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BOARD OF THE BANK OF LITHUANIARESOLUTION
ON THE AMENDMENT OF THE RESOLUTION NO 03-181 OF THE BOARD OF THE BANK OF LITHUANIA OF 14 NOVEMBER 2013ON THE APPROVAL OF THE GUIDELINES ON THE ASSESSMENT OF MEMBERS OF THE MANAGEMENT BODY AND KEY FUNCTION HOLDERS OF THE FINANCIAL MARKET PARTICIPANTS SUPERVISED BY THE BANK OF LITHUANIA
12 September 2017 No 03-142
Vilnius
The Board of the Bank of Lithuania has r e s o l v e d:
To modify the Annex to the Guidelines on the Assessment of Members of the Management Body and Key Function Holders of the Financial Market Participants Supervised by the Bank of Lithuania approved by the Resolution No 03-181 of the Board of the Bank of Lithuania of 14 November 2013 and recast as follows (appended).
Chairman of the Board / Vitas VasiliauskasAPPROVED by
Resolution No 03-181 of the Board of the Bank of Lithuania of 14 November 2013
GUIDELINES ON THE ASSESSMENT OF MEMBERS OF THE MANAGEMENT BODY AND KEY FUNCTION HOLDERS OF THE FINANCIAL MARKET PARTICIPANTS SUPERVISED BY THE BANK OF LITHUANIA
I. GENERAL PROVISIONS
1. The Guidelines on the assessment of members of the management body and key function holders of the financial market participants supervised by the Bank of Lithuania (hereinafter Guidelines) define the main principles and processes to be observed by financial market participants supervised by the Bank of Lithuania and by the Bank of Lithuania in assessing the suitability of members of the management body (hereinafter – members of the management body) and (or) key function holders of the financial market participants supervised by the Bank of Lithuania (hereinafter – financial market participants).
2. The Guidelines shall apply to the financial market participants in respect of whom legal acts of the Republic of Lithuania regulating their activities establish the requirements for the reputation and (or) qualification and experience of members of the management body and (or) key function holders. In respect of a financial conglomerate the supplementary supervision whereof is carried out by the Bank of Lithuania pursuant to the Republic of Lithuania Law on the Supplementary Supervision of Entities in a Financial Conglomerate (Valstybės žinios (Official Gazette) No 120-4433, 2004) the Guidelines mutatis mutandis shall apply to a parent (holding) company or to a mixed financial holding company.
3. Terms used in the Guidelines:
3.1. Member of the management body – as defined by legal acts regulating the activities of the financial market participant, when requirements for the reputation and (or) qualification and experience of the person holdings such position are laid down by legal acts regulating the activities of the financial market participant. The board and supervisory board members and the head of administration shall always be deemed to be the members of management bodies;
3.2. Key function holder – an employee or another person of the financial market participant the requirements for whose reputation and (or) qualification and experience are laid down by legal acts regulating the activities of the financial market participant and who is not deemed to be a member of the management body within the meaning of subparagraph 3.1 of the Guidelines, unless this term is defined otherwise by legal acts regulating the activities of the financial market participant. Persons, who perform only the insurance broker’s or financial broker’s functions, shall not qualify as the key function holders;
3.3. Policy on the assessmentof the suitability of members of the management body and key function holders – means all measures and procedures provided for in the internal documents of the financial market participant aimed at assessing the suitability of members of the management body and key function holders;
3.4. Other terms used in the Guidelines shall have the meanings assigned to them by laws regulating the activity of financial market participants.
4. The Guidelines have been drafted in observance of the Guidelines on the assessment of the suitability of members of the management body and key function holders of the European Banking Authority of 22 February 2012.
II. ASSESSMENT BY THE financial market participants
5. Assessment of the initial and ongoing suitability of members of the management body and key function holders should primarily be the responsibility of the financial market participant.
6. The financial market participant shall assess the suitability of members of the management body and (or) key function holders on the basis of the criteria set out in Sections V, VI and VII of the Guidelines and the Policy on the suitability of members of the management body and (or) key function holders approved by the financial market participant (if any), as well as in observance of the principle of proportionality.
7. The assessment of the suitability of the member of the management body and (or) key function holder of the financial market participant should be done before he (she) takes up his (her) position and the process and results of the assessment should be documented.
8. After certain events specified in Sections V, VI or VII of the Guidelines that might affect the suitability of the member of the management body and (or) key function holder, the financial market participant must reassess the suitability of the members of the management body and (or) key function holders in order to verify their continuous suitability. In such case the assessment may be limited to examining whether the member of the management body and (or) key function holder remains suitable taking into account the relevant event or changes due to which the reassessment is carried out.
