On 1 September 2011, the Central Bank of Ireland (the "Central Bank”) published new fitness and probity standards (the “Standards”) for a person performing a prescribed “controlled function” (a “CF”) or a “pre-approval controlled function” (a “PCF”) in entities in Ireland that are regulated by the Central Bank (including collective investment schemes).
The Standards will be introduced as follows:
- from 1 December 2011, the Standards will apply to a person performing a PCF;
- from 1 March 2012, the Standards will apply to a person (other than a person performing a PCF) appointed to perform a CF (including offers of appointment and internal transfers of staff ); and
- from 1 December 2012, the Standards will apply to every person performing a CF (whenever appointed).
Each collective investment scheme was required to identify its PCFs in situ on 1 December 2011, and to provide the Central Bank by 31 December 2011 with a list of all PCFs (in this case, directors) in its organisation.
By 31 March 2012, each collective investment scheme will need to have completed an internal due diligence process to confirm compliance by persons holding those PCFs with the Standards.
A confirmation will then need to be provided by each collective investment scheme to the Central Bank that it is satisfied that each person occupying a PCF is compliant with the Standards and that it has obtained written agreement from each such person to abide by the Standards – this written confirmation may be signed by any Director of the fund.
In relation to the due diligence requirements outlined above it will be for each fund to determine the level of due diligence required for its purposes before it is in a position to confi rm to the Central Bank that it is satisfied that the relevant PCF meets the Standards. One approach that might be adopted is as follows – a fund company would require the following from each of the Directors:
- to confirm in writing that his/her biographical details set out in the most recent Prospectus of the relevant fund are accurate;
- to respond in writing to the queries set out in Section 5.1 – 5.21 of the new Individual Questionnaire which was published by the Central Bank, (for example; “5.1 - A person is required to be honest, ethical, act with integrity and be financially sound. In this regard, have you any information to disclose regarding a material issue or do you have any concerns about your ability to perform the relevant function?” and “5.10 - Have you ever, in any jurisdiction, been the subject of any civil penalty enforcement action taken by a regulatory authority under any law?”);
- to confirm in writing whether he/she has any other directorships; and
- to confirm that he/she is capable of conducting the function of non-executive director of the company and has adequate time to perform that function having regard to other directorships/ responsibilities that he/ she may have.
The key question will be whether any matter disclosed would adversely affect the Director’s ability to perform its function to a material degree. The fund should also independently carry out the following steps:
- check the website of the Central Bank and any other relevant regulatory authority to determine whether the Director has been subject to regulatory actions;
- check the website of the Companies Registration Office to determine whether any restrictions or disqualification orders have been made in respect of the Director; and
- check publicly available sources to determine whether a judgement debt has been registered against the person in Ireland. Where the Director has lived outside of Ireland for more than 6 months in the past 5 years, the fund should ask him/her to provide an equivalent check from a publicly available source in that jurisdiction.