Board Notice 194 of 2017 which contains the latest Fit and Proper requirements introduced a new concept called “Good standing”.
This does not refer to your ability to consume copious amounts of alcohol and still stay in tune when joining Elton John in the chorus of “I’m still standing.”
Dr Des Leatt, a FAIS and financial sector expert, recently wrote an article first published in Moneymarketing magazine in August which explains the concept in layman’s terms.
Fit and Proper requirements for individuals in the financial sector are here to stay. Board Notice 194 clarifies the requirements for honesty, integrity and good standing, which apply to key individuals and representatives at all registered financial service providers (FSPs).
What does it mean in practice?
“Personal character and good standing within corporate entities is demonstrated through their corporate conduct – but it is also demonstrated through the personal behaviour of the persons governing the entity, including directors, members, trustees, partners or key individuals. It is crucial that every FSP has measures in place to ensure that appointed individuals are in fact honest individuals with integrity and good standing.”
The onus is on each individual to disclose all relevant information to the FSP demonstrating that they comply with the requirements of Fit and Proper, and likewise to flag any potential issues that may reflect negatively in terms of the requirements for honesty, integrity and good standing.
Though good standing is not specifically defined in BN194, there are 23 questions that can be used to assess candidates in terms of honesty, integrity and good standing, and these provide some clarity. For example, the suspension of a licence for non-compliance will impact on a person’s good standing but not necessarily on the person’s honesty and integrity. The examples below are a small sample of the kinds of actions or behaviours indicating that a person does not meet the honesty, integrity and good standing requirements.
These examples would constitute prima facie evidence that a person does not qualify – and the onus would then be on the individual to provide evidence supporting their case or proving otherwise. In other words, it is up to the individual to prove their honesty, integrity or good standing, rather than being up to the FSP – or the Financial Sector Conduct Authority (FSCA) – to prove their compliance.
- The person has been found guilty of theft, fraud, forgery, perjury or a similar dishonest or dishonourable act
- The person has been removed from an office of trust for theft, forgery or dishonesty or a similar action
- The person has been refused registration or membership of a professional body
- The person has been disciplined, reprimanded, disqualified in relation to honesty, integrity, incompetence or business conduct by a professional body or regulatory authority
- The person has been found unwilling to comply with legal, regulatory or professional requirements and standards
- The person has been found not Fit and Proper by the Commissioner previously
- The person has been found to have failed to disclose any information required to be disclosed by the Act
- The person has been found to be not Fit and Proper by the Commissioner or ANY other regulatory authority, and the reasons have not been remedied.
Failure to comply
Failing to meet the requirements set out in the questionnaire will not result in an automatic disqualification or disbarment for the individual concerned. Each case must be evaluated individually, considering the seriousness of the person’s conduct or misconduct, the relevance of their actions or behaviour, and also the passage of time.
It is crucial that the individual concerned discloses any necessary information promptly, fully and accurately, and on their own initiative, to either the FSP or the FSCA.
“The important thing to note is that the onus is on the individual to disclose, and on the FSP to ensure there are sufficient screening mechanisms in place,” says Leatt. “Honesty, integrity and good standing are ongoing requirements of Fit and Proper and it is essential for the individuals in the financial sector, as well as their employers, to ensure they understand the requirements and have plans in place to ensure they meet them.”