The Central Bank of Ireland (CBI) has updated its procedures concerning fitness and probity investigations, suspensions, and prohibitions, as provided for in Part 3 of the Central Bank Reform Act 2010 (2010 Act), to align with provisions of the Central Bank (Individual Accountability Framework) Act 2023 (IAF Act).
This will impact those performing "controlled function" (CF) roles in regulated financial services providers (RFSPs).
Under Part 3 of the 2010 Act, the CBI may:
- investigate whether individuals meet the fitness and probity standards and whether they are of appropriate competence, honesty, and integrity to perform CF roles,
- in certain circumstances, suspend or prohibit individuals from CF roles.
Following amendments to Part 3 of the 2010 Act, regulations and guidance in relation to fitness and probity procedures have been updated. The updated regime includes:
- Central Bank Reform Act 2010 (Procedures Governing the Conduct of Investigations) Regulations 2023 (2023 Regulations)
- Fitness and Probity Investigations, Suspensions and Prohibitions: Guidance (April 2023) (2023 Guidance).
The 2023 Regulations and 2023 Guidance apply to all fitness and probity procedures beginning on or after 20 April 2023. They do not apply to procedures concluded before that date.
On 21 April 2023, the CBI wrote to various industry representative bodies notifying them of the changes.
Investigation of individuals who previously performed CF roles
The CBI can now investigate an individual who previously performed a CF role. However, they must have performed that role within the shorter of the following periods: (a) the period since 19 April 2023, and (b) the six years before the date on which an investigation is commenced.
Commencement of Investigation
A new statutory procedure has been introduced for the giving of notice of fitness and probity investigations. Where the CBI decides to investigate an individual's fitness and probity to perform a CF, it will notify the individual in writing by serving a Notice of Investigation. This must be done as soon as practicable after the decision is made to conduct the investigation.
The Notice of Investigation will include:
- the reasons for the CBI's opinion that there is reason to suspect the individual's fitness and probity to perform the relevant CF,
- a copy of material on which that opinion is based,
- a statement that any response to the Notice of Investigation will be taken into account if made within the specified period in the Notice. This period will be seven days, or such extended period as is necessary.
Suspension Notice
Where a person is, or has been, the subject of an investigation, the CBI may issue a Suspension Notice. This is a temporary, interim measure whereby the suspended person may not perform a CF, part of a CF or any CF in contravention of a Suspension Notice while the Notice is in effect. Suspension Notices confirmed by the CBI may now be appealed to the Irish Financial Services Appeals Tribunal.
The CBI may apply to the High Court (Court) to extend a Suspension Notice by up to six months at a time. This has increased from three months.
Investigation Report
The procedure for investigation reports has also changed to provide for the preparation and service of a draft report of the investigation followed by a final report.
When an investigation is completed, the CBI will consider any relevant information gathered or received during the investigation and prepare a draft report as soon as practicable. The CBI will send a copy of the draft report to the individual concerned. The individual will be able to make written submissions on the draft report. The CBI will consider any submissions received and will then finalise the Investigation Report as soon as practicable, having made any warranted revisions.
Discontinuance of Investigation
The CBI may discontinue an investigation with written notice at any point for various reasons, including:
- CBI is no longer of the view that there is reason to suspect an individual's fitness and probity to perform the relevant CF,
- CBI is no longer of the view that any reason to suspect the individual's fitness and probity to perform the relevant CF is sufficient to warrant an investigation,
- reasons of resources,
- policy reasons.
Prohibition
Where the CBI reasonably forms the opinion that an individual is not of the appropriate fitness and probity to perform a particular or any CF, or any part of a CF, a prohibition may be imposed (Prohibition), and a Prohibition Notice served on them. Prohibition Notices, which previously took effect on service, will now take effect only when confirmed by the Court or agreed in writing.
A Prohibition may:
- forbid the person from carrying out the CF or part of it,
- forbid the person from carrying out the CF or part of it in relation to any relevant entity, specified relevant entity/entities or class(es) of relevant entities,
- be imposed indefinitely or for a specified period.
A procedure has now also been introduced which allows the CBI or the individual concerned to apply to the Court for an order varying or revoking a Prohibition Notice that the Court previously confirmed.
Conclusion
The framework for individual accountability under the IAF Act is designed to provide greater governance, performance, and accountability in RFSPs. The 2023 Regulations and the 2023 Guidance provide welcome clarity on the CBI's expectations for the enhanced fitness and probity regime under the IAF Act. RFSPs and those performing CF roles should note the changes.
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.
