Fit and Proper Requirements for Directors in Regulated Industries
Many finance leaders set their sights on bank, insurance or super fund boards.
These are some of the most respected and best-paid board roles in Australia and New Zealand. They suit people with deep finance, risk and audit experience. And they often look for exactly the skills a CFO builds over a career.
But there is a step that catches some candidates off guard. Before you can take up a seat in a regulated industry, you will usually need to meet fit and proper requirements. Your skills, honesty and history are assessed, and the regulator may also be told about your appointment.
Most people pass without trouble. A few find late in the process that something in their past needs explaining. Knowing what is checked, and preparing early, avoids surprises.
This article covers what fit and proper means, the industries where it applies, what is checked, preparing your record, disclosure and board CV points. It is general information only. The rules change and differ between countries and sectors, so check the current requirements and get professional advice for your situation.
What fit and proper means
Fit and proper is a test of whether a person is suitable to hold a senior role in a regulated organisation.
In broad terms, it usually covers two areas:
Competence. Do you have the skills, knowledge and experience for the role?
Character. Are you honest, of good reputation and financially sound?
Regulated organisations are expected to assess their directors and senior executives against these standards, both before appointment and on an ongoing basis. In some cases, the regulator must be notified or may raise concerns about an appointment.
The test is not just a box to tick. Boards in regulated industries are expected to take it seriously, and regulators can act when they do not.
Industries where it applies
Regulators in Australia and New Zealand set fit and proper standards for directors and senior people in a range of financial services. The most common for finance leaders are:
Banks and other deposit takers, including credit unions and mutual banks
Insurers, including general, life and health insurers
Superannuation fund trustees in Australia, and some managed fund and KiwiSaver structures in NZ
In Australia, the prudential regulator sets standards for banks, insurers and super trustees. In New Zealand, the Reserve Bank sets requirements for banks and insurers, and other regulators cover parts of the financial markets. Other sectors, such as financial advice, credit and some health and gaming bodies, have their own suitability or probity checks.
Because the detail varies, always ask the organisation which standards apply to the role. See also super fund and investment committee board roles.
What is checked
The exact checks depend on the organisation and the rules, but they often include:
Identity and qualifications. Proof of who you are and the qualifications you claim.
Career history. Roles, dates and responsibilities, often checked against references.
Criminal history checks. Usually through a police check in each country you have lived in.
Bankruptcy and insolvency. Whether you have been bankrupt or involved in a failed company.
Director disqualification. Whether you have been banned or disqualified from managing companies.
Regulatory actions. Past investigations, enforcement action or bans by any regulator.
Professional body records. Any disciplinary action by your accounting or other professional body.
Reputation. Media searches and reference checks.
Conflicts of interest. Other roles or interests that could affect your judgement.
You will usually sign a declaration confirming the information is true. A false or incomplete declaration is often treated more seriously than the original issue.
How search consultants see fit and proper
When I worked in executive search, fit and proper questions sat in the background of every regulated board brief. Search firms knew the checks were coming, so we asked about anything that might come up well before the final stage.
What I learned is that most issues are manageable if they are raised early. A director of a company that later failed, an old dispute with a professional body or a past regulatory inquiry is not always a barrier. What caused problems was surprise. When something came out late, after the candidate had not mentioned it, the chair’s trust often went with it.
Candidates who were open from the start, with a short, factual explanation, usually fared far better.
Preparing your record
Start preparing before you apply.
Build a full career history. Exact dates, titles and entity names. Regulated boards check these closely.
List every directorship. Include small, family, not-for-profit and past roles. Note the status of each entity.
Check for failed entities. If any company you were a director or officer of went into administration or liquidation, prepare a short factual summary of your role and what happened.
Gather qualification evidence. Degree certificates and professional body membership.
Review your public record. Search your name. Know what a panel will find.
Line up referees. Choose people who can speak to your judgement, integrity and governance work. See board appointment references.
If you have lived overseas, allow time for police checks from other countries. They can take weeks.
Disclosure
The rule is simple: disclose early, disclose fully and explain briefly.
Example disclosure: “From 2014 to 2017, I was a non-executive director of a technology start-up that entered voluntary administration in 2018, after I had stepped down. I raised cash flow concerns with the board in 2016, and the board engaged advisors. I was not subject to any regulatory action. I am happy to provide more detail or a reference from the former chair.”
This kind of statement is clear, factual and calm. It shows judgement rather than avoidance.
If you are not sure whether something needs disclosing, ask the search consultant or the company secretary, or get legal advice. When in doubt, disclose.
Ongoing requirements
Fit and proper does not end at appointment. Directors in regulated industries are usually expected to:
Tell the board promptly about any change that might affect their status
Complete regular declarations, often each year
Keep their skills current through director training and sector updates
Manage conflicts as new roles or interests arise
Check what the organisation’s fit and proper policy requires before you join, as part of your board role due diligence.
Questions to ask before you apply
A few early questions save time for you and the board.
Which fit and proper standards apply to this role?
Does the regulator need to be notified of the appointment, and how long does that usually take?
What checks will the organisation run, and in what order?
Who should I speak to if I have something to disclose?
What ongoing declarations and training does the board expect?
The answers also tell you how mature the organisation’s governance is. A clear, confident reply is a good sign. Vague answers may be worth exploring further.
Board CV points
Your board CV should make the competence side of fit and proper easy to see.
Lead with relevant experience. Finance, risk, audit, capital and regulatory work.
Name regulated sector experience. Banking, insurance, super, funds management or other regulated businesses.
Show regulator engagement. Work with prudential regulators, auditors or supervisors.
List governance training. Director courses and ongoing development.
Keep dates exact. Mismatches between your CV and checks raise questions.
Example lines:
“Chief Financial Officer of a regional bank. Lead capital management, regulatory reporting and engagement with the prudential regulator.”
“Chaired the audit committee of a mutual insurer, overseeing a full review of the risk management framework.”
A quick self-check
Do you have an exact list of every directorship you have held?
Are there any failed entities, disputes or regulatory matters you would need to explain?
Could you write a three-sentence disclosure for each today?
Do you know which fit and proper standards apply to the boards you are targeting?
Your next step
Write your full career and directorship history this week, with exact dates. Note anything that might need disclosing and draft a short, factual explanation. Then check the current requirements for the sector you are targeting.
If you want help with your board CV, my board resume writing helps senior leaders present regulated sector experience clearly and accurately for bank, insurance and super boards.
If you are preparing for a regulated board role and want to plan your approach, book a complimentary Clarity Session.
