• INDI Chapter 3 INDI Chapter 3 Controlled functions

    • INDI Part 3.1 INDI Part 3.1 Assessment of individuals for controlled functions

      Note

      Principle 3 of the principles on training and competency (see rule 5.1.3) requires an authorised firm to undertake initial and ongoing assessments of each individual's competencies to perform controlled functions.

      Derived from QFCRA RM/2014-5 (as from 1st January 2015)

      • INDI 3.1.1 Controlled functions — firms' competence and fitness assessments

        Before making an application to the Regulatory Authority for an individual to be approved to perform a controlled function, an authorised firm must be satisfied, on reasonable grounds after making appropriate inquiries, that the individual:

        (a) has the competencies required to perform the function;
        (b) is a fit and proper person to perform the function; and
        (c) satisfies any additional requirements under these or any other Rules for the function.

        Note Under FSR, article 41 (1) (Approval of persons performing controlled functions), an authorised firm must ensure that no individual performs a controlled function unless he or she is approved by the Regulatory Authority as an approved individual.

        Derived from QFCRA RM/2014-5 (as from 1st January 2015)

      • INDI 3.1.2 How firms to make competence assessments

        (1) In deciding whether an individual has the competencies required to perform a controlled function, an authorised firm must take into account:
        (a) the specific requirements, characteristics and role of the function within the firm;

        Guidance

        Requirements: what an individual should have to perform the function — for example, a certain level of knowledge, experience and training

        Characteristics: what an individual should be able to do in performing the function — that is, his or her skills (technical and behavioural).

        Role: what the individual is expected to do — for example, the function's duties, responsibilities, reporting lines and position within the firm.
        (b) the nature, scale and complexity of the firm's business, including:
        (i) the products and services that it offers or provides, or proposes to offer or provide; and
        (ii) changes to those products and services and to the market;
        (c) the firm's customers; and
        (d) the regulatory system, including any recent, or reasonably expected, changes to it.
        (2) The assessment of an individual's competence to perform the internal audit function must be made by the firm's governing body.

        Note Governing body is defined in the glossary.
        (3) The assessment of an individual's competence to perform the risk management function, the compliance oversight function or the actuarial function must be made:
        (a) by the firm's governing body; or
        (b) after consultation with the firm's governing body.
        (4) In making its decision the firm may also take any other relevant matter into account.
        Note Under CTRL, rule 3.1.15, decisions about the appointment, performance assessment, remuneration, disciplining and dismissal of certain approved individuals must be made by the firm's governing body, or after consultation with it.

         

        Amended by QFCRA RM/2019-4 (as from 1st January 2020).
        Amended by QFCRA RM/2021-1 (as from 1st July 2021)

      • INDI 3.1.3 INDI 3.1.3 Competencies

        (1) The competencies for a controlled function are the elements of skills, knowledge and experience that make an individual competent to perform the function.
        (2) Subject to subrules (3) and (4), an individual who is to perform a controlled function is expected to have the competencies set out in Schedule 1 for the function.
        (3) An individual must have the qualifications set out in Schedule 1 as knowledge competencies before he or she can be approved to perform certain controlled functions. Those controlled functions are the following:
        (a) the compliance oversight function;
        (b) the risk management function;
        (c) the finance function;
        (d) the MLRO function;
        (e) the actuarial function;
        (f) the internal audit function.
        (4) In assessing an individual's competencies against the relevant requirements in Schedule 1, the level of the competencies that the individual must have must be commensurate to the nature and complexity of his or her role in the firm and the regulated activity or activities that the firm conducts.

        Example for subrule (4)
        An individual who seeks to be assessed as competent to perform the compliance oversight function for a firm that conducts only limited regulated activities need not necessarily have all the skills set out in Schedule 1, clause S1.4.1 to clause S1.4.13. In contrast, an individual who seeks to be assessed as competent to perform that function for a firm that conducts complex regulated activities would be expected to have all or most of those skills.
        Amended by QFCRA RM/2018-1 (as from 1st May 2018).

