The UK Financial Conduct Authority (“FCA”) has banned three individuals from working in the financial services industry, following their convictions of serious non-financial criminal offences.
In each instance, the individual was found to be not fit and proper. Under the Senior Managers and Certification Regime (“SMCR”) the ‘fit and proper test’ applies to Senior Managers, Certification Function Holders and Non-executive Directors.
The offences included the making, possession and distribution of indecent images of children, voyeurism and sexual assault. In each case the individual was required to sign the sex offenders’ register.
This is a significant development regarding the FCA’s approach in determining when the ‘fit and proper test’ has been breached, with reference to activity conducted either outside of the workplace and/or where the activity is unrelated to financial services.
In the past, the FCA has focussed on fraud or dishonesty outside of the workplace. This included an individual who was banned from the industry for persistent train fare evasion.
However, this demonstrates that the FCA may also sanction an individual for other offences and in particular those where it is demonstrated that the individual lacks ‘moral character’. It is possible that this mirrors social trends such as the ‘#MeToo’ and ‘#BlackLivesMatter’ movements.
This presents some challenges for firms that are obliged to assess the fitness and propriety of certain members of staff when they first perform the role in question, and on an ongoing basis.
The parameters of activity that may constitute a lack of fitness and propriety are arguably now more ambiguous. For example, what would the position of a firm, or the FCA, be should a member of staff be convicted of a serious racist of religious hate crime? Possession of illegal drugs?
Furthermore, under SMCR, Certification Function Holders are not vetted by the FCA, which places a further onus on firms to make appropriate fitness and propriety assessments.
Improving conduct, culture and accountability at financial institutions is a key regulatory initiative. These three enforcement cases demonstrate an expectation that conduct outside of the workplace is embedded into this, and that an appropriate standard of conduct is expected at all levels within a FCA regulated firm.