Fit & Proper supervision

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Fitness and propriety of management

Reliable organisation of administration and adherence to sound and prudent business principles, among other things, have been set as conditions for the authorisation of financial market entities. They must be managed professionally and in accordance with the aforementioned principles. This is also ensured by Fit & Proper (FAP) assessments, which are part of the assessment of authorisation and registration requirements. In addition, these conditions must be met for the duration of the entity’s activities.

The fitness and propriety of management is regulated by legislation on credit institutions, investment firms, management companies, alternative fund managers, financial and insurance conglomerates, payment institutions, the stock exchange, the central securities depository, insurance companies and crowdfunding providers.

The subjects of Fit & Proper assessments are the persons governed by regulations on the Financial Supervisory Authority’s supervised entities and other financial market participants, such as significant owners, senior and executive management and also, in several sectors, persons responsible for key functions. Management usually means the supervised entity’s board of directors, supervisory board and managing director, their deputies, and those working directly under the managing director, who are in senior management positions of the supervised entity or actually manage the supervised entity’s operations. Other persons to be assessed are persons responsible for key functions, for example the heads of internal audit, compliance and risk management. These persons must meet the special requirements set for fitness and propriety in the regulations.

The Financial Supervisory Authority (FIN-FSA) does not supervise the reliability of the management of listed companies, i.e. issuers. If an issuer is a supervised entity of the FIN-FSA, however, the obligations apply to the entity.

Supervised entities are responsible for Fit & Proper assessments

Before selecting a person for a position, it is the task of the supervised entity to assess whether the person in question meets the FAP requirements set by the regulations, also in terms of professional competence. These prerequisites must be clearly set out as the basis for the decision-making of the organisation making the selection. It is the supervised entity’s duty is to obtain all the necessary information and reports, and also to assess the significance of matters that may only come to light in the FIN-FSA’s investigations. The task of the FIN-FSA is to verify the appropriateness of the assessment made by the supervised entity.

By preparing a report on the selection, the supervised entity assures that it has verified that the person meets the FAP requirements required in the regulations, i.e. that:

  • the person’s professional competence and previous work experience meet the requirements of the position
  • the person has been informed that the FIN-FSA will conduct criminal and fine register enquiries about the person
  • the supervised entity is aware of positions of trust, holdings and financial links that affect the person’s independence, and it has assessed their impact on the person’s handling of the tasks required
  • the person has no payment defaults or financial irregularities that may be relevant to the person’s handling of the tasks required or to maintaining confidence in the supervised entity’s operations
  • the impact of possible complaints or admonition proceedings against the person has been assessed
  • the supervised entity has taken into account other factors of which it has become aware and which may be deemed to be material when assessing the person’s fitness, propriety and professional competence with regard to the position to which the person will be appointed.

The supervised entity must also reveal in its FAP report any adverse factors found in the assessment that have not prevented the appointment of the person.

Reporting obligation

The FIN-FSA must be notified of new appointments and changes, and of the FAP assessments related to them. The FIN-FSA recommends that the report is submitted to the FIN-FSA in good time prior to the appointment decision. However, the report must always be made without delay after an appointment decision or change of tasks, if nothing else is required in the regulations or in the FIN-FSA’s regulations and guidelines based on them.

Reports are submitted either via the FIN-FSA’s e-services, via the ECB’s e-services or using the standard forms published on the FIN-FSA’s website.

The following entities submit reports via the FIN-FSA’s e-services:

  • alternative fund managers and their holding companies
  • entities supervised by the FIN-FSA, i.e. credit institutions, investment firms, central bodies of amalgamations of deposit banks, holding companies of credit institutions and investment firms, holding companies of financial and insurance conglomerates as well as foreign credit institutions and investment firms authorised in a non-EEA country and having a branch in Finland.

Standard forms from the FIN-FSA’s website are used in connection with authorisation and registration applications.

Credit institutions under the supervision of the ECB:

  • Information on new members and deputy members of the board of directors and the supervisory board as well as managing directors and their deputies is reported via the ECB e-services IMAS Portal
  • Reports concerning changes to persons other than the aforementioned members of management, including persons responsible for key functions, and reports of changes to all previously reported information should be submitted using the form Significant supervised entities' Fit&Proper questionnaire form. 
    • The form should be sent via email to the FIN-FSA Registry, address: kirjaamo[at]finanssivalvonta.fi.

Member credit institutions under the Act on the Amalgamation of Deposit Banks (599/2010):

Member credit institutions under the Act on the Amalgamation of Deposit Banks (599/2010) shall submit to the FIN-FSA quarterly information on new appointments to the management of member credit institutions and on new non-executive key function holders. The report shall be made using the list notification procedure.

See also:

The following entities submit reports using the standard forms published on the FIN-FSA’s website:

  • insurance companies (life and non-life insurance companies), company pension funds and industry-wide pension funds, branches of third-country insurance companies, separate companies referred to in the Insurance Companies Act, crowdfunding service providers, bondholder representatives, payment institutions, electronic money institutions, persons providing a payment service without authorisation, persons issuing electronic money without authorisation, insurance intermediaries (insurance agents and insurance brokers), mortgage credit intermediaries, central securities depository, central counterparties, stock exchange, multilateral trading facility operators and virtual currency providers
  • The forms should be sent to FIN-FSA Registry, kirjaamo(at)finanssivalvonta.fi

Insurance intermediaries (insurance agents and insurance brokers)

  • Report forms are uploaded directly to the Register of Insurance Intermediaries; they are not delivered to the FIN-FSA Registry

Employment pension insurance companies

  • For the time being, no standard forms have been published for the employment pension insurance companies to make a declaration. Therefore the information in accordance with the regulations and provisions is reported to the FIN-FSA in a free form.
  • The declaration should be sent to FIN-FSA Registry, kirjaamo(at)finanssivalvonta.fi
Processing of reports in the FIN-FSA

The FIN-FSA checks that the report contains the information and attachments required by the regulations. In addition, based on the report received, it assesses whether the reported person meets the FAP requirements. When assessing fitness and propriety, the FIN-FSA checks extracts from the crime and fine registers.

The FIN-FSA may, if necessary, request additional clarifications of the report information or the assessment made by the company. If a person does not meet the eligibility requirements, the supervised entity may be required in writing to carry out, for example, a training and induction programme or other corrective measures (such as preventing conflicts of interest, strengthening the composition of the board of directors). In some cases, a special reporting obligation (for example, the outcome of legal proceedings and an assessment made on the basis of it, the implementation of corrective measures within a deadline) may be imposed on the supervised entity.

If the FIN-FSA has nothing to comment on the assessment carried out by the supervised entity on the person being assessed, a written confirmation of the matter is sent to the supervised entity. The letter is sent either through the FIN-FSA’s e-services or by email, depending on the delivery method of the report.

Regulations

FAP requirements are governed by sector-specific regulations concerning financial market participants.

More on the subject, by sector, on the FIN-FSA website:

Bank:

Insurance:

Capital markets

Payment institutions