NYDFS Recommends Developing a Framework to Assess the Character of Senior Executives

The New York Department of Financial Services ("NYDFS") proposed guidance for financial institutions on conducting character and fitness reviews for directors, senior officers and managers.

In the proposed guidance, the NYDFS made clear its expectations that New York State banking organizations and non-depository financial institutions licensed or chartered under the New York Banking Law conduct reviews of upper management upon onboarding, and on an ongoing basis. The NYDFS explained that financial institutions should identify "sensitive issues, warning signs, and other indicators" that, if found during the vetting process of an individual, would warrant closer examination before taking further steps to onboard an individual.

Further, the NYDFS said that financial institutions should (i) report character and fitness assessment results to their boards of directors and chief compliance officers, and (ii) require personnel subject to such assessments to report any changes in material relevant to their character and fitness reviews.

Comments on the proposed guidance must be submitted by June 30, 2023.