FCA rejects approved persons application following unsuccessful SIF interview
2 October 2017
The FCA’s recent decision to reject an application by Goldenway Global Investments (a ‘CFD firm’) to approve Rupert Nathan as CF10 (compliance officer) and CF11 (money laundering reporting officer) is interesting on a number of levels.
The decision to reject the application followed two Significant Influence Function (SIF) interviews (using two different interview panels) that Mr Nathan had with the FCA. Based on the SIF interviews, the FCA was not satisfied that Mr Nathan has the competence and capability to perform the CF10 and CF11 roles. In its Final Notice, the FCA cites that “Mr Nathan failed to demonstrate a detailed knowledge and understanding of the implications of the Firm’s operating model, the money laundering and financial crime risks faced by the Firm and the processes that need to be put in place at the Firm satisfactorily to [sic] address those risks” and that “Mr Nathan did not convey an adequate understanding of the difficulties in assessing the appropriateness of transactions for customers inherent in the Firm’s business model, including a sufficient understanding of the risks arising from the Firm’s ICAAP.”
Interestingly, Mr Nathan has had a 20 year career in financial services and has previously been approved in a number of senior management roles, including the CF10 and CF11 roles, within a wealth management firm and also another CFD firm. And the Final Notice also stated that “it is possible that Mr Nathan might be assessed as fit and proper to perform the same controlled functions at other firms now or in the future.”
One might think that a rejection would be a relatively common outcome of the SIF interview process, and evidence of a suitably challenging and rigorous regulator policing the ‘approved persons gateway’. Interestingly though, we believe this is the first instance of the FCA (or PRA) formally rejecting an approved persons application on the basis of a SIF interview.
The SIF interview process was introduced in 2009, to establish a formal ‘competency-based’ framework within the FCA approved persons application process. The FCA quite correctly states that a material proportion of SIF interviews do not end up with the approval of the individual in question – basically implying that the SIF interview process is not a ‘box ticking exercise’. But in reality, non-approval has been because firms and/or candidates have withdrawn their applications – perhaps following scrutiny from the regulator, rather than because the FCA or PRA formally rejected the application. Generally speaking, it is preferable for the firm and candidate to withdraw the application before the FCA reaches its decision, not least because once the regulator reaches a decision to reject it becomes a fact of public record, as in the case of Mr Nathan – something which is unlikely to enhance a candidate’s future employment prospects.
The key message from this unprecedented action is that the FCA expects senior individuals to have a strong and detailed understanding of the issues and risks posed by the firm’s business model and, where appropriate, to be able to coherently articulate the necessary control framework the firm has, or should have, in place to mitigate those risks. This case is a salutary lesson demonstrating that just having a high level understanding of the above is not good enough – SIF interviews should be taken very seriously indeed – they are not a box-ticking exercise. If you get summoned by the regulator for a SIF interview, you should ensure you invest a considerable amount of time preparing for the interview, and consider getting external support and advice to ensure you are well prepared. If the interview does not go well, it could have a long-lasting impact upon your career.