Authorisation Interviews with the FSA
Authorisation Interviews for SIFs
Towards the end of 2008 the Financial Services Authority in the UK (FSA) decided that they would tighten the "gateway" for the authorisation of individuals applying to become Approved persons in Significant Influence Functions (SIFs).
This was in response to the concerns raised from the banking crisis where the competence of those in board positions was brought into doubt. Since October 2008 the FSA has conducted over 660 SIF interviews (36% of which were between April and October 2010) resulting in over 50 candidates withdrawing their applications, and a number of others requiring futher interviews and training before being granted approval.
In October 2009 the FSA issued its 'Dear CEO' letter which clarified its approach to approving and supervising persons performing SIFs.
In November 2009 the FSA appointed five new senior advisors to assist in its work on governance issues. The advisors provide input into developing the FSA’s regulatory framework for ensuring effective governance in financial institutions, and also contribute to the panel interview process for individuals wishing to take up major board positions in the UK’s largest financial institutions.
In January 2010 the FSA issued its consultation paper Effective Corporate Governance explaining the more intensive process in greater detail, but also aiming to make clear that the FSA's intention is not to deter strong candidates from pursuing senior roles in firms.
"Our more intrusive approach continues to place a great deal of emphasis on governance and therefore the senior management at firms. This starts with a firm’s own due diligence. Our experience shows that once a firm gets its corporate governance right; with a strong and effective board, everything else flows from that."
Graeme Ashley-Fenn, the FSA’s director of permissions, decisions and reporting
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Underpinning this intrusive approach, the CP consults on extending the scope of the SIF regime and introduces a new, more detailed framework of controlled functions. These will make clearer the exact role an individual is performing within a firm and increases the FSA’s ability to vet and track individuals as they move role. The FSA is also extending the regime to capture more individuals from parent companies who exert significant influence upon a UK regulated firm.With nine new Significant Influence Controlled Functions (comprising six new governing functions and three new systems and control functions) the FSA will expect more detailed knowledge of the role at interview stage.
The most recent CP is important for all UK regulated firms who will need to make changes to their governance structure, recruitment policies and support for executive training. Whilst the consultation period is due to finish at the end of April, the FSA is already acting in a far more intrusive manner and firms should be fully prepared now. Expect rules to be fully in place before the end of 2010.
The message is clear. The FSA will conduct increasingly more SIF interviews and even if someone has been an Approved Person in another firm it does not necessarily follow that they will escape an interview for their new role, nor should it be expected to just sail through the interview in a 'rubber stamping' process.
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"We believe the interview is a valuable tool for raising the standards of governance and control in firms. For the first 18 months the rate of firm’s withdrawing their candidate ran at 7.5%. Since April this year [2010] this has increased to 10%, with the majority being for reasons of competency."
Rosalie Langley Judd, the FSA's Corporate Governance Manager (read rest of speech)
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What about interview preparation?
Preparation in advance of such interviews is essential. Understanding the basis for the questions and the evidence of suitability that the FSA is seeking will ensure that the candidate communicates their credentials for the role well. One to one coaching has proved very successful in helping candidates and in one case we have assisted with prior to a second interview, the FSA’s concerns were removed as a result.
The interview itself is testing. The candidate will be unaccompanied and face a panel of up to five FSA representatives, including an FSA senior industry advisor, and is wide ranging. With a new framework of classification of SIF roles interviews will become more focused and in-depth. Particular areas probed include:
- The candidates knowledge of the FSA's requirements in terms of both the high level standards the specific areas that they will be responsible for, for example, Finance Directors understanding of the client money rules.
- The candidate’s previous experience and the expertise they bring to the role. Questioning here will test competence, for example, give examples of issues where you have challenged the board.
- The candidates knowledge of the company they are joining (even thought they will not have taken up the post!). There is an expectation that the candidate will have undertaken "due diligence" on the firm they are joining and have a grasp of the current situation and the strategy going forward.
Those applying for board positions should definitely expect an interview. For smaller firms we are aware of interviews being arranged where the fit between the CV of the candidate and the role is not immediately obvious.
The impact on firms will be significant so we're holding SIF Briefings for Executives and Non-Executives. Click here for further details.
We also provide bespoke courses and coaching as required by individual client needs. Contact CTP Global now to discuss your requirements in confidence...
CTP Global – Good Governance: Great Performance
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