        • INDI 3.1.3 Guidance

          1 The 3 kinds of competency elements against which an individual is to be assessed as competent or not are:
          •   the individual's skills (what he or she ought to be able to do)
          •   the individual's knowledge (what he or she ought to know or to have by way of qualifications)
          •   the individual's experience (what he or she has previously done, if anything).
          2 The competency elements are to be used in making assessments under this rule and rule 3.2.3 (Eligibility to remain approved).
          3 The firm must decide whether the individual has the competencies required to perform the function, taking into account the circumstances of the case and the individual's role.
          4 The following are examples of levels of experience that the firm may use when assessing the individual's competence:
          •   for a junior role — up to 2 years' experience performing the function or a similar role
          •   for a mid-level role — more than 2 years', and up to 10 years', experience
          •   for a senior role — more than 10 years' experience.
          Derived from QFCRA RM/2014-5 (as from 1st January 2015)

      • INDI 3.1.4 Qualifications that are appropriate or equivalent

        (1) If Schedule 1 specifies a particular qualification as a knowledge competency, but allows an authorised firm to assess another qualification as being appropriate for an individual's role, the firm must hold appropriate evidence about the appropriateness of the other qualification.
        (2) If Schedule 1 specifies a particular qualification as a knowledge competency, but allows an authorised firm to assess another qualification as being equivalent, or that the qualification is unnecessary, the firm must hold appropriate evidence, or must otherwise demonstrate, that the other qualification is equivalent, or that the qualification is unnecessary, as the case may be.

        Note Qualification includes the membership of a professional body or association — see the glossary.
        (3) In considering whether a qualification is equivalent to a qualification that is specified in Schedule 1, an authorised firm may take into account qualifications that are recognised as appropriate for the relevant role by another regulator.

        Examples of other regulators
        •   the Financial Conduct Authority (UK)
        •   the Australian Securities and Investments Commission
        •   the Financial Markets Authority (New Zealand)
        •   the Financial Industry Regulatory Authority (US)
        •   the Securities and Futures Commission (Hong Kong)
        •   the Monetary Authority of Singapore.
        (4) The firm must record its assessment, and any supporting evidence, in the record about the individual required by rule 1.1.6 (Record-keeping).
        Derived from QFCRA RM/2014-5 (as from 1st January 2015)

      • INDI 3.1.5 How firms to make fitness assessments

        (1) In deciding whether an individual is a fit and proper person to perform a controlled function, an authorised firm must take into account:
        (a) the individual's honesty, integrity and reputation; and
        (b) the individual's financial soundness.
        (2) For paragraph (1) (a), the firm must take into account the following matters about the individual's honesty, integrity and reputation:
        (a) any past, ongoing or pending legal proceedings, whether civil or criminal, relating to or involving the individual;
        (b) any investigation undertaken, disciplinary action taken, or sanctions imposed, in relation to or on the individual by a court, tribunal, regulatory or governmental agency, body or authority, exchange, clearing house, self-regulatory body or other professional body;
        (c) any complaint against the individual relating to, or any contravention by or involving the individual of, any financial services legislation (including any regulations, rules, statements of principle or codes of practice made by an exchange, clearing house, self-regulatory body or other professional body);
        (d) any complaint made about the individual's standard of conduct in relation to activities subject to regulation inside or outside the QFC;
        (e) the individual's involvement with any business that:
        (i) was wound up or put into liquidation, placed in receivership or administration, ceased trading, negotiated a settlement with creditors, or became insolvent:
        (A) while the individual was involved with the business; or
        (B) within 1 year after that involvement ended;
        (ii) had any approval, authority, licence, registration or other permission to conduct business removed, restricted or suspended;
        (iii) has been refused any approval, authority, licence, registration or other permission to conduct business;
        (iv) has been expelled by any regulatory or governmental agency, body or authority; or
        (v) has been investigated, criticised, disciplined, censured or suspended by any regulator, professional body or tribunal, whether publicly or privately;
        (f) whether the individual has been dismissed, or has been asked to resign and has resigned, from a position of trust or fiduciary appointment;
        (g) the effect that the individual's reputation may have on the authorised firm and the QFC;
        (h) whether the individual has been candid and truthful in dealing with the authority.
        (3) For paragraph (1) (b), the firm must take into account the following matters about the individual's financial soundness:
        (a) whether the individual is able to pay debts as they fall due;
        (b) any arrangement that individual has made with creditors;
        (c) whether the individual has filed for bankruptcy, been served with any bankruptcy petition or been subject to any bankruptcy order;
        (d) whether the individual has had assets seized, confiscated or frozen.
        (4) In deciding whether an individual is a fit and proper person to perform a controlled function, the firm may also take any other relevant matter into account.
        Derived from QFCRA RM/2014-5 (as from 1st January 2015)

