Ireland: Ireland To Introduce Individual Accountability Regime

Recent speeches by the Central Bank of Ireland's (the "Central Bank") Director of Enforcement (August 2018) and the Director of Securities and Markets Supervision (September 2018) highlight proposals for the adoption of policy "reforms assigning responsibility to senior personnel" in regulated financial service providers ("RFSPs") which will be modelled on the UK's Senior Managers and Certification Regime (the "SMCR").

The proposals target four areas of reform; (i) the introduction of high level standards of behaviour in the financial services industry, (ii) the establishment of a senior executive accountability regime, (iii) enhancements to the current Fitness & Probity regime (the "F&P Regime") and (iv) the unification of the Central Bank's enforcement process. The first, third and fourth proposals are to be applied to at all RFSPs, including investment funds and fund management companies regulated by the Central Bank. The second proposal for a senior executive accountability regime is intended, initially, to be limited in scope to banks, insurers and certain types of investment firms.

Although the Central Bank has acknowledged that the introduction and operationalisation of such reforms would be a "multi-year project" these appear, nonetheless, to be a key regulatory focus for the Central Bank. As such, early familiarisation with the proposals would be advisable to allow for a considered implementation of the reforms in due course.

POLICY REFORM – WHAT IS PROPOSED BY THE CENTRAL BANK?

In its response to the Irish Minister for Finance's request for a report on the behaviour and culture of Irish retail banks (July 2018), the Central Bank took the opportunity to outline its recommendations for an individual accountability framework comprising:

  1. standards of behaviour for RFSPs and the individuals working within them ("Conduct Standards") which set out the behaviour the Central Bank expects of RFSPs and their employees;
  2. a Senior Executive Accountability Regime ("SEAR") "which ensures clearer accountability by placing obligations on firms and senior individuals within them to set out clearly where responsibility and decision-making lies for their business";
  3. enhancements to the current F&P Regime to further solidify the obligation on firms "to proactively assess individuals in controlled functions on an ongoing basis"; and
  4. "a unified enforcement process, which would apply to all contraventions by firms or individuals of financial services legislation".

(i) Conduct Standards

The current regulatory framework for RFSPs provides for certain conduct standards. For example, under the F&P Regime the Central Bank has a "standard setting role" which allows it to impose statutory standards of fitness and probity for individuals in the financial services industry to follow. Under this regime, persons in senior positions are required to be competent and capable, act honestly, ethically and with integrity and be financially sound.

Under the reforms proposed, the Central Bank's standard setting role would be enhanced with the introduction of three sets of "non-sector specific, core common standards" to which RFSPs and individuals would be obliged to hold themselves; common conduct standards for all staff in RFSPs; additional conduct standards for senior management; and standards for businesses.

Common Conduct Standards for all RFSPs

"In the case of individuals working in RFSPs, it is proposed that they would be required to:

  • Act honestly, ethically and with integrity;
  • Act with due skill, care and diligence;
  • Be open and cooperative with the Central Bank and other regulators and deal with them in good faith;
  • Act in the best interests of customers and treat them fairly and professionally; and
  • Observe proper standards of market conduct."

Conduct Standards for Senior Management

"Recognising the specific responsibilities imposed on those in more senior roles, it is proposed that the following additional Conduct Standards be imposed on those in PCF roles [roles which require advance Central Bank approval (Pre-Approval Control Function or PCF roles)] or captured by the SEAR:

  • You must take all reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively;
  • You must take all reasonable steps to ensure that the business of the firm for which you are responsible complies with relevant regulatory requirements;
  • You must take all reasonable steps to ensure that any delegation of tasks for which you are responsible is to an appropriate person and that you oversee the discharge of the delegated task effectively; and
  • You must disclose promptly, proactively and appropriately any information of which the Central Bank would reasonably expect notice."

