18 March 2021
They did so by looking at a list of criteria (Article 10.2, SFA Handbook, 2020/21), such as whether or not he had fallen foul of certain rules and laws (he had, in fact, been in prison at one time). But the SFA Board also 'reserves discretion' to take into account any other factors, above and beyond those in the list. In other words, to retain the discretion to make judgements on the basis of character, or anything else they may consider relevant (Section 10.2, SFA Handbook, 2021).
In his case, it seems that they used that discretion to discount the fact of his conviction, in the face of other evidence of his good character. So discretion can cut both ways; the key point is that it is there, and the process cannot be, entirely, a tick-box exercise.
In the UK financial services industry, the 'fit and proper test' is a very big deal. Anyone in a senior position, in a regulated financial company (which includes nearly all of them, and certainly all of them that deal directly with the public) has to be certified by the company and by the Financial Conduct Authority (FCA) as 'fit and proper' to exercise senior-level control over the business.
The FCA follows an approach similar to that of the SFA. They set out a (quite long) list of possible transgressions that can be relatively easily confirmed or denied by examining the records of various bodies: breaches of the law, compliance with frameworks of professional standards, and so on. But they also, like the SFA, take care to say that this list is not exhaustive; and they explicitly introduce considerations that relate to a person’s character. In fact, they say that the most important considerations are a person’s "honesty, integrity and reputation" (Paragraph 1.3.1, FCA Sourcebook, 2021).
It is easier, especially when people who are distressed at not being assessed as 'fit and proper' might want to challenge a decision, to rest on empirically verifiable factors such as whether or not a person has been in breach of a law or a professional code. Either they have, or they have not — it is not a matter of judgement or opinion.
Issues of character, however, are more nuanced and more difficult. There are many examples of people who comply with all the rules but are dishonest or lacking in integrity. Even FIFA (to continue with the football angle) which ejected its President from office over a very serious ethical crisis in 2015, possessed an ethics committee, which was presumably satisfied that the rules were being followed.
Most businesses think about ethics in terms of duties (compliance) or consequences (calculations of benefit and harm and the trade-offs that follow, for example a wage rise might reduce shareholder dividends).
The first approach is mainly associated with the philosopher Immanuel Kant, the second with Jeremy Bentham, and the utilitarians. Both approaches are susceptible to the dominant ways of thinking in contemporary business, in that they can be handled empirically (with a bit of effort) by putting in place procedures and doing calculations. Most businesses are very comfortable with these ways of thinking, as they use them for lots of things already, like organising production or dealing with customer complaints. The third and most ancient way of thinking about ethics derives from the idea that ethics are a reflection of character. Aristotle, who invented ethics, took this view (as did Plato).
This can all begin to sound alarmingly judgemental and even preachy. Who are we to judge another person’s character? But we do it all the time in everyday life: 'I just don't trust her', 'he's a bad lot', or even 'my word is my bond', to quote the old City of London saying. What is that if not a statement about character?
I argue that the best efforts of regulators to remove considerations of character cannot ever succeed entirely: something Aristotle figured out a long time ago. Some element of judgement must remain. It is not difficult to think of extremely prominent public figures who are unapologetic tellers of lies.
It is interesting to wonder whether such people would be considered 'fit and proper'. They might pass the tick box test of giving yes or no answers to questions about formal transgressions of codes and laws; but would they be considered as having 'honesty, integrity and reputation'? That is a much harder question to answer, as Aristotle would have been the first to acknowledge; and I suspect that the people employed to deal with these things are quietly hoping that those prominent figures never apply for a senior job in financial services (or, come to that, to be the manager of a Scottish football team).
Owen Kelly is the Director of Engagement at the University of Edinburgh Business School.