Ireland proposes new fitness and probity regime for regulated firms
The government proposes that from 31 December 2023, all regulated financial services firms will have to certify the fitness and probity of individuals in any 'controlled function' role, including holding companies established in Ireland. Additionally, a senior executive accountability regime (SEAR) will apply from 1 July 2024 for certain types of entity, including credit institutions and investment firms that hold client assets.
The law, enacted on 9 March 2023, increases the transparency between regulated financial services providers (RFSPs) and the Central Bank of Ireland (the Central Bank), particularly in terms of where accountabilities lie in organisations. It will be implemented by the Central Bank, whose consultation paper notes that its approach is based on the principles of 'proportionality, predictability and reasonable expectations'.
The draft certification regulations require regulated firms to issue a certificate of compliance in respect of an individual in a 'controlled function' role in the firm. They must be satisfied on reasonable grounds that the individual complies with the Central Bank’s standard of fitness and probity. The individual must agree to comply with this standard and notify the firm without delay if they no longer comply. Certifications last for 12 months and individuals are not allowed to perform controlled roles without them.
The firm must maintain a record for each controlled function role-holder of the particular role held, the aspects of the affairs of the firm in which the individual is involved and the basis on which the firm is satisfied that the individual is fit and proper. Where the firm becomes aware that fitness and probity concerns may arise it must investigate and take 'appropriate action' without delay. Any relevant disciplinary action must be reported to the Central Bank within five business days. Firms must also maintain records relating to certification of all individuals in these roles for a period of six years after the individual ceases to perform the role.
'The new regime is a significant transformation project that will require regulated firms to review and amend their current governance procedures and internal policies', says law firm Eversheds Sutherland. 'This is a major task that will take a considerable amount of time to plan and implement. It is not simply a “compliance” project', it warns.
The consultation is open until 13 June 2023.
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