The fit and proper test is the standard used to decide whether an individual is suitable to perform a senior or significant role in an FCA or PRA regulated firm. It applies to candidates for Senior Management Functions (SMFs) before regulatory approval and to certification staff under the Senior Managers and Certification Regime (SM&CR). The criteria are set out in the FIT sourcebook within the High Level Standards block of the FCA Handbook.
The three assessment criteria
FIT 2 identifies three areas a firm must consider. First, honesty, integrity and reputation (FIT 2.1), covering criminal convictions, regulatory and disciplinary findings, and any conduct casting doubt on the person’s character. Second, competence and capability (FIT 2.2), covering relevant qualifications, training, knowledge and experience for the specific role. Third, financial soundness (FIT 2.3), covering matters such as outstanding judgment debts and bankruptcy, although financial difficulty does not by itself make someone unfit. The FCA assesses fitness in the round rather than applying mechanical disqualifications.
When and how firms assess
A firm must satisfy itself that an SMF candidate is fit and proper before applying for approval, and must reassess all senior managers and certification staff at least annually. For certification staff, this annual assessment supports the certificate that section 63E of FSMA 2000 requires before the person can perform a significant-harm function. Assessments must be evidenced through checks such as criminal records screening, qualification verification and regulatory references obtained under SYSC 22, which require firms to share conduct and disciplinary information about departing staff.
Why it matters
A robust, documented fit and proper process is central to SM&CR compliance. Weak assessments expose firms to FCA criticism and can result in unsuitable individuals holding influential roles, so firms must keep clear records of each assessment and its supporting evidence.