The company file is usually the easy half. The half that decides the timetable is the set of individual forms behind it: one per director, one per senior manager with a controlled function, and one per person or entity holding a qualifying stake. Each of those people is assessed separately, and the assessment is personal. It follows the individual, not the licence.
Regulators tend to group the test into three questions, worded differently in each rulebook but recognisably the same. Is the person honest. Is the person competent to do the specific job being applied for. Is the person financially sound enough that the role does not create pressure to behave badly. A person can pass one and fail another. Someone with a clean record and twenty years in insurance can still be refused as head of dealing at a retail CFD firm, because competence is judged against the actual permissions requested, not against a general impression of seniority.
What honesty means on the form
Honesty is assessed through disclosure rather than assertion. The forms ask for criminal convictions, regulatory findings, refused or withdrawn applications elsewhere, directorships of companies that went into insolvency, disqualifications, civil judgments, tax defaults and dismissals for misconduct. In most regimes the applicant is also asked whether any of the above applies to any entity they controlled at the time.
The damage rarely comes from the underlying event. A ten year old bankruptcy, disclosed with an explanation, is survivable in most jurisdictions. The same bankruptcy, omitted and then discovered through a company registry search or a reference request, changes the file from a capital question into an integrity question. Supervisors treat non disclosure as evidence about the person's future conduct, which is exactly what the test is trying to predict.
Supporting evidence usually includes police or judicial record certificates from every country of residence over a look back period, a certified passport and proof of address, a full curriculum vitae with no unexplained gaps, professional references, and in several regimes a sworn declaration. Certificates from countries the applicant merely visited are not required, but time spent living abroad without a certificate is a common reason a file sits unprocessed.
Competence is judged against the permission, not the title
The competence limb is where business plans and people meet. If the application asks for permission to deal on own account and hold client money, the regulator expects to see someone with dealing and risk experience in the risk function, and someone who has run client money reconciliations in finance. If the application is for agency execution only, the profile changes. This is why the individual forms should be drafted after the permissions are settled, not before. Choosing the wrong permission set first and then hunting for people to justify it produces a file that reads as reverse engineered, and it usually is.
Two functions get the closest reading in trading firms. The compliance officer is expected to have real seniority, direct access to the board, and no reporting line that lets the commercial side overrule them. The money laundering reporting officer is expected to be a named person with the authority to file a report without asking the chief executive first. A firm that lists the same person as chief executive, compliance officer and MLRO in a business that plans to onboard thousands of retail clients is telling the supervisor that none of those functions will be done properly.
Fit and proper is not a one off gate. In most regimes the firm has a continuing duty to notify the regulator when a director's circumstances change, including a new conviction, a new insolvency or a departure. Missing that notification is itself a breach, and it is often what triggers the first supervisory visit.
Financial soundness, and why nominees fail it
Financial soundness looks at whether the individual is solvent, whether they can fund any commitment they have given to the company, and where their money came from. Shareholders face the heaviest version of this. A person taking a qualifying stake is asked to evidence the source of the funds being injected, with documents rather than a narrative: audited accounts, sale agreements, tax returns, bank statements showing the accumulation.
This limb is where paper directors collapse. The whole point of a nominee arrangement is that the named person does not decide anything, and a supervisor who suspects that will ask the director technical questions about the business in an interview. A director who cannot describe the firm's own execution model, or who has signed for a dozen unrelated financial firms across several jurisdictions, is a visible signal. In jurisdictions that take substance seriously it fails outright. In jurisdictions that do not, it fails later, when a bank or a card acquirer looks at the same structure.
The same test, run by everyone else
Founders often assume fit and proper ends when the licence is granted. It does not, because the counterparties a trading firm actually needs run their own version of it. A bank opening a corporate account performs know your business checks that reach through to ultimate beneficial owners and directors. A payment service provider underwriting a merchant does the same and adds directors to sanctions and adverse media screening. Liquidity providers and technology vendors run a lighter version before signing. None of these are regulators, and their decisions are commercial, but the inputs are close enough that a director who is marginal for a supervisor is usually marginal for a bank too. That mechanism is described in more detail in our note on which licences banks accept.
The practical consequence is that structuring a board around who is available, rather than who is credible, creates a cost that shows up much later as declined accounts and failed onboarding. It is cheaper to recruit for the test at the start. Building the plan and the board together belongs at the same stage of the project.
None of this is legal advice, and requirements differ sharply between regimes. Any firm approaching an application should take advice from counsel admitted in the jurisdiction it has chosen, and should assume every statement on an individual form will be verified.
"Most applications that stall do not stall on capital. They stall because a director left a company off the form and the regulator found it anyway."
— Alex Onta, Executive Director, SINGUARD
Key Takeaways
- Directors, senior managers and qualifying shareholders are each assessed individually, and the assessment follows the person rather than the company
- Non disclosure damages an application far more than the underlying conviction, insolvency or refused application would have
- Competence is measured against the specific permissions applied for, so settle the permission set before drafting individual forms
- Banks, payment providers and vendors run their own version of the same checks, so a marginal board creates commercial problems long after approval
Frequently Asked Questions
Does a past bankruptcy stop someone becoming a director of a licensed firm?
Not automatically in most regimes. Financial soundness looks at the current position, how long ago the event was, whether it was disclosed and what the person did afterwards. What tends to be fatal is failing to declare it, because that converts a solvency question into an honesty question.
Can one person hold the chief executive, compliance and MLRO roles?
Some regimes allow limited combinations in a very small firm, but combining the commercial head with both control functions is usually rejected for a retail trading business, because it removes the independence those functions exist to provide.
Is the fit and proper assessment repeated after the licence is granted?
Yes. Firms carry a continuing duty to notify changes in a director's circumstances, and any new appointment or change of control normally needs approval before the person takes up the role.
About the Author
Alex Onta is an Executive Director at SINGUARD. He built eTrader, the terminal, the mobile apps, eTrader Broker, Copytrading, Business and Community, along with the worldwide clustered-server infrastructure it all runs on, with his brother Roman Onta helping on the design, and he leads that division today. Together with Roman he builds the Prop Firm CRM, the Broker CRM, Scalegram and CopySignals, and the two of them carry worldwide compliance, payment processing and international business structuring side by side. He lives and works in Dubai for most of the year. Meet the executive duo leading Singuard's five divisions.