The “Fitness and Propriety ” criteria make reference to requirements for evaluating managers, directors and shareholders. Particularly, the ability to fulfil their duties (“fitness”) as well as their integrity and suitability (“propriety”) are examined.
This concept is a standard in corporate governance of financial institutions. On 29th September 2020, the Financial Services Commission (FSC) of Mauritius issued a revised guideline on “Fitness and Propriety”. The revised guidelines were rolled out to define the criteria to be considered by the FSC in assessing the “fitness and propriety” of an applicant/licensee.
This assessment involves applicant/licensee’s internal policies, procedures and controls. Applicants/licensees must remain “fit and proper” at all times and any change in the appropriateness circumstances must be promptly notified to the FSC. An initial “fit and proper” test will be carried out when an applicant/licensee applies for a licence or requests any other authorisation from the FSC.
The failure by a relevant person to meet any one of the criteria set by the FSC may not lead to an automatic refusal of an application.
The Fitness and Propriety Test
According to Section 20 of the FSA, the FSC considers that a person is “fit and proper person” when consideration is made about his “ability to perform the relevant functions properly, efficiently, honestly and fairly” and his “reputation, character, financial integrity and reliability”.
The purpose of the fitness and propriety test is to:
- establish an international benchmark for licensing and for ongoing regulation of licensees/applicants;
- protect the interests of investors by deterring dishonest, incompetent, unskilled or otherwise inappropriate operators in Mauritius;
- encourage high standards of market conduct;
- encourage a high level of confidence amongst those using (and those considering using) Mauritius as a base for their operations;
- deter the abuse of Mauritius and of its financial markets; and
- promote a business environment that meets acceptable international standards.
The concept of “fit and proper” is an open-ended one and is aimed at ensuring sound conduct of business in the financial services sector. Regulated entities are required to reflect the elements of these new guidelines in their internal policies, procedures and controls.
These entities must apply them in their assessment of persons who manage, control, direct, own or perform key functions in a regulated entity. In addition, these entities must take the measures necessary to ensure that fitness and propriety are met on a continuous basis.