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FINANCIAL SERVICES
ACCOUNTANCY IRELAND AUGUST 2012 VOL.44 NO.4

FITNESS AND PROBITY

In response to a backdrop of unprecedented global financial turmoil and indeed Irelands own financial crisis, pursuant to the Central Banks Reform Act 2010 the new 'Fitness and Probity' regime came into effect in December 2011, explains Pat ODonnell.

entral to the new Fitness and Probity regime is that all persons employed by regulated financial service providers (RFSP) other than credit unions in designated controlled functions (CF) or pre-approval controlled functions (PCF) must meet prescribed statutory standards of fitness and probity. Under the new requirements it is an offence for an RFSP to permit an individual to perform a PCF (of which there are 42) or a CF function unless that individual complies with fitness and probity standards as set out in section 2.2 of the Fitness and Probity Standards (Code issued under Section 50 of the 2011 Central Bank Reform Act 2010) outlines that to comply, an individual must be competent and capable; act honestly, ethically and with integrity; and be financially sound. For employers taking on new CF or PCF staff, under the revised requirements an offer of employment cannot be extended to an individual until such time as the Central Bank (CBI) has given its approval in writing. However, the prospective employer can issue a statement of intent to an individual subject to such approval.While existing contracts of employment are covered by the provisions of the Terms of Employment (Information) Acts

19942001, new PCF and CF appointments should state in no uncertain terms that continued employment will be subject to on-going satisfaction of the statutory fitness and probity requirements. For many organisations, this will mean putting in place a procedure to continually assess and monitor staff. In addition, new CF and PCF recruits are required by the Central Bank to complete an Individual Questionnaire relating to their fitness and probity. The realities of the new regime mean that in order to establish and maintain approved person status, an individuals skills, experience, competency, qualifications, concurrent responsibilities, professional memberships, knowledge of the prospective organisation and indeed references are now subject to greater inspection than ever before and ongoing probity checks will also be required. Another obligation on prospective employers that of obtaining detailed references prior to CBI approval. For individuals, this might mean that their current employer will learn of their intention to seek alternative employment earlier than they may have wished. To date, the CBI appears to have adopted a pragmatic approach by limiting the approach for references to those external to a candidates

current employer. It is as yet unclear what will happen in situations where an individual fails to meet the required standards of fitness and probity and it seems likely that legal difficulties for individuals and/or organisations may arise in some circumstances.Taking into account an individuals constitutional, common law and statutory rights to natural justice and fair procedures it will be important that individuals have an opportunity to participate in discussions relating to their fitness and probity. Although the logic and benefits of the new regime are difficult to argue with, the process of establishing and ensuring that individuals meet the new fitness and probity standards can be both lengthy and onerous. Compliance with the standard presents increasingly demanding administrative challenges on RFSPs and it seems likely that legal, operational, and compliance issues may emerge for employers within the financial services sphere over the next number of years. Putting in place a well written and robust fitness and probity policy to ensure all aspects of the regime are addressed would therefore be sensible.
Pat ODonnell is Head of Executive Search and Selection at Principal Connections (Ireland) Ltd.