9. If the financial market participant decides that a person is unsuitable to hold the position of the member of the management body and (or) to perform the key functions, such person shall not be appointed to the respective position, and where such person has already been appointed – the appropriate measures shall be taken to replace such person. If the financial market participant, having performed the reassessment, concludes that the member of the management body and (or) key function holder is no longer suitable, the financial market participant shall immediately take the appropriate measures (e.g., training of certain or all members of the management body and (or) key function holders of the financial market participants to ensure sufficent general qualification and experience of members of the management or supervisory body; redistribution of responsibilities and functions; replacement of relevant persons by other person(s)) to rectify the situation.
10. A financial market participant, when taking measures in the case referred to in paragraph 9 of the Guidelines, shall consider the particular situation, possible consequences, proportionality of measures used and applicable legal acts.
III. POLICY ON THE ASSESSMENT OF SUITABILITY OF members of the management body AND key function holders OF THE financial market participants
11. Credit institutions and insurance companies should draft the policy on the assessment of the suitability of members of the management body and, if applicable, of the key function holders. Provisions of this Section for other financial market participants shall be recommended, but not mandatory.
12. The internal documents of assessment of the suitability of members of the management body and, if applicable, of the key function holders of the financial market participant shall cover at least the following aspects:
12.1. a committee, or any other structural unit or person responsible for the assessment of members of the management body and (or) key function holders. If a supervised financial market participant belongs to a financial conglomerate, a committee or structural unit referred to in this subparagraph may be set up and a person may be appointed in a financial holding company, or in a mixed financial holding company;
12.2. internal procedures applied to assess the suitability of a member of the management body and (or) key function holder;
12.3. qualification and experience, as well as abilities and skills that are mandatory for a relevant member of the management body and (or) key function holder;
12.4. information and data to be provided by the person being assessed to the financial market participant who performs the assessment;
12.5. measures and procedures according to which the person referred to in subparagraph 12.1 of the Guidelines communicates the results of the assessment of suitability of a member of the management body and (or) key function holder to the body electing or appointing them (also including the general meeting of shareholders or a meeting of members), and the requirements for holding the particular position.
12.6. the cases in which the suitability of members of the management body and (or) key function holders are reassessed and measures aimed at identifying such cases. The measures referred to in this subparagraph shall cover the requirement for a member of the management body and (or) key function holder to notify of all changes likely to affect the suitability of such person. A financial market participant shall have the right to establish the obligation for a member of the management body and (or) key function holder to notify annually of all changes that are likely to affect the suitability of such person;
12.7. the training possibilities provided by the financial market participant, where members of the management body and (or) key function holders need a special and (or) additional training or development.
IV. ASSESSMENT BY THE BANK OF LITHUANIA
13. The Bank of Lithuania shall assessthe suitability of members of the management body and (or) key function holders of the financial market participant in observance of legal acts regulating the activity of the financial market participant, criteria set out in Sections V, VI and VII of the Guidelines and the principle of proportionality, i.e. the relevance of the particular financial market participant in the financial system of the Republic of Lithuania and among its peers, the significance of position held by the person or of the position to which the person is nominated for election or appointment, the decision-making powers and related risks, as well as other circumstances.
14. The Bank of Lithuania shall assess the suitability of members of the management body and (or) key function holders in the cases stipulated by legal acts regulating the activities of the particular financial market participant, or when serious doubts arise about the suitability of the particular member of the management body and (or) key function holder (e.g., a member of the management body or a financial market participant disregards the instructions, obligations or other mandatory measures established by the Bank of Lithuania, a financial market participant is repeatedly subject to sanctions, etc.).
15. In the cases stipulated by legal acts, or at request of the Bank of Lithuania, a financial market participant must provide all information necessary for the assessment of a member of the management body and (or) key function holder specified by legal acts regulating the activity of the particular financial market participant, a questionnaire of a member of the management body and (or) key function holder of the financial market participant supervised by the Bank of Lithuania (Annex to the Guidelines), results of performed assessment of a member of the management body and (or) key function holder of the financial market participant, inter alia covering the assessment of all circumstances referred to in Sections V, VI and VII of the Guidelines. At request of the Bank of Lithuania, a financial market participant must also provide other information significant for the assessment.
16. When assessing the suitability of a member of the management body and (or) key function holder, the Bank of Lithuania may interview these persons. The interview process may be used to assess the management body member’s and (or) key function holder’s qualification and experience, knowledge, skills and their application, ability to perform the functions linked with relevant positions, understanding of legal acts regulating the activities of a particular financial market participant and other circumstances referred to in sections VI and VII of the Guidelines. The interview shall take place in accordance with the procedure set forth by the Bank of Lithuania.
17. If during the interview conducted by the Bank of Lithuania serious doubts arise about the qualification and experience of a member of the management body and (or) key function holder, the Bank of Lithuania shall have the right to:
17.1. notify the financial market participant of the existing doubts and require the reassessment of the suitability of a member of the management body and (or) key function holder;
17.2. obligate the financial market participant to take measures, as specified in paragraph 9 of the Guidelines.
