During at least the initial growth phase of the business, the platform may want at least one person to fill several PCF roles – for example, with a view to minimizing personnel costs. Under the F&P regime, a person is generally permitted to perform more than one PCF role. However, the CBI emphasizes that the person in question must demonstrate competence for each PCF role they apply for and must be approved by the CBI to perform each role. CBI approval for a particular PCF role does not necessarily guarantee approval for other PCF roles.
The CBI expects that, pre-clearance under IDR 2018, a candidate will only propose individuals for appointment to PCF positions who have acquired relevant experience at an appropriately senior level. As a general rule, I would generally encourage a candidate, where possible, to seek to hire individuals in board and senior management positions who have served in the same or at least a similar PCF role at a existing Irish regulated financial services provider, and therefore have already been approved by the CBI under the F&P regime. Although this does not necessarily guarantee that the person would be approved by the CBI for the same PCF role(s) within the candidate, it should improve the likelihood of approval. Similarly, where a potential PCF hire is performing or has performed a similar role for a regulated financial services provider headquartered in another EEA Member State, this should generally expedite the application for approval. of the CBI by that person’s CPF.
Where prospective board members or senior management are based outside Ireland, the candidate must be able to demonstrate to the CBI that its substance, spirit and direction is or will be located in Ireland and that day-to-day decisions regarding its affairs will be made in Ireland. Although outside the scope of this article, this requirement generally implies that there is some level of full-time presence in Ireland, both at board and senior management level. In practice, the precise level of presence required in Ireland will generally depend on the nature, scale and complexity of the business model proposed by the applicant. There may also be Irish corporation tax considerations as to the level of ‘substance’ believed to be located in Ireland which the applicant must take into account.
For start-ups, the financial costs associated with a new regulated business will need to be carefully managed, and in cases where the license applicant is part of an existing group of companies that conducts regulated financial activities elsewhere in the EEA or UK, a natural inclination may be to seek to make appointments to PCF positions within the group’s existing human resource pool. In practice some of these people may not live in Ireland and there is no prospect of relocation to Ireland. Mindful of the need to demonstrate to the CBI that the mind and direction of the applicant will be located in Ireland when authorised, an applicant who proposes to carry on business in or from Ireland without the presence or very few PCFs in Ireland are unlikely to find favor with the CBI.
Review and assess standards of fitness and propriety
As specifically addressed in the F&P Standards, a person who is proposed by a CBI license applicant to fulfill a PCF role must be competent and capable; honest, ethical and act with integrity; and financially sound. The applicant himself must be satisfied, on reasonable grounds, that the person complies with the F&P standards and, where applicable, the MCC 2017.
The selection of a person for appointment to a CPF position should not be viewed as an endorsement exercise by the candidate. In its F&P Standards Guidelines (PDF 58 pages / 964 KB), the CBI sets out its expectations for due diligence to be undertaken by employers when assessing an individual’s fitness and probity to a PCF role. The regulator warned that it is increasingly finding that some PCFs proposed by applicants are unable to demonstrate how they meet F&P standards. When the CBI deems a candidate unsuitable for appointment to the PCF position to which they are nominated, this tends to lengthen its assessment of a clearance application considerably or even reject the application entirely.
When proposing to appoint a person to fill a CPF role, a candidate should carefully consider whether the candidate:
- holds an appropriate professional or other qualification;
- is able to demonstrate that he has the ability appropriate to the role;
- has acquired the skills and abilities appropriate to the role (whether through training or on-the-job experience); and
- has demonstrated competence and ability to assume the role through the performance of previous roles.
Although an applicant for a PCF position may not necessarily be called for an interview by the CBI as part of the PCF approval process, the CBI advises that a candidate should be prepared to attend an interview if they invited and prepare adequately. The CBI F&P Scheme Interview Guide (17 page PDF / 915 KB) provides information on what to expect if a candidate is called for an interview.
Identify general managers and staff who will comply with the Minimum Competency Code
The 2017 MCC is closely linked to the F&P regime. Together with the MCR 2017, the MCC 2017 defines minimum professional standards for persons providing certain financial services, including those covered by the IDR 2018, in particular when dealing with consumers. The objective of these standards is to ensure that consumers obtain a minimum acceptable level of competence from persons acting for or on behalf of regulated businesses in the provision of advice and information and associated activities in relation to retail financial products, including insurance.
The CBI mentions in their article that there is a common misconception that the minimum competency requirements only apply to people in an intermediary who will provide advice to consumers. In this regard, applicants for authorization may be inclined to ignore the possibility that the MCC 2017 may apply to someone proposed for a PCF position, as these are generally managerial and managerial positions. This is not necessarily the case: where the person will be involved in activities such as advising consumers on insurance products, arranging or offering to arrange insurance products for consumers, or supervising other persons providing advice or information to consumers, they are likely to be subject to MCC 2017.
Where MCC 2017 applies, if the individual cannot demonstrate compliance, their appointment to a PCF position in question will not be approved by the CBI. Again, this risks delaying or rejecting the platform’s request for authorization under the IDR 2018.
Applicants should therefore carefully consider whether MCC 2017 will apply to any of their PCF roles at an early stage of the licensing project and before identifying candidates for these roles. This will help to indicate which Recognized Insurance Qualification, set out in Schedule 4 of MCC 2017, the applicant should have.
Note that where the MCC 2017 applies to a particular PCF role, meeting the MCC 2017 requirements alone will not be sufficient for an individual to be approved by the CBI for appointment. Other aspects of F&P standards should also be met.