GENE Schedule 1 GENE Schedule 1 Guidance on fitness and propriety of authorised firms
Editorial changes (as from 1st January 2016).
GENE A1.1 GENE A1.1 Introduction
GENE A1.1 Guidance1. This Schedule provides guidance on the criteria the Regulatory Authority may take into account when assessing for the purposes of FSR, article 29 and Chapter 2 the fitness and propriety of:(a) an
applicantto be an authorised firm; and(b) an authorised firm.2. In considering any specific matters, the Regulatory Authority may request reviews by any appropriately skilled third party on any aspect of the authorised firm's proposed or actual activities or the environment in which it predominantly operates.3. The Regulatory Authority may request or require any information which it considers relevant to its consideration of an application. Editorial changes (as from 1st January 2016).
GENE A1.2 Fitness and Propriety Criteria1. In addition to FSR, article 29 and Chapter 2, this rulebook, the Regulatory Authority may consider the following matters in assessing the fitness and propriety of an
applicantor an authorised firm.
Controllers, close links and other connections2. Pursuant to rule 2.3.1(a) and (b) the Regulatory Authority must be satisfied that an
applicant'sor authorised firm's controllers, close linksand other connections, are not likely to prevent effective supervision of the authorised firm by the Regulatory Authority.3. The Regulatory Authority will also have regard to:(a) the authorised firm's position within its group, including any other relationships that may exist between the authorised firm's affiliates, controllers or other close links;(b) any information provided by other regulators in relation to the authorised firm or any entity within its group;(c) the background, history and principal activities of the authorised firm's controllers, including that of the controller's directors, partnersor other officers associated with the group, and the degree of influence that they are, or may be, able to exert over the authorised firm or its activities; and(d) whether the authorised firm or its group is subject to any adverse effect or considerations arising from its country of incorporation or the country (or countries) of incorporation of its controllers. In considering such matters, the Regulatory Authority will also have regard to the type and level of regulatory oversight in the country or countries of incorporation referred to above, the regulatory infrastructure and adherence to any internationally held conventions and standards.4. The Regulatory Authority may request that an applicantor authorised firm submit a report on its controllers, close linksor other connections at any time.
Location of Offices5. Under rule 2.3.1(e), an
applicantor an authorised firm will need to satisfy the Regulatory Authority that the location of its and its parent entity's head office and registered office will not prevent the effective supervision of the authorised firm.6. The Regulatory Authority will consider the head office of an authorised firm to be where the firms mind and management is and will have regard to the location of its directors, partners and senior management with respect to its strategic, operational and administrative arrangements.
Background and History7. The Regulatory Authority will have regard to:(a) any matter affecting the propriety of the authorised firm's conduct, whether or not such conduct may have resulted in the commission of a criminal offence or the contravention of the law or the institution of legal or disciplinary proceedings of whatever nature;(b) whether an authorised firm has ever been the subject of disciplinary procedures by a government body or agency or any self regulating organisation or other professional body;(c) any contravention of any provision of financial services legislation or of rules, regulations, statements of principle or codes of practice made under it or made by a recognised self regulatory organisation, exchange or clearing house;(d) whether an authorised firm has been refused, or had a restriction placed on, the right to carry on a trade, business or profession requiring a licence, registration or other permission;(e) any adverse finding or an agreed settlement in a civil action by any court or tribunal of competent jurisdiction resulting in an award against or payment by an authorised firm in excess of $10,000 or awards that total more than $10,000;(f) whether an authorised firm has been censured, disciplined, publicly criticised or the subject of a court order at the instigation of any regulatory authority, or any officially appointed inquiry, or any other
overseas regulator; or(g) whether an authorised firm has been open and truthful in all its dealings with the Regulatory Authority.
Resources, Systems and Controls8. The Regulatory Authority will have regard to whether the authorised firm has sufficient resources of all types, including:(a) the authorised firm's financial resources and whether it complies, or will comply, with any applicable financial
rules, and whether the authorised firm appears in a position to be able to continue to comply with such rules;(b) the extent to which the authorised firm is or may be able to secure additional capital in a form acceptable to the Regulatory Authority where this appears likely to be necessary at any stage in the future;(c) the availability of sufficient competent human resources to conduct and manage the authorised firm's affairs, in addition to having a sufficient type and number of approved individuals to conduct and manage the authorised firm's regulated activities;(d) whether the authorised firm has sufficient and appropriate systems and controls in order to support, monitor and manage its affairs, resources and regulatory obligations in a sound and prudent manner;(e) whether the authorised firm has an appropriate AML/CFT programme; and(f) the impact of other members of the authorised firm's group on the adequacy of the authorised firm's resources and in particular, though not exclusively, the extent to which the authorised firm is or may be subject to consolidated prudential supervision by the Regulatory Authority or another overseas regulator.
Collective suitability of individuals or other persons connected to an authorised firm9 Although an individual exercising a controlled function must be an approved individual, and an authorised firm must appoint individuals to certain controlled functions, in assessing the fitness and propriety of an authorised firm the Regulatory Authority will also consider:(a) the collective suitability of all of the firm's staff taken together, and whether there is a sufficient range of individuals with appropriate skills and experience to understand, operate and manage the firm's affairs in a sound and prudent manner;(b) the individual suitability of each person connected with the firm, and the collective suitability of all such persons;(c) whether the firm has robust human resources policies designed to ensure high standards of conduct and integrity in the conduct of its activities; and(d) whether the firm has appointed auditors, actuaries and advisers with sufficient experience and understanding of the firm's activities.
Editorial changes (as from 1st January 2016).