Standards for Businesses

"The proposed Standards for Businesses are consistent principles setting out in clear and simple terms the common standards that all firms, regardless of sector, must meet – they are to firms what the Conduct Standards are to individuals:

  • Professionalism, honesty, ethics and integrity: A firm must conduct its business professionally, honestly, ethically and with integrity.
  • Skill, care and diligence: A firm must conduct its business with due skill, care and diligence.
  • Market conduct: A firm must observe proper standards of market conduct, comply with relevant market codes and exchange rules, and not engage in or permit market manipulation.
  • Communications with customers: A firm must pay due regard to the information needs of its customers; make full disclosure to its customers of all relevant material information in a way which is clear, fair and not misleading; and seek from its customers information relevant to the product or service requested.
  • Customers' interests: A firm must act in the best interests of its customers and treat them fairly and professionally;
  • Customers: relationships of trust: A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment;
  • Management and control: A firm must take reasonable care to organise and control its affairs, systems (including risk management systems) and resources responsibly, effectively and in a manner appropriate to the business of the firm;
  • Financial prudence: A firm must maintain adequate financial resources and manage its affairs in a sound and prudent manner;
  • Clients' assets: A firm must arrange adequate protection for clients' assets when it is responsible for them;"

(ii) Senior Executive Accountability Regime or 'SEAR' (applicable only to banks, insurers and investment firms which underwrite on a firm commitment basis and/or deal on own account and/or are authorised to hold clients monies/assets, and third country branches of any of these three)

The Central Bank's proposals also recommend "reforms assigning responsibility to senior personnel" be adopted and that such reforms be modelled on the UK's SMRC, which the UK Financial Conduct Authority ("FCA") is currently rolling out to all firms following its introduction in March 2016 for banking firms.

The SEAR would allow the Central Bank to require every senior manager, which, broadly speaking, includes board members, executives reporting to the board and heads of critical business areas, to prepare a statement of responsibilities stating clearly the matters for which they are "responsible and accountable". Under the SEAR, in-scope firms would be obliged to put in place responsibility maps in respect of their senior managers, management and governance arrangements. The Central Bank considers that these requirements "would assist in assigning responsibility to individuals in a regulatory context and decrease the ability of individuals to claim that the responsibility for wrongdoing lay outside their sphere of responsibility".

(iii) Enhancements to the Fitness and Probity Regime

Improvements to the F&P Regime are also proposed in relation to RFSP's obligations vis-à-vis their controlled function ("CF") roles. Such improvements provide for the introduction of a "certification regime, which would oblige firms to certify on an annual basis that the individuals in question are fit and proper persons to perform their functions". Currently, under the F&P regime, RFSPs are recommended to carry out an annual audit of CF roles and obtain annual confirmations from those performing CF roles "of their awareness of, and compliance with, the Central Bank's F&P Standards". In relation to PCFs, RFSPs are currently required to submit an annual PCF confirmation return to the Central Bank confirming that each PCF is compliant with the F&P standards and that they continue to abide by those standards, as published by the Central Bank.

(iv) A Unified Enforcement Process

The Central Bank's reform proposals also include the consolidation, into one single legislative act, of the "full suite of relevant inspection and investigations powers" of regulatory agencies to assist in the elimination of issues caused by the currently fragmented nature of the framework. Furthermore, it is recommended that provision be made for the Central Bank to "pursue individuals directly for their misconduct rather than only where they are proven to have participated in a firm's wrongdoing" and that, "as with other requirements, a breach of the Conduct Standards would be subject to direct enforcement action".

TIMING – WHEN WILL THE REFORMS BE INTRODUCED?

Each of the proposed reforms, set out at (i)-(iv) above, require legislative change to empower the Central Bank to provide for their introduction. In line with the FCA's approach, the Central Bank would likely, following the publication of the necessary legislation, consult industry on the proposed policy reforms prior to their introduction and the issuance of any guidance to assist firms' compliance with the new/amended regimes. The introduction of these proposals is, therefore, unlikely to be imminent, however, in light of their potentially significant impact, firms would be well advised to stay abreast of any developments and begin considering any likely impact on their current structures.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Arthur Cox
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Arthur Cox
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions