The FCA Fit and Proper Test in Full
Every Senior Manager and every certified employee at an FCA-regulated firm must be fit and proper, and the firm must be able to show how it reached that view. Most guides mention the test in passing. This one breaks it down into the specific questions the FCA directs firms to consider under each of its three headline categories, explains who is assessed and when, and sets out the evidence a firm should hold.
Where the Test Comes From
The fit and proper test is set out in the FCA Handbook’s FIT sourcebook, which sets the criteria for assessing whether a person is fit and proper. It applies when the FCA approves a Senior Manager, when a firm certifies a member of staff under the Certification Regime, and on an ongoing basis afterwards. The test has three headline categories: honesty, integrity and reputation; competence and capability; and financial soundness. The firm makes the first judgement, and for Senior Managers the FCA then makes its own decision on the Form A application.
Who Is Assessed, and When
| Who | When | Who decides |
|---|---|---|
| Senior Managers (SMF holders) | Before appointment, then at least annually | The firm, then the FCA on the Form A |
| Certified staff | Before appointment, then at least every 12 months | The firm, which issues the certificate |
| Non-executive directors who are not SMFs | On appointment | The firm |
| Interim and fractional Senior Managers | As for permanent holders, beyond the 12-week temporary cover period | The firm, then the FCA |
Our guide to the Certification Regime explains the annual certification process, and Senior Manager Functions explained covers which roles need approval.
Honesty, Integrity and Reputation
This is the category most people associate with “fit and proper,” and it covers considerably more ground than a simple absence of criminal history.
What’s actually assessed
Whether the candidate has been the subject of any criminal proceedings, particularly (but not only) for offences involving dishonesty, fraud, or financial crime. Whether the candidate has been the subject of any adverse civil findings, particularly in relation to financial matters. Whether the candidate has been subject to any disciplinary action by a professional or regulatory body. Whether the candidate has been dismissed, or asked to resign, from any position of trust, and the circumstances involved. Whether the candidate has been candid and truthful in all dealings with regulators, including in the application process itself. Whether the candidate has any history of being refused registration, authorisation or a licence by a regulatory body, in the UK or elsewhere.
The candour point specifically
A candidate’s honesty in the application process itself is treated as a specific, standalone consideration, separate from whatever underlying history is being assessed. A candidate who is forthcoming and transparent about a past issue is generally viewed far more favourably than one who is found to have minimised, omitted or misrepresented something the firm later discovers independently — the concealment itself becomes a fresh integrity concern layered on top of whatever the original issue was.
Competence and Capability
This category is where general seniority is most likely to be mistaken for genuine fitness, and where the sub-criteria reward specificity over impressiveness.
What’s actually assessed
Whether the candidate has the necessary skills and experience to perform the specific function they’re being appointed to — not competence in general, but competence against the particular Statement of Responsibilities they’ll be operating under. Whether the candidate has demonstrated, through their career history, the ability to genuinely fulfil the responsibilities of the role, including through direct examples a reference can verify rather than self-description alone. Whether the candidate has kept their professional knowledge current, particularly in relation to regulatory developments relevant to their function. Whether the candidate has adequate time available to perform the role properly, given any other professional commitments — a genuine consideration for portfolio non-executives and fractional appointments specifically.
Why this is the category most searches under-test
As we discuss throughout our designation guides, “regulated firm experience” is not a single, transferable credential, and the competence and capability limb of the fit and proper test is exactly where that distinction matters most. A candidate can be highly competent in the general sense and still fail this specific limb if their actual experience doesn’t map to the particular accountability the role carries — which is precisely why we build designation-specific assessment into every search rather than screening for general seniority.
Financial Soundness
The least discussed of the three categories, and one that surprises some candidates when it’s raised directly.
What’s actually assessed
Whether the candidate has been subject to any judgment debts or awards that remain outstanding, or that were paid only after enforcement action. Whether the candidate has made any arrangements with creditors, including individual voluntary arrangements. Whether the candidate has been adjudged bankrupt, and if so, the circumstances and whether the bankruptcy has been discharged. Whether the candidate has been subject to a company insolvency, particularly where their conduct as a director contributed to it.
Why this category exists
The underlying concern isn’t that personal financial difficulty makes someone untrustworthy in a moral sense — it’s that certain kinds of financial history can indicate a level of financial management or judgement that’s directly relevant to roles carrying financial oversight responsibility, and can, in some circumstances, create a vulnerability to financial pressure or inducement that a firm needs to weigh honestly. A single historical financial difficulty, properly explained and resolved, is treated very differently from a pattern of financial mismanagement, or from an issue that remains unresolved and ongoing.
