[vc_row columns=”1″][vc_column link=”%7B%22url%22%3A%22%22%7D”][vc_column_text]
The Financial Conduct Authority has always required firms to ensure that employees performing regulated roles are “fit and proper”. Traditionally, this assessment focused on fairly familiar areas: criminal records, regulatory breaches, financial soundness, and professional competence.
However, recent regulatory developments signal an important shift.
With the publication of Policy Statement PS25/23, the FCA has clarified that non-financial misconduct may also be relevant when assessing whether someone remains fit and proper to perform their role.
For firms operating under the Senior Managers and Certification Regime (SM&CR), this represents a subtle but important evolution in how risk should be assessed.
The implication is that fit and proper assessments must now take a broader view of conduct, behaviour, and reputational risk.
[/vc_column_text][us_separator link=”%7B%22url%22%3A%22%22%7D” show_line=”1″ thick=”2″ css=”%7B%22default%22%3A%7B%22height%22%3A%2250px%22%7D%7D”][vc_column_text]
What has changed – A broader view of misconduct
Historically, the types of misconduct most closely associated with regulation were directly tied to financial services activity. Fraud, market abuse, dishonesty and regulatory breaches were obvious triggers for concern.
PS25/23 does not remove that focus, but it broadens the picture. It makes clear that behaviour such as bullying, harassment, discrimination, violence or threatening conduct may also be relevant where it raises questions about integrity, judgement or reputation.
This reflects the FCA’s wider concern with culture, governance and trust across the sector.
[/vc_column_text][us_separator link=”%7B%22url%22%3A%22%22%7D” show_line=”1″ thick=”2″ css=”%7B%22default%22%3A%7B%22height%22%3A%2250px%22%7D%7D”][vc_column_text]
Conduct outside regulated activities
One of the most interesting aspects of the new guidance is the recognition that behaviour does not necessarily need to occur during regulated activities to be relevant.
Misconduct within the workplace that does not directly relate to financial services can still affect whether an individual meets the integrity and reputation requirements under the Fit & Proper test.
This reflects a wider regulatory focus on culture, governance, and trust across the financial services industry.
[/vc_column_text][us_separator link=”%7B%22url%22%3A%22%22%7D” show_line=”1″ thick=”2″ css=”%7B%22default%22%3A%7B%22height%22%3A%2250px%22%7D%7D”][vc_column_text]
The operational challenge for firms
While the regulatory direction is clearer, many firms are now asking a practical question:
How should organisations actually assess these broader conduct risks?
Traditional screening methods tend to focus on structured data sources such as:
- Criminal records
- Sanctions lists
- Regulatory registers
- Employment history
These remain essential elements of any fit and proper assessment. But they do not always capture behavioural risks or reputational concerns.
As a result, compliance teams are increasingly reviewing whether their screening frameworks are still fit for purpose.
[/vc_column_text][us_separator link=”%7B%22url%22%3A%22%22%7D” show_line=”1″ thick=”2″ css=”%7B%22default%22%3A%7B%22height%22%3A%2250px%22%7D%7D”][vc_column_text]
Building a more complete picture
[/vc_column_text][us_separator link=”%7B%22url%22%3A%22%22%7D” show_line=”1″ thick=”2″ css=”%7B%22default%22%3A%7B%22height%22%3A%2250px%22%7D%7D”][vc_column_text]
The importance of ongoing monitoring
Another area receiving growing attention is ongoing monitoring.
Fit and proper assessments are not a one-time exercise. Under SM&CR, firms must ensure that certified staff remain fit and proper on an ongoing basis.
This means circumstances can change over time. For example:
- An employee may appear on a PEPs or sanctions list
- Financial circumstances may change
- Regulatory issues may emerge.
Modern screening platforms increasingly allow organisations to monitor individuals continuously, with alerts triggered if risk indicators change.
This approach helps firms demonstrate that they are maintaining oversight, rather than relying solely on point-in-time checks.
[/vc_column_text][us_separator link=”%7B%22url%22%3A%22%22%7D” show_line=”1″ thick=”2″ css=”%7B%22default%22%3A%7B%22height%22%3A%2250px%22%7D%7D”][vc_column_text]
What this means for compliance teams
The FCA’s latest guidance does not necessarily require firms to implement entirely new processes.
However, it does reinforce the importance of robust, well-documented screening frameworks that support informed decisions about fitness and propriety.
In practice, this means firms should ensure they can:
- Verify identity reliably
- Collect six years of regulated employment references
- Screen against sanctions and PEPs databases
- Maintain clear records of fit and proper decisions
- Review individuals regularly throughout their employment
Technology is increasingly playing a role in helping compliance teams manage these requirements efficiently and consistently.
[/vc_column_text][us_separator link=”%7B%22url%22%3A%22%22%7D” show_line=”1″ thick=”2″ css=”%7B%22default%22%3A%7B%22height%22%3A%2250px%22%7D%7D”][vc_column_text]
Looking ahead
PS25/23 reflects a broader regulatory trend: integrity and behaviour are now central to the concept of fitness and propriety.
For firms, the challenge is ensuring that screening processes evolve accordingly.
In the next article in this series, we will explore how the FCA’s focus on non-financial misconduct is reshaping the way firms think about culture risk – and what that means for pre-employment screening.
[/vc_column_text][us_popup use_page_block=”9793″ btn_label=”Click here to subscribe and stay up to date” btn_style=”11″]
This content will appear inside a popup…
[/us_popup][/vc_column][vc_column link=”%7B%22url%22%3A%22%22%7D”][us_separator link=”%7B%22url%22%3A%22%22%7D” show_line=”1″ thick=”2″ css=”%7B%22default%22%3A%7B%22height%22%3A%2250px%22%7D%7D”][vc_column_text]
[/vc_column_text][/vc_column][/vc_row]