Employees of U.S. financial firms that do business in London could have to ask the U.K.'s regulator to approve their suitability for the job under a new scheme.

The Financial Services Authority already has a strict program of approving key personnel at the country’s financial firms. But it has now extended the scheme to cover staff from overseas parent companies too.

Regulatory approval in another jurisdiction would not exempt staff from the need to be passed as “fit and proper” by the FSA, the regulator's new policy says. Companies have a six-month window to work out which employees might be affected and to apply for clearance where necessary.

The regime covers people who exert “significant influence” at a firm regulated by the FSA. Last year, the regulator said it wanted to extend the scope of the scheme to put greater emphasis on the role of senior management, including non-executive directors. Its new policy does that, but it also extends its coverage to the U.K. branches of overseas firms that are based outside the European Economic Area.

The FSA says it expects firms to be able to identify anyone employed in their parent company who exercises significant influence. But it is willing to talk to firms that are not sure whether their staff are affected, before they submit an application.

Candidates who are refused approval are not allowed to exercise significant influence over an FSA-regulated entity. If they are approved, and then breach the FSA’s rules of conduct they can be fined and have their approval revoked. All decisions to refuse or revoke approvals are public, which means that the scheme “may also have consequences for the individual in their home state,” the regulator says.

The FSA says it thought about introducing “grandfathering” clauses to exempt people approved by other regulators and considered waiting until it could work in tandem with other agencies. But it decided that this “would increase the costs of the exercise, and due to the time taken to get international consensus, would delay implementation, with limited additional benefit.”

Since last October the FSA has carried out 115 interviews for “significant influence” posts at what it calls high-impact firms. Nine applications were withdrawn as a result.

Graeme Ashley-Fenn, director of the permissions, decisions, and reporting division at the FSA, said: “It is important that directors and senior managers at firms understand their regulatory obligations and have the relevant competencies and experience to carry out their roles with integrity.”

The changes come into effect on Aug. 6, 2009, with a transitional period of six months.