra/Pages/contactpra/whistleblowing.aspx

Afirmmayalsowishtoprovideapositiveaffirmation,inlinewithPrinciple1,toindividualswhoembodyanddemonstrateacommitmenttofosteringacultureofopenness,challengeandsupport.


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Principle10:Promotinggreatercollaborationbetweenfirms


Firmsshould:

• identifyopportunitiestocollaborateinordertodevelopacommonapproachtocertification;and

• worktogethertodevelopaconsistentapproachtotheassessment,reporting,recordingandcommunicationofF&P,sothateachfirmcanrecogniseandhaveconfidenceinanother’sassessment.

TheestablishmentoftheCRWGitselfreflectsthevaluethatfirmsattachtoacollaborativeapproachinimplementingtheCertificationRegime.

TheCRWGandconsultationrespondentswereallsupportiveofindustrycollaborationinlinewithrelevantCompetitionLawrequirementsandwiththedevelopmentoftheStatementofGoodPracticeandSupportingGuidance.

Therequirementforregulatoryreferencesoffersanotheropportunityforcollaborationinensuringaconsistentapproachacrosstheindustry.ThefinalrulesrelatingtoregulatoryreferenceswereissuedbytheFCAandthePRAaftertheBSB’sconsultationonassessingF&Phadbeenpublished.WewilllookintoregulatoryreferencesinourongoingworkwiththeCRWG,withtheaimofproducingfurtherguidanceasappropriate.Formoredetailsonregulatoryreferencesseethefollowinglinks:

https://www.fca.org.uk/publications/consultation-papers/strengthening-accountability-banking-insurance-reg-refs

http://www.bankofengland.co.uk/pra/Pages/publications/ps/2016/ps2716.aspx


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Principle11:Promotinghighprofessionalstandardsacrosstheindustry


Afirmshould:

• investinthepersonaldevelopmentof:- staffincertifiedroles;- staffwhohavethepotentialtooccupycertified

rolesinthefuture;and- staffsupportingthecertificationprocess;

• ensurethatstaffmaintaintheirownContinuous

ProfessionalDevelopment(CPD)andthatdevelopmentissupportedoutsidetheirday-to-dayrolethrough,asappropriate:

- skills-basedtraining;- role-basedknowledgetraining;- knowledgeofthebankingandbroaderfinancial

servicessectors;and- ethicsawarenessandtraining.

AconsistentthemeinCRWGdiscussionswastheneedtogobeyondtheminimumrequirementsoftheCertificationRegimeand,whereappropriate,topromotehighprofessionalstandardsacrosstheindustry.

Consistentwiththeconceptofpositiveaffirmation,theCRWGdiscussedhowfirmsandindividualscanpromotehighprofessionalstandards.Fromafirmperspectiveitwasfeltthatinvestmentshouldbemadeinthepersonaldevelopmentofindividuals,whetherformally(e.g.throughrelevanttrainingcourses)oronthejob(e.g.throughdevelopmentalconversationswithalinemanager).

ItwasalsofeltthatCPD,ledbytheindividualbutwithsupportfromthefirm,wasessentialtosupportinghigherprofessionalstandardsthroughtheenhancementofbroaderskillsandknowledge.Itwasnotedthatthisshouldbeadiscretionaryactivitytoallowforappropriatetailoringtotheneedsoftheindividual.FirmswerealsoseenashavinganobligationtoensurethatindividualsmaintaintheircompetenceaspartoftheFCA’sTraining&CompetenceRegime.

TheroleofprofessionalbodiesandprofessionalqualificationsinsupportingandpromotinghighprofessionalstandardsisbeingconsideredaspartoftheBSB’sProfessionalismwork.


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Documents

STATEMENT OF GOOD PRACTICE 1 CERTIFICATION REGIME: …€¦ · Certification risks and issues In this document, a ‘certification risk’ is defined as a situation which, should