Prudential Regulation Authority Rulebook

1.1

Unless otherwise stated, this Part applies to:

1. (1) a large non-directive insurer; and
2. (2) a Swiss general insurer.

1.2

In this Part, the following definitions shall apply:

continued approval

has the meaning given in Large Non-Solvency II Firms – Senior Insurance Managers Regime – Transitional Provisions.

disciplinary action

in relation to a person, means any of the following:

(1) the issuing of a formal written warning;

(2) the suspension or dismissal of the person; or

(3) the reduction or recovery of any of the person’s remuneration.

individual conduct requirements

means:

(1) the Individual Conduct Rules and Senior Manager Conduct Rules in Conduct Rules 2 and 3;

(2) the Individual Conduct Standards and Senior Insurance Manager Conduct Standards in Insurance – Conduct Standards 3;

(3) the Individual Conduct Standards and Senior Insurance Manager Conduct Standards in Large Non-Solvency II Firms - Conduct Standards 3;

(4) FIT and APER in the PRA Handbook;

(5) COCON in the FCA Handbook; and

(6) APER in the FCA Handbook.

regulatory reference template

means the template found in 6.1.

2.1

A firm must ensure that all persons who perform key functions are at all times fit and proper persons.

2.2

In deciding whether a person is fit and proper pursuant to 2.1, a firm must be satisfied that the person:

1. (1) has the personal characteristics (including being of good repute and integrity);
2. (2) possesses the level of competence, knowledge and experience;
3. (3) has the qualifications; and
4. (4) has undergone or is undergoing all training,

required to enable such person to perform his or her key function effectively and in accordance with any relevant regulatory requirements, including those under the regulatory system, and to enable sound and prudent management of the firm.

2.3

Before deciding, and in considering on an on-going basis, whether a person is fit and proper pursuant to 2.1 and 2.2, a firm must consider:

1. (1) the person's past business conduct; and
2. (2) whether the person performs his or her key functions in accordance with the relevant conduct standards specified in Large Non-Solvency II Firms - Conduct Standards 3.

2.4

In deciding whether a person (P) is fit and proper to be appointed as a senior insurance management function holder or a notified non-executive director, a firm must:

1. (1) obtain P’s consent for the firm to request the fullest information in relation to P that it is lawfully able to request under the Police Act 1997 and related subordinated legislation of the UK or any part of the UK;
2. (2) if P has lived or worked outside the UK for a material time in the previous five years, obtain P’s consent for the firm to request the fullest information in relation to P that it is lawfully able to request under equivalent overseas legislation; and
3. (3) request, and have regard to, such information.

2.5

1. (1) Before deciding whether a person (P) is fit and proper to be appointed as a key function holder, a firm must take reasonable steps to obtain appropriate references covering the past six years from the following:
1. (a) each FCA-authorised person and PRA-authorised person that is, or was:
1. (i) P’s current or former employer; or
2. (ii) an organisation (not falling within (i)) at which P is currently serving, or has served, as a key function holder, senior insurance management function holder, other approved person, non-executive director, notified non-executive director or credit union non-executive director or performed, or is currently performing, a certification function;
2. (b) P’s other current and former employers; and
3. (c) other organisations at which P served as, or is currently, a non-executive director.
2. (2) A firm (A) is not required to request references from an employer of P or any organisation referred to in (1)(a) to (c) (such employer or organisation, B) where:
1. (a) A and B are members of the same group; and
2. (b) there are adequate arrangements in place under which A has access to all information sources to which B has access to the extent necessary were B giving a reference in accordance with this Part.
3. If A has access to only some of the information in 2.5(2)(b), A may ask for a reference that only covers the information to which A does not have access. To the extent that A does not request a reference in the circumstances set out in this (2), A must access and obtain the relevant information.
4. (3) When making a senior insurance management approval application, a firm must take reasonable steps to obtain references in accordance with (1) and (2):
1. (a) no later than one month before the end of the application period set out in section 61 of FSMA; or
2. (b) where a request by a firm for a reference to an employer or organisation would require the firm, the employer, the organisation or any other person to make a mandatory disclosure prior to P disclosing to its current employer or organisation, as the case may be, that such application has been made, before the end of the application period set out in in section 61 of FSMA.

2.6

1. (1) Where a firm (A) seeks to obtain a reference pursuant to 2.5, A must request that the organisation giving the reference (B) discloses all matters of which B is aware that are relevant to the assessment of that person's fitness and propriety.
2. (2) A must also request that, if B is a full scope regulatory reference firm, B discloses the information referred to in the regulatory reference template.

2.7

If a firm previously obtained the information required by 2.4 to 2.6 when it determined that a key function holder was fit and proper for the purposes of this Part, and the firm engages that person for a continuous period of time, the firm is not required to comply with 2.4 to 2.6 again in respect of any subsequent key function appointments at the same firm within that continuous period.

3.1

1. (1) If any PRA-authorised person (A):
1. (a) is considering issuing a certificate to, making a senior management application in respect of, or appointing as a senior insurance management function holder, a key function holder, a non-executive director, a notified non-executive director or a credit union non-executive director, a person (P);
2. (b) makes a request for a reference or other information in respect of P from a firm to which this Part applies (B), in B’s capacity as:
1. (i) P’s current or former employer; or
2. (ii) an organisation (not falling within (i)) at which P is currently serving, or has served, as a key function holder or other approved person; and
3. (c) indicates to B the purpose of the request

B must, as soon as reasonably practicable, provide a reference and disclose to A in the reference all information of which B is aware that B reasonably considers to be relevant to A’s assessment of whether P is fit and proper.

