What is a fit and proper assessment?

A fit and proper assessment is a judgement, usually required by a financial regulator, of whether a person is suitable to hold a particular role. It typically looks at three things: honesty and integrity, competence and capability, and financial soundness. Firms carry it out before appointment and repeat it periodically for people in regulated roles.

Why does it matter once agents are in use?

Fit and proper regimes exist to make sure the people with authority in a firm are trustworthy and able. When agents start drafting decisions and executing routine work, part of a manager's capability becomes the ability to oversee those agents: to understand what they may do, who approves what, and what the record shows. A senior manager responsible for an operation that runs on agents but cannot explain how they are governed has a gap in the competence limb.

That does not make agent oversight a separate test. The point is that competence is judged against the role as it actually is, and the role has changed.

How does a fit and proper assessment work?

In the UK, the Senior Managers and Certification Regime places named individual accountability on senior managers and requires firms to certify certain staff as fit and proper. Other markets run similar regimes for directors and key function holders. The process usually includes:

• checks on criminal, regulatory and credit history;
• references from previous employers;
• evidence of qualifications, experience and training relevant to the role;
• a judgement by the firm, and in some cases approval by the regulator;
• periodic reassessment, often annually.

For a role that includes agent oversight, the competence evidence should now cover it: what the person has learned, how it was assessed, and whether the credential is current.

What is an example?

A bank appoints a head of retail operations whose area runs agents drafting account changes and holding payments above limits. In the fit and proper file, alongside experience and references, the bank records that the candidate holds a current certificate in overseeing agent deployments, checkable at source, and has completed the bank's briefing on its agent inventory. At the annual review, the bank confirms the certificate is still current.

How is it different from competency-based assessment?

A competency-based assessment asks one question: can this person do these tasks to the standard? A fit and proper assessment asks a wider one: should this person hold this role at all? Competence is one part of it; integrity and soundness are others. Evidence from competency-based and work-based assessment feeds the competence limb but does not settle the whole question.

It also differs from an AI risk assessment, which judges a system's use rather than a person's suitability. Management system standards such as ISO/IEC 42001 expect competence for AI roles to be defined and evidenced; how that fits with certifying agents is covered in ISO/IEC 42001 and agent certification.

Which terms are related?

• Named accountability: the principle that a specific person answers for an area.
• Needs assessment: finding gaps before appointment; see the AI literacy needs assessment template.
• Evidence of competence: the records the competence limb relies on.

For the wider topic, read AI literacy and certification for people who work with agents.