How should a fund management company assess the suitability of its service provider’s employees, or its sub-contractors?
last revised 12 October 2021
MAS recognises that there could be operational difficulties in assessing subcontractors for the purpose of meeting the expectations in the MAS’ Guidelines on Outsourcing. MAS does not expect FIs to directly assess all sub-contractors, as they may not necessarily have direct contractual nexus. Nonetheless, an FMC are expected to satisfy itself that its main service providers have acceptable governance process when appointing and relying sub-contractors, especially when the outsourcing arrangement between the FMC and the main service provider is material.
Some relevant factors to consider could be whether there is proper monitoring of service standards of sub-contractors; and service providers’ track record of dealing with subcontractors when service standards fall below thresholds. An FMC should also satisfy itself that its service providers have suitable hiring and screening policies for their employees. This may require a higher degree of screening for employees in material outsourcing arrangements and/or in positions to handle sensitive information.