Why Firms Assess Fitness and Propriety Every Year

Under the Senior Managers and Certification Regime, firms must be satisfied that their Senior Managers remain fit and proper, and must certify each member of certified staff as fit and proper before they start in the role and at least annually afterwards. The criteria are in the FCA’s FIT sourcebook, and our guide to the fit and proper test in full explains them in detail.

A well-run annual assessment protects the firm. It shows the regulator the firm takes the requirement seriously, picks up issues before they become problems, and gives the firm a record to rely on if a decision is later questioned.

What’s in the Template

How to Use It

One Form Per Person, Every Year

Complete a form for each Senior Manager and certified employee. Align the timing with performance reviews where you can, so evidence from one feeds the other.

Record Evidence, Not Just Conclusions

The most common weakness in fitness and propriety assessments is a box ticked with no evidence behind it. For each question, record what you relied on: a declaration, a check, a training record, feedback or a performance review.

Look at How the Role Has Changed

A person who was fully competent for their role a year ago may not be fully competent for the role it has become. Ask specifically whether the scope has grown and whether competence has kept pace.

Don’t Wait for the Annual Cycle

If something happens that could affect an individual’s fitness, such as a serious complaint, a Conduct Rules breach or a change in financial circumstances, assess it promptly rather than waiting for the next annual review.

The Three Parts of the Test

Honesty, Integrity and Reputation

Check for any proceedings, investigations, disciplinary action, Conduct Rules breaches or complaints in the period, and any matters disclosed in references. A signed self-declaration is a useful start, but not enough on its own.

Competence and Capability

Look at the knowledge and skills the role needs, training and CPD completed, qualifications (including Level 4 and Statements of Professional Standing for advisers), performance, and feedback from the board and control functions.

Financial Soundness

Check for bankruptcy, individual voluntary arrangements and county court judgments, and run credit checks where your policy requires them.

Conduct Rules and Non-Financial Misconduct

The assessment should consider whether the individual has complied with the Conduct Rules, including any breaches recorded in the period. Serious non-financial misconduct, such as bullying or harassment, is also relevant to fitness and propriety. Our Conduct Rules training guide explains the rules and how breaches are reported.

Common Mistakes

• Tick-box declarations with no supporting evidence.
• Ignoring role changes since the last assessment.
• Leaving concerns to the annual cycle instead of assessing them promptly.
• No link to Conduct Rules records or disciplinary files.
• Assessments done by HR alone, without input from line managers or the board.
• No follow-up on conditions or development actions.

When the Answer Is Not Clear-Cut

Sometimes the assessment finds a concern that doesn’t clearly make someone unfit, such as a competence gap after a role change, or a minor matter disclosed in a reference. The template allows a “yes with conditions” outcome, with agreed development actions or support. Record the reasoning and follow up the actions. Where a Senior Manager may no longer be fit and proper, the firm may need to notify the regulator.

Senior Managers and Certified Staff

The regulator approves Senior Managers, but the firm must still assess them on an ongoing basis. For certified staff, the firm’s assessment is the approval: there’s no regulatory sign-off, so the firm’s process carries all the weight. Use the same template for both, with more detail on competence for roles where the risks are greater. Consistency matters: applying the same structure to everyone makes outcomes easier to compare and defend.

Using the Assessment for Development

The best firms use the annual assessment as more than a compliance exercise. It’s an opportunity to agree training, plan development towards a Senior Manager role, and spot where a team needs more support. Our page on hiring a first-time Senior Manager shows how documented development makes future approval applications stronger.

Assessing Fractional and Part-Time Staff

Fractional Senior Managers and part-time certified staff need the same assessment, with extra attention to time and conflicts. Confirm their other roles each year, whether the days agreed are still adequate, and how they manage conflicts between clients. A fractional compliance officer who has taken on two new clients since the last assessment may still be fit and proper, but the firm should check that the arrangement still works. Our page on fractional and interim SMF cover explains how these arrangements are usually structured.

Keeping Records

Keep completed assessments with the individual’s personnel and regulatory records, together with the evidence relied on. They support the annual certification of certified staff, inform the regulatory references the firm may later have to give, and show the regulator how the firm reached its conclusions. A consistent process, applied the same way to everyone, also protects the firm if a decision is later challenged by the individual.

Frequently Asked Questions

How often must firms assess fitness and propriety?

On an ongoing basis, and at least annually for certified staff. Senior Managers should also be assessed at least once a year.

Who should carry out the assessment?

Usually the individual’s line manager, with input from HR and compliance. For Senior Managers, the chair or chief executive is often involved.

Do we need criminal records and credit checks every year?

The rules don’t require them every year. Many firms repeat them periodically, for example every few years, and rely on annual self-declarations in between.

Is the template free?

Yes. Download it and adapt it for use within your firm. It’s general guidance, not legal or regulatory advice.