    • INDI Part 3.2 INDI Part 3.2 Approval of individuals for controlled functions

      • INDI 3.2.1 Firms' application for approval of individuals

        If an authorised firm is satisfied that an individual:

        (a) has the competencies required to perform a controlled function;
        (b) is a fit and proper person to do so; and
        (c) satisfies any other requirements under these or any other Rules;

        the firm may apply to the Regulatory Authority for the approval of the individual to perform the function.

        Derived from QFCRA RM/2014-5 (as from 1st January 2015)

      • INDI 3.2.2 Eligibility for approval of individuals — general

        An individual is eligible to be approved by the Regulatory Authority to perform a controlled function for an authorised firm only if the firm has assessed him or her:

        (a) as having the competencies required to perform the function;
        (b) as being a fit and proper person to perform the function; and
        (c) as satisfying any other requirements under these or any other Rules for the function.

        Note In certain circumstances an individual may be approved to perform 2 or more controlled functions for an authorised firm, or to perform a controlled function for 2 or more members of a group. See CTRL, Chapter 5.

        Derived from QFCRA RM/2014-5 (as from 1st January 2015)
        Amended by QFCRA RM/2021-1 (as from 1st July 2021)

      • INDI 3.2.3 Eligibility to remain approved

        An approved individual is eligible to remain approved by the Regulatory Authority to perform a controlled function only if the authorised firm concerned can demonstrate, on an ongoing basis, to the authority's satisfaction that the individual:

        (a) has the competencies required to perform the function;
        (b) is a fit and proper person to perform the function; and
        (c) satisfies any additional requirements under these or any other Rules for the function.

        Note For the competencies for controlled functions, see rule 3.1.3 and the guidance following that rule.

        Derived from QFCRA RM/2014-5 (as from 1st January 2015)

    • INDI Part 3.3 INDI Part 3.3 Cessation of performance of controlled functions

      • INDI 3.3.1 Regulatory Authority withdrawal of approval

        The Regulatory Authority may withdraw the approval of an individual to perform a controlled function in any of the following circumstances:

        (a) the authority has determined that the individual is no longer a fit and proper person in relation to the function;
        (b) the authority considers that the individual no longer has the relevant competencies;
        (c) the authority considers that the individual's performance of the function has fallen below the standard at which a reasonable person having the necessary skills, knowledge and experience would be expected to perform the function.

        Note If the authority has permitted an approved individual to perform 2 or more controlled functions for an authorised firm, the authority may direct the firm to stop combining the functions, or to appoint another approved individual to perform 1 of them (see CTRL, rule 5.1.1 (5)).

        Derived from QFCRA RM/2014-5 (as from 1st January 2015)
        Amended by QFCRA RM/2021-1 (as from 1st July 2021)

      • INDI 3.3.2 What firm must do if individual ceases to perform controlled function

        (1) If an authorised firm becomes aware that, for any reason (other than the withdrawal of the individual's approval by the Regulatory Authority), an approved individual is to cease to perform, or has ceased to perform, a controlled function that he or she is approved to perform, the firm must request the authority to withdraw the individual's approval to perform the function.
        (2) The firm must make the request:
        (a) at least 10 business days before the day on which the individual is to cease to perform the function; or
        (b) if the request cannot be made as required by paragraph (a) — immediately after the firm becomes aware that the individual is to cease to perform, or has ceased to perform, the function, but within 2 business days after that time.

        Examples — meaning of 'within 2 business days'
        1 If the firm becomes aware, on a business day, that the individual will cease to perform the function, the firm must make the request immediately, but by no later than the next business day.
        2 If the firm becomes aware, on a day that is not a business day, that he or she has ceased to perform the function, the firm must make the request immediately, but by no later than 2 business days after that day.
        Derived from QFCRA RM/2014-5 (as from 1st January 2015)