The Central Bank of Ireland (the “Central Bank”) issued a consultation paper on 5 May 2015 entitled ‘CP94 Consultation on Corporate Governance Requirements for Investment Firms’ (“CP94”) with the aim of strengthening corporate governance standards and practices for all Markets in Financial Instruments Directive (“MiFID”) firms and all non-retail investment intermediary firms authorised by the Central Bank that are designated as High, Medium High or Medium Low Impact under PRISM.

The requirements will not apply to firms designated as Low Impact by the Central Bank, however, such firms are encouraged to adopt the new requirements when they come into effect.

Proposed Requirements

The proposed requirements that investment firms will be required to comply with under CP94  include the following:

  • Minimum board size
    • At least three directors.  
  • Composition of the board
    • A majority of independent non-executive directors.  
  • Chairman – Mandatory Appointment
    • Must be an independent non-executive director;
    • Must ensure communication between the executive and non-executive directors;
    • Must have relevant expertise, qualifications and experience for the role or be required to undertake relevant training;
    • May not perform the role of CEO while performing the role of Chairman; and
    • Role must be subject to reappointment on an annual basis.   
  • Role of the CEO
    • Main link between the board and the executive;
    • Must have relevant expertise, qualifications and experience for the role or be required to undertake relevant training;
    • Must have the necessary personal qualities, professionalism and integrity to fulfil the role; and
    • Contract should be reviewed at least once every 5 years.   
  • The frequency of board meetings
    • At a minimum, the board should meet at least four times in a year and at least once every six months.   
  • The role and composition of the risk committee;
    • There is an obligation to set up such a committee;
    • Independent non-executive directors must play a leading role;
    • Must have a shared member with the audit committee;
    • Should be composed of a majority of non-executive directors or independent non-executive directors or a combination of both;
    • The Chairman must be either a non-executive director or an independent non-executive director; and
    • Responsibilities include overseeing the risk management function.   
  • The role and composition of the audit committee
    • There is an obligation to set up such a committee;
    • Independent non-executive directors must play a leading role;
    • Must have a shared member with the risk committee;
    • Should be composed of non-executive directors including at least one independent non-executive director;
    • The Chairman must be an independent non-executive director; and
    • Responsibilities include monitoring the firm’s internal control, internal audit and I.T. systems. 

Additional requirements are also proposed for investment firms designated with a High and Medium High Impact rating under PRISM. 

These additional requirements include the following:

  • The board at a minimum must contain five directors;
  • The board must review its performance and that of its individual directors at least annually;
  • An evaluation by an external evaluator must take place every three years and be provided to the Central Bank;
  • A skills matrix must be put in place so that there is an appropriate skills mix across the board. New appointees to the board must also be assessed against this matrix; and
  • Subject to exceptions, these firms must all have an audit, risk, remuneration and nomination committees in place. 

The consultation process closed on 5 August 2015.