Honesty, Integrity and Good Standing: The Fit and Proper Test for Key Individuals

Of all the fit and proper requirements, honesty, integrity and good standing is the one that applies to everybody: FSPs, key individuals, representatives and compliance officers. It is also the one that cannot be fixed by passing an exam.

The basic requirement

A person must be honest, have integrity and be of good standing. The Authority looks at conduct, wherever and whenever it occurred, that bears on whether the person can be trusted with clients' affairs.

Listed incidents

Board Notice 194 sets out a list of incidents that count as prima facie evidence that a person does not meet the requirement. Prima facie means "on the face of it": the incident raises the question, and the person may answer it.

The list includes cases where a person has:

• been found guilty in criminal proceedings, or liable in civil proceedings, involving dishonesty, fraud, theft, breach of fiduciary duty or similar conduct;
• been removed from an office of trust for misconduct involving dishonesty;
• had a licence or authorisation refused, suspended or withdrawn by a regulatory or professional body;
• been disciplined or debarred by a regulator or professional body;
• been untruthful or uncooperative in dealings with the Authority or another regulator;
• demonstrated a lack of readiness or willingness to comply with legal or regulatory requirements;
• been found not fit and proper in an earlier assessment, with the cause unremedied;
• been a director or involved in the management of a business that was placed in liquidation or business rescue while the person was connected with it, or within one year of that connection ending.

That last one is often tested with dates. A director who resigned on 31 January 2024 from a company that went into business rescue on 15 December 2024 is within the year. It is a listed incident.

Ordinary life events are not on the list. A pending divorce is not an integrity matter.

It is not automatic

A listed incident does not end a career by itself. It must be weighed, having regard to:

• the seriousness of the conduct,
• its relevance to the duties the person performs or will perform, and
• the passage of time since it occurred.

A minor matter from twenty years ago is treated differently from a fraud finding last year.

Disclosure

A person must disclose information relevant to their honesty, integrity and good standing, fully and accurately. Concealing an incident is usually worse than the incident, because being untruthful with the Authority is itself a listed incident, and deliberately concealing a material fact in an application under the Act is an offence.

Companies and other entities

An FSP that is not a natural person shows its honesty, integrity and good standing through its corporate conduct and through the personal conduct of the people who control or govern it. A company cannot claim clean hands while its directors do not have them.

This is why the FSP must be satisfied about the honesty and integrity of directors, members, trustees and partners who are not key individuals, and must tell the Authority about a new one within 15 days.

What a key individual must do

About themselves: disclose promptly. If you are found liable in a civil court for breach of fiduciary duty, your FSP needs to know, and it must notify the Authority immediately once it is aware.

About representatives: the FSP must be satisfied at all times that its representatives are fit and proper. In practice that means:

• checks before appointment: references, the central register of debarred persons, criminal and credit checks with consent;
• an annual declaration from each representative;
• a channel for staff to report concerns;
• a documented decision whenever an incident comes to light, showing how seriousness, relevance and time were weighed.

Where a representative no longer meets the requirement, the FSP must act, and in serious cases that means debarment.

Exam pointers

• "Prima facie" means the incident is evidence, not a verdict.
• The three weighing factors are seriousness, relevance and passage of time.
• Loss of fitness by a key individual: notify immediately.
• New director who is not a key individual: satisfy yourself, then inform within 15 days.
• Meeting the minimum competence requirements says nothing about honesty, and nothing certain about general competence either.