1. (2) A firm (B) which is required to make a disclosure under 3.1(1) is required to disclose information on or relating to something which occurred or existed:
1. (a) in the six years before the request for a reference;
2. (b) between the date of the request for a reference and the date B gives the reference; or
3. (c) in the case of serious matters, at any time.
2. (3) When giving the reference referred to in 3.1(1), a firm must:
1. (a) use the regulatory reference template; and
2. (b) include all the information set out in the regulatory reference template.
3. (4) A firm may make formatting modifications to the regulatory reference template when giving a reference under 3.1(1), provided the regulatory reference template as modified includes all substantive information required by 3.1(3)(b).

3.2

1. (1) If:
1. (a) a firm to whom this Part applies (B) has given a reference pursuant to 3.1 to any PRA-authorised person (A) about any person (P); and
2. (b) either
1. (i) B is or has become aware of matters or circumstances that mean that, if B was giving that reference now, this Part would require B to draft it differently; or
2. (ii) B has reached conclusions of the type described in item (E), or taken disciplinary action of the type described in item (F) of the regulatory reference template, and had B taken or reached those conclusions or actions in the six year period referred to in the regulatory reference template, this Part would require B to draft the reference differently; and
3. (c) it would be reasonable to consider the differences in (b) to be significant for an assessment by A of the fitness and propriety of P for the role at A for which the reference was given;
2. B must make reasonable enquiries as to the identity of P’s current employer and (subject to (3)), provide A with details of those differences in writing as soon as reasonably practicable.
3. (2) The obligation to update regulatory references in (1) applies in the following circumstances:
1. (a) if P is no longer employed by or in the service of B, the obligation to update references in (1) ends six years after P ceased to be employed by, or in the service of B;
2. (b) if P is no longer employed by or in the service of B and the matters or circumstances are not serious matters, B does not have to disclose something if it did not occur or exist in the six year period ending on the date B gave the original reference. This limitation is additional to that in (2)(a).
3. (c) if P is still employed by, or in the service of B, (1) applies throughout the period P remains employed by, or in the service of, B.
4. (3) B is not required to update a regulatory reference given to A if:
1. (a) A is no longer a full scope regulatory reference firm;
2. (b) P is no longer employed by, or in the service of, A; or
3. (c) P is not yet employed by, or in the service of A, and it is no longer intended that P will be employed by or serve at A: or
4. (d) despite making reasonable enquiries under (1) B does not know whether P is still employed by, or in the service of, A.
5. (4) (1) does not require B to update references provided prior to 7 March 2017.
6. (5) If a firm (B) has given a reference to another firm (A) under 2.5 in respect of a person (P) no more than six years ago and B asks A if P is still an employee of, or serving at, A, A must answer that question as soon as reasonably possible, even if B does not tell A the reason for the enquiry.

3.3

A firm must not enter into any arrangements or agreements with any person that limit its ability to disclose information under this Part.

3.4

This Part does not require a firm to disclose information that has not been properly verified.

3.5

1. (1) A firm must arrange for orderly records to be kept that are sufficient to enable it to comply with the requirements of this Part in response to any requests for references referred to in this Part in relation to item (E) and item (F) in the regulatory reference template.
2. (2) A firm does not breach the requirements of this Part by failing to include information in a reference that it would otherwise have to include if:
1. (a) the reason for the omission is that the firm does not have the necessary records; and
2. (b) neither (1) nor any other requirement of or under the regulatory system requires the firm to have those records.

4.1

1. (1) A firm shall notify the PRA of any changes to the identity of key function holders and shall provide the PRA with:
1. (a) all the information needed to assess whether such person is fit and proper pursuant to 2.2; and
2. (b) the information referred to in Large Non-Solvency II Firms - Allocation of Responsibilities 5.1(3) in respect of that person.
2. (2) Where a firm has complied with 4.1(1) in connection with the appointment of a person as a key function holder, and such person transfers from that key function to a different key function or is appointed to an additional key function, in either case within the same firm, for the purposes of 4.1(1) the firm need only supply, in connection with such subsequent appointment:
1. (a) updates to the information previously provided; and
2. (b) if the key function holder is also to perform a senior insurance management function or an FCA controlled function, the information required in connection with an application for approval to do so.

4.2

Where:

1. (1) a person who is to become a key function holder is also to be approved by the PRA to perform a senior insurance management function or by the FCA to perform an FCA controlled function; and
2. (2) the firm includes the information referred to in 4.1 in its application to the PRA for the approval of that person to perform the senior insurance management function, or in the application to the FCA for the approval of that person to perform the FCA controlled function,

this shall satisfy the requirement in 4.1 in respect of that key function appointment.

4.3

If a firm becomes aware of information which would reasonably be expected to be material to the assessment of a current or former key function holder’s fitness and propriety under this Part, it must inform the PRA as soon as practicable.

4.4

Where a firm replaces a key function holder because the firm considers that that person is no longer fit and proper pursuant to 2.1 and 2.2, the firm must notify the PRA as soon as reasonably practicable.

5.1

The requirements of 2.4 to 2.6 do not apply to a firm in respect of any person who has continued approval in relation to that firm.

5.2

The requirements of 2.4 – 2.6 do not apply to a firm in respect of a key function holder in relation to any key function held by that person as at 7 March 2016 at that firm.

5.3

The requirement to request regulatory references from a full scope regulatory reference firm in accordance with the requirements of 2.6(2) does not apply to a firm in respect of an application for approval as an approved person made before 7 March 2017.

5.4

Item (F) in the regulatory reference template does not require disclosure of disciplinary action that took place before 7 March 2017 if the firm’s records do not show whether the conduct that was subject to disciplinary action amounted to a breach of the individual conduct requirements referred to in item (F) in the regulatory reference template.

6.1

The regulatory reference template is the template found here.