Regulators authorise businesses, but they assess people. The “fit and proper” test — applied to directors, key-function holders and qualifying shareholders — is where a supervisor decides whether the individuals running a licensed firm have the honesty, competence and capacity to do it well.
Fit, and proper, are two different questions
Proper is about integrity: honesty, reputation, financial soundness, and a clean record of dealings with regulators and counterparties. Fit is about competence and capability: the knowledge, experience and time to perform the role.
A brilliant compliance officer spread across five firms fails the test not on integrity but on capacity. Time commitment is a real criterion, not a formality.
Both must be evidenced — for every individual, at appointment and on an ongoing basis.
Governance that demonstrates control
The fit-and-proper assessment of individuals only holds if the structure around them makes control real:
- A management body with a genuine balance of skills and the authority to challenge executives.
- Committees — risk, audit, compliance — with clear mandates, quorum and minuted decisions.
- Key-function holders for compliance, risk, MLRO and internal audit, with documented responsibilities and reporting lines.
- Decision logs that show the governance chart is not decorative — that decisions are taken where they are supposed to be.
Evidence over assertion
Saying a board is effective is not the same as showing it. The evidence a supervisor looks for is mundane but decisive: appointment due diligence, skills matrices, meeting minutes, conflict-of-interest registers, and a record of the board actually overriding or questioning management when it mattered.
Governance is not the org chart on the wall. It is the accumulated, dated, signed evidence that the right people made the right decisions in the right forum — and can prove it.