Information Bulletin - Fit and Proper Persons

Summary

This 2009 Information Bulletin from the Bermuda Monetary Authority summarises the results of its review of the fit and proper persons regime for key functionaries of regulated entities. It explains why the Authority concluded that no new Guidance is needed at this time, since existing statutory criteria and the proposed Insurance Code of Conduct already meet international standards.

• Existing approval regime: The various regulatory Acts require notification to the Authority of proposed appointments of controllers, directors, secretaries and senior executives, and allow the Authority to object to or remove persons found unfit or improper.
• Fitness criteria: Assessment covers relevant experience, skill, soundness of judgment, diligence, qualifications, probity, reputation, criminal record, past misconduct, and compliance with professional and regulatory codes.
• Third parties covered: Auditors, actuaries, insurance managers and other third parties whose roles are integral to an institution's financial soundness must also meet fitness and propriety requirements.
• Shareholder controllers: Fitness and propriety assessment extends to shareholder controllers, focusing on their influence over the regulated entity, potential conflicts of interest, and any reputational or financial risk they pose.
• Proposed Insurance Code of Conduct: A draft Code (then in consultation) would require boards of regulated entities to establish documented processes for assessing the fitness and propriety of board members, controllers, officers and third party service providers.

The Authority concludes that its existing framework is adequate for supervising senior individuals and management, but states it will continue to monitor key functionaries and periodically review the regime, including whether it needs additional power to bar unfit persons from holding controller positions across the regulated financial sector.

Key obligations

• Regulated entities must notify the Authority of the proposed appointment of key functionaries (controllers, directors, secretaries, senior executives) so the Authority can assess fitness and propriety and object if warranted.
• Third parties such as auditors, actuaries and insurance managers appointed by regulated institutions must meet fitness and propriety requirements.
• Under the proposed Insurance Code of Conduct, boards of regulated entities would be required to establish and document processes to assess the fitness and propriety of board members, controllers, officers and third party service providers.

Applies to

banks, deposit companies, insurers, investment business firms, investment fund administrators, trust companies, controllers, directors, officers and other key functionaries of these regulated entities

Deadlines

• January 2010: The Insurance Code of Conduct, referenced in the consultation paper, was to be issued in January 2010.
• December 2010: Implementation of the Insurance Code of Conduct was due by this date.