U.K. regulator the Financial Services Authority will be getting far more involved in the recruitment decisions made by the firms it regulates, according to a letter it has sent to the CEOs of some 5,000 companies.

Firms that want to appoint someone to a “significant influence function” already have to seek approval from the regulator. But it has now warned that job candidates face a much tougher approval process to determine whether they are fit and proper.

The move is part of a ramping up of the FSA’s regulation of the individuals who hold key decision-making roles in financial firms. In August, it extended the scope of its enforcement in this area to include people employed by the parent or holding companies of firms it regulates, if their decisions or actions are regularly taken into account by the governing body of a regulated firm. That brought many overseas employees into its approval net for the first time.

The FSA used its letter to remind CEOs that it is their responsibility to assess whether a candidate is fit and proper to carry out a role. They should have “robust recruitment, referencing, and due diligence processes in place” to help them make that decision, the FSA said.

The regulator told firms it will be getting involved in the recruitment process at a much earlier stage. For example, it wants to conduct its own interviews of job candidates and even expects to know who a firm is thinking of putting on the short list for a job.

The FSA already interviews any staff member that a firm wants to appoint to a significant influence role. In the year to October 2008 it interviewed 172 people, 18 of whom subsequently withdrew their application. That fail rate “shows there is considerable scope for some firms to be more robust in their own recruitment processes,” the FSA said.

Graeme Ashley-Feen, FSA director of permissions, decisions, and reporting, said: “It is crucial that at a time when effective governance has never been more important, candidates have the right levels of competence and capability to perform these senior roles and that they are fully aware of their responsibilities.”