During at least the initial growth phase of the business, the platform may wish for at least one individual to perform multiple PCF roles – for example, with a view to minimising personnel costs. Under the F&P Regime, it is generally permissible for an individual to perform multiple PCF roles. However, the CBI emphasises that the individual in question must display competency for each PCF role for which they are applying, and must be approved by the CBI in respect of the performance of each role. Approval from the CBI for one particular PCF role does not necessarily guarantee approval for other PCF roles.
The CBI expects that, pre-authorisation under IDR 2018, an applicant would only propose individuals for appointment to PCF roles that have obtained relevant experience at a suitably senior level. As a rule of thumb, I would generally encourage an applicant where possible to seek to hire individuals to board and senior management positions who have performed the same or at least a similar PCF role at an existing Irish regulated financial service provider, and who have therefore have already been approved by the CBI under the F&P Regime. While this does not necessarily guarantee that the individual would be approved by the CBI for the same PCF role(s) within the applicant, it should enhance the likelihood of approval. Similarly, where a prospective hire to a PCF role is performing or has performed a similar role for a regulated financial service provider with a head office in another EEA member state, that should usually that should expedite that individual’s PCF application for CBI approval.
Where prospective board or senior management hires are based outside of Ireland, the applicant must be able to demonstrate to the CBI that its substance and mind and management is or will be located in Ireland and that the day-to-day decisions in respect of its business will be made in Ireland. While it is outside the scope of this article, this requirement typically involves there being a certain level of full-time presence in Ireland at both board and senior management level. In practice, the precise level of presence that is required in Ireland will usually depend on the nature, scale and complexity of the applicant’s proposed business model. There may also be Irish corporate tax considerations as to the level of ‘substance’ expected to be located in Ireland for the applicant to consider.
For start-ups financial costs associated with a new regulated business will need to be carefully managed, and in circumstances where the applicant for authorisation is a part of an existing corporate group that carries on regulated financial activities elsewhere in the EEA or in the UK, a natural inclination may be to seek to make appointments to PCF roles from within the group’s existing human resource pool. In practice, some of those individuals may not live in Ireland and there is no prospect of them relocating to Ireland. Being mindful of the need to demonstrate to the CBI that the applicant’s mind and management will be located in Ireland upon authorisation, an applicant that is proposing to carry on its business in or from Ireland with no or very minimal PCF presence in Ireland is unlikely to find favour with the CBI.
Reviewing and assessing the fitness and propriety standards
As is more particularly addressed under the F&P standards, an individual who is being proposed by an applicant for authorisation to the CBI to perform a PCF role must be competent and capable; honest, ethical and act with integrity; and financially sound. The applicant itself needs to be satisfied on reasonable grounds that the individual complies with the F&P standards and, if applicable, with the MCC 2017.
The selection of an individual for appointment to a PCF role should not be seen as a rubber-stamping exercise by the applicant. In its guidance on the F&P standards (58-page / 964KB PDF), the CBI sets out it expectations on due diligence to be undertaken by employers when assessing an individual’s fitness and probity for a PCF role. The regulator has warned that it is increasingly finding that some PCFs proposed by applicants are unable to demonstrate how they meet the F&P standards. Where the CBI considers a candidate to be unsuitable for appointment to the PCF role for which they are nominated, this has the propensity to considerably elongate its assessment of an application for authorisation or even to reject the application entirely.
When proposing to appoint an individual to perform a PCF role, an applicant should carefully consider whether the candidate:
- holds an appropriate professional or other qualification;
- is able to demonstrate that they have the capability appropriate to the role;
- has obtained the competence and skills appropriate to the role (whether through training or experience gained in an employment context); and
- has shown the competence and proficiency to undertake the role through performance of previous roles.
While a candidate for a PCF role would not necessarily be called for interview by the CBI as a part of the PCF approval process, the CBI advises that a candidate should be ready to attend an interview if invited to do so and prepare adequately. The CBI’s F&P Regime Interview Guide (17-page / 915KB PDF) provides information on what to expect if a candidate is called for interview.
Identifying executive directors and staff that will comply with the Minimum Competency Code
The MCC 2017 is closely linked to the F&P Regime. Together with the MCR 2017, the MCC 2017 sets out minimum professional standards for individuals providing certain financial services, including those under the IDR 2018, particularly when dealing with consumers. The aim of these standards is to ensure that consumers obtain a minimum acceptable level of competence from individuals acting for or on behalf of regulated firms in the provision of advice and information and associated activities in connection with retail financial products, including insurance.
The CBI mentions in its article that there is a commonly held misconception that the minimum competency requirements only apply to individuals in an intermediary that will be providing advice to consumers. In that regard, applicants for authorisation may be inclined to ignore the possibility of the MCC 2017 applying to an individual proposed for a PCF role, as these are generally board and senior management roles. This is not necessarily the case: where the individual will be involved in activities such as providing advice to consumers on insurance products, arranging, or offering to arrange, insurance products for consumers or supervising others providing advice or information to consumers they are likely to be subject to the MCC 2017.
Where the MCC 2017 applies, if the individual cannot demonstrate their compliance, their appointment to a PCF role in question would not be approved by the CBI. Again, this has the potential for the platform’s application for authorisation under the IDR 2018 to be delayed or potentially rejected.
Applicants should therefore carefully consider whether the MCC 2017 will apply to any of their PCF roles at an early stage in the authorisation project, and prior to identifying candidates for those roles. This will help to inform what recognised insurance related qualification, set out at Appendix 4 of the MCC 2017, the candidate would need to have.
Note that, where the MCC 2017 applies to a particular PCF role, satisfying the requirements of the MCC 2017 alone will not be sufficient for an individual to be approved by the CBI for appointment. The other aspects of the F&P Standards would also need to be satisfied.
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