The Central Bank of Ireland (the “Central Bank”) published its programme of themed inspections (the “Programme”) on 14 December 2015. The Programme reflects a number of supervisory priorities for 2016 and builds upon the supervisory work in 2015 in the areas of cyber security, operational risk and pricing of investment firms.
The twelve planned themed inspections of the Programme will involve a review of the following:
- Outsourcing Arrangements: this will involve a review of service level agreements and operational arrangements with outsourcing providers for investment firms, fund managers and fund service providers.
- AIFM adherence to Programme of Activity.
- Client Asset Management Plans for Investment Firms.
- Production Costs of Investment Funds: we expect this to involve a review of Total Expense Ratio data ("TER"), with a focus on investment firms with particularly high TERs.
Director Time Commitment: there will be a continued focus on the time commitments of directors to ensure they have sufficient time to dedicate to their roles.
Risk Function: following the Central Bank’s 2015 themed inspections, this will involve a review of the risk culture within investment funds, with a particular focus on governance arrangements, responsibility and risk ownership.
Eligibility of Financial Indices for UCITS: this will involve a review of the use of financial indices as eligible investments for UCITS.
Information Technology Risk: following on from the Central Bank’s focus on cyber security in 2015, a review of the resilience of IT systems of investment firms and fund service providers will be carried out.
Suitability Assessment of Clients: the suitability assessment of clients undertaken by investment firms will be reviewed by the Central Bank.
Conduct and Client Information: this will involve an examination of the information provided to clients on an ongoing basis.
Hedging Arrangements: a review of hedging arrangements at share class level for investment firms will be carried out.
- Market Integrity: the practices of investment firms and fund service providers regarding market abuse and when dealing with insider information will be reviewed.
It is apparent that a review of governance, regulatory compliance and risk will play major roles in the Central Bank’s agenda for the coming year. Further, the Central Bank has highlighted that it is increasing its inspection activities on investment firms which are designated as low impact under its risk-based framework for the supervision of investment firms, PRISM.