17. Common elements for the assessment of the individual and collective suitability of members of the management body

Unless otherwise specified in the Guidelines, the management body in its supervisory function or, where established, the nomination committee should ensure that the individual and collective suitability assessments of the members of the management body are carried out before they are appointed. They may liaise with other committees (e.g. risk and audit committee) and internal functions (e.g. human resources, legal or control functions). The management body in its supervisory function should be responsible for determining the final suitability assessments.

By way of derogation of paragraph 134 the individual and collective suitability assessments may be performed after the appointment of the member in any of the following cases for which the institution has provided duly justification:

• a. shareholders, owners or members of the institution nominate and appoint members of the management body at the shareholders ’ or equivalent meeting that have not been proposed by the institution or by the management body, e.g. slate system;
• b. a complete suitability assessment prior to the appointment of a member would disrupt the sound functioning of the management body, including as a result of the following situations:
• i. where the need to replace members arises suddenly or unexpectedly, e.g. death of a member; and
• ii. where a member is removed because he or she is no longer suitable.

The suitability assessments should take into account all matters relevant to and available for the assessments. Institutions should consider the risks, including the reputational risk, arising in the event that any weaknesses are identified affecting the individual or collective suitability of the members of the management body.

Where members are appointed by the g eneral shareholders’ meeting and w here the assessment of the individual and collective suitability of members has been performed before the general shareholders’ meeting, institutions should provide appropriate information on the assessment results to shareholders before the meeting. Where appropriate, the assessment should comprise various alternative compositions of the management body that can be introduced to the shareholders.

Where, in the duly justified cases referred to in paragraph 135, members are appointed by shareholders before an assessment of suitability is made, the appointment should be subject to the positive assessment of their suitability. In these cases, institutions should assess the suitability of the members and the composition of the management body as soon as practicable and at the latest within one month of the appointment of the members. If the subsequent assessment by the institution resulted in a member being considered not suitable for his or her position, the member and the competent authority should be informed without delay. Institutions should also inform shareholders about the assessment made and the need to appoint different members.

Institutions should ensure that shareholders have full access to relevant and practical information about the obligation that the members of the management body and the management body collectively must at all times be suitable. The information provided to shareholders regarding the suitability of the management body and its members should enable shareholders to take informed decisions and to address any shortcomings in the composition of the management body or its individual members.

Where some members are appointed by the management body, such assessments should be performed before they effectively perform their function. In the duly justified cases referred to in paragraph 135, the assessment of suitability may be performed after the appointment of the member. This should be done as soon as practicable but at the latest within one month from the date of appointment.

Institutions should take into account the results of the assessment of the suitability of the individual member of the management body when assessing the collective suitability of the management body and vice versa. Weaknesses identified within the overall composition of the management body or its committees should not necessarily lead to the conclusion that a particular member is individually not suitable.

Institutions should document the results of their assessment of suitability, and in particular any weaknesses identified between the necessary and the actual individual and collective suitability of members of the management body, and measures to be taken to overcome these shortcomings.

Institutions should transmit to competent authorities the outcome of the suitability assessments for new members of the management body, including the institution’s assessment of the collective composition of the management body in line with the specified procedures referred to in section 23. This should include the documentation and information listed in Annex III³² .

³² Please also refer to the draft RTS under Article 7(4) of Directive 2014/65/EU and draft ITS under Article 7(5) of Directive 2014/65/EU on the information to be provided at authorisation: http://ec.europa.eu/finance/securities/docs/isd/mifid/rts/160714-rts-authorisation_en.pdf and https://www.esma.europa.eu/sites/default/files/library/2015-1858_-_final_report_-_draft_implementing_technical_standards_under_mifid_ii.pdf. See also the Consultation Paper on the draft RTS on authorisation published by the EBA.

Institutions should, at the request of the competent authorities, provide additional information necessary for the individual or collective suitability assessment of the members of the management body. In the case of a re-appointment this information may be limited to relevant changes.