17.3. take other actions provided for by legal acts.
18. If during the interview it is established that the qualification and experience of a member of the management body and (or) key function holder is no longer suitable for holding the position, the Bank of Lithuania shall, in accordance with the procedure set by legal acts, object the appointment of such person to the relevant position, and if the person is already appointed – recognise such person as unsuitable for the position concerned.
19. When carrying out the assessment of suitability of a member of the management body and (or) key function holder referred to in paragraph 16 of the Guidelines, the Bank of Lithuania, inter alia, shall take into account the ability of the person, who is being assessed, to adopt decisions, strategy, vision, perception of the financial market participant’s vision, ability to assess the risk, independent thinking, as well as other qualities required for holding the particular position.
20. The Bank of Lithuania may take into consideration assessments of the same person carried out by other institutions or persons.
21. A person, who provides incomplete or false information required by legal acts and (or) by the Bank of Lithuania, may not be a member of the management body and (or) key function holder.
22. If measures taken by the financial market participant in accordance with provisions of paragraph 9 of the Guidelines are insufficient, the Bank of Lithuania may obligate the financial market participant to take other measures specified in paragraph 9 of the Guidelines and (or) in the cases and in accordance with the procedure set by legal acts regulating the activities of the financial market participant give instructions to perform other actions and (or) decide on the imposition of sanctions.
V. REPUTATION ASSESSMENT CRITERIA
23. A person should be considered to be of good repute if there is no evidence to suggest otherwise and no reason to have reasonable doubt about his or her good repute. All relevant information available for the assessment should be taken into account regardless of the country of occurrence of any events significant for the assessment.
24. A person’s reputation should be assessed taking into account all circumstances. The cumulative effects of more minor incidents, which individually do not impinge on a member’s reputation but may in sum have a material impact, should be considered.
25. A person’s reputation should be assessed taking into account any criminal or relevant administrative records, considering the type of conviction or indictment, the level of appeal, the punishment received, the phase of the judicial process reached and the effect of any rehabilitation measures. The surrounding, including mitigating, circumstances and the seriousness of any relevant offence or administrative or supervisory action, the time period and the member’s conduct since the offence and the relevance of the offence or administrative or supervisory action to the proposed role should be considered.
26. A person should not be considered to be of good repute if his or her personal or business conduct gives rise to any material doubt about his or her ability to ensure the sound and prudent management of the financial market participant.
27. A particular account should be taken of the following factors, which may cast doubt on a person’s good repute:
27.1. conviction or prosecution of a criminal offence in particular:
27.1.1. offences under the laws governing the activities of banks or financial institutions, insurance activity or markets in financial instruments, or activity concerning securities markets or securities or payment instruments, including laws on the prevention of money laundering, market manipulation, or insider dealing;
27.1.2. offences of dishonesty, fraud, or financial crime;
27.1.3. tax offences;
27.1.4. other offences under legislation relating to companies, bankruptcy, insolvency, or consumer protection;
27.2. relevant current or past investigations and (or) procedural or other enforcement actions or administrative sanctions imposed on a person being assessed for non-compliance with provisions of legal acts governing the activities of banks or other financial institutions, insurance activities or activities of other financial market participants, markets in financial instruments, payments or any financial services;
27.3. relevant current or past investigations and (or) procedural or other enforcement actions imposed by any other regulatory or professional bodies for non-compliance with any relevant provisions of legal acts and (or) internal procedures;
27.4. any evidence that a person being assessed has not been cooperative in its dealings with the Bank of Lithuania, supervisory or regulatory authorities, has failed to provide all necessary information, or provided false information;
27.5. refusal to provide to a person being assessed any registration, authorisation, membership, or license to carry out a trade, business, or profession; or revocation, withdrawal, or termination of such registration, authorisation, membership, or license; or expulsion by a regulatory or government body from any organisation;
27.6. any dismissal of a person being assessed from employment or any responsible position or position based on trust, or in a similar situation, or having been asked to resign from employment in such a position;
27.7. disqualification by competent authority from acting as a person who directs the business of a legal person;
27.8. any information confirming that a person being assessed defaults or defaulted on credit obligations;
27.9. financial and business performance of legal persons owned or directed by a person, or legal entities in which the person directly or indirectly held or holds a qualifying holdingof the authorised capital and (or) a proportion of the authorised capital, any rehabilitation, bankruptcy and winding-up proceedings and with special consideration whether the person being assessed has contributed (and if yes – how) to the situation that had lead to the proceedings;
27.10. declaration or initiation of the natural person’s bankruptcy in respect of the person;
27.11. civil lawsuits, administrative or criminal proceedings, investments or exposures and loans taken out, in so far they can have a significant impact on the financial soundness of the person;
27.12. other significant circumstances.