FSA extends executive vetting

The Financial Services Authority (FSA) has reviewed the structure of its “significant influence controlled” functions after finding they are “not currently sufficiently detailed” to allow the regulator to segregate and capture specific key roles within governance structures.

The regulator plans to increase the number of roles for which executives must be vetted from 14 to 22. The proposals, detailed in the FSA’s Effective Corporate Governance consultation paper, give it powers to block the appointments of new categories of financial services personnel including the chairman, senior non-executive directors and the audit committee chairman. Risk committee chairmen and those responsible for internal audit will also be covered by the proposed regime.

The regulator only began vetting those in “significant influence functions” in 2008 and has the power to refuse candidates if they are not deemed fit and proper. To date, the FSA has interviewed 332 candidates and has not rejected any ­ although 25 have dropped out following interview.

In its review, the FSA found that three of the six current functions capture too broad a range of individual roles, meaning that it is unable to track and vet individuals who may change roles within one of those functions.

The FSA is also proposing other changes. Until now, the regulator had excluded from the regime those companies whose parent entity or holding company was itself FSA-authorised. While some individuals based in FSA-authorised parent entities may already be subject to the “approved persons” regime and may already be approved for a significant influence controlled function, it does not apply to that person’s actions in respect of the subsidiary. Under the FSA’s proposals, however, such individuals may need to seek approval to act within, or on behalf of, subsidiaries as well.

The consultation period closes on 28 April 2010 and the FSA hopes to have final rules in place during the third quarter of 2010.

Useful links
Read the consultation paper here