How the Three Categories Interact
The FCA’s own guidance is explicit that these three categories aren’t assessed in isolation, or given fixed, mechanical weighting — a firm is expected to reach an overall judgement, considering the seriousness of any adverse finding, how long ago it occurred, whether it’s part of a pattern, and what the individual has done since to address it. This means the test rewards a genuinely thoughtful, evidenced overall assessment far more than a checklist approach that treats each category as a simple pass or fail with no room for context or explanation.
What This Means for How a Search Should Actually Run
Building the fit and proper test into a search means testing for all three categories directly and specifically throughout the process — not simply running a background check at the end and hoping nothing surfaces. Reference conversations that probe honesty and integrity through specific past scenarios, competence assessment that tests against the actual Statement of Responsibilities rather than general seniority, and a straightforward, judgement-free conversation with candidates about financial soundness where it’s genuinely relevant to the role — this is what turns the fit and proper test from a final compliance hurdle into the actual organising structure of a well-run SMF search.
The Evidence a Firm Should Hold
A fit and proper assessment is only as good as the record behind it. For each Senior Manager or certified person, the firm should be able to produce:
- regulatory references from every regulated employer in the past six years (see regulatory references and the six-year rule)
- a criminal records check at the right level for the role (see SMCR background checks)
- credit and directorship checks, including any insolvencies the person was involved in
- evidence of qualifications and relevant training
- a competence assessment against the role’s Statement of Responsibilities, not just the CV
- notes of any matters disclosed by the candidate and how the firm weighed them
- confirmation that the person has enough time for the role, especially for portfolio non-executives and fractional appointees
Our free fit and proper assessment template and regulatory reference checklist give a ready structure, and our guide to pre-offer checks for SMF candidates covers the order to do them in.
Fit and Proper in Practice: Different Roles, Different Emphasis
The test is the same for every role, but where the weight falls changes. For a compliance officer (SMF16), competence means hands-on experience of the rules that apply to the firm’s business, such as COBS, CONC or the Consumer Duty. For an MLRO (SMF17), it means sound judgement on suspicious activity and a working knowledge of the Money Laundering Regulations. Where one person holds both, the FCA assesses competence for each function separately, which is why our combined compliance officer and MLRO searches test both disciplines explicitly. For a regulated chief executive (SMF1), the regulator looks closely at leadership of a regulated business and the person’s record of dealing openly with supervisors.
Want to check what you have learned? Try our fit and proper quiz, part of our free SMCR quiz series.
Scenario: A candidate for a compliance officer role at a consumer credit firm discloses, early in the process, a county court judgment from eight years ago that was settled in full. We record the disclosure, confirm the circumstances and the settlement, and check the candidate’s regulatory references for anything similar. The firm documents its view that a single, resolved matter from eight years ago, openly disclosed, does not affect fitness for this role. The Form A sets out the matter clearly, and the application is approved without further questions.
Recruiting Senior Managers Who Pass the Test
Fit and proper built into every search, not added at the end. Every SMF search is overseen by Adrian Lawrence FCA
Compliance and MLRO
The roles assessed most closely.
→ Combined SMF16 and SMF17 → MLRO recruitment (SMF17)SMF16 and SMF17 explained →
Executive Roles
Leadership of a regulated firm.
→ Regulated CEO (SMF1) → CFO (SMF2)SMF designations guide →
Approval
Getting the Form A right.
→ FCA authorisation support → Form A mistakesApproval interviews →
Free Templates
Ready-made tools.
→ Fit and proper assessment template → Regulatory reference checklistAll free guides →
Every SMF search is overseen by Adrian Lawrence FCA
Frequently Asked Questions
How often must fit and proper be assessed?
Before appointment and then at least annually for Senior Managers and certified staff. Firms should also reassess if something relevant comes to light in between.
Does a past problem automatically fail the test?
No. The FCA expects a judgement that weighs how serious the matter was, how long ago, whether it was a one-off and what the person has done since. Open disclosure counts in the candidate’s favour.
Who is responsible for the assessment?
The firm. For Senior Managers, the FCA then makes its own decision on the Form A, but the firm must be satisfied first.
Do fractional Senior Managers face the same test?
Yes, with extra attention on whether they have enough time alongside their other roles.
About the Author
Adrian Lawrence FCA is the founder of SMF Capital. He is a Chartered Accountant and Fellow of the ICAEW, holds a practising certificate in his own name, and is a former listed-company Finance Director with a BSc from Queen Mary College, University of London. He founded FD Capital in 2018 and has since built a network of five specialist recruitment practices. He oversees every SMF Capital search. View Adrian’s ICAEW profile.
Want a Search That Tests the Full Standard?
We assess all three categories of the fit and proper test from the first conversation, not as a final check. Tell us about your hire and we’ll come back to you the same working day.