MiFID investment firms, non-retail investment intermediaries, and MiFID market operators will be subject to the new Central Bank Corporate Governance Requirements for Investment Firms and Market Operators 2018 from 1 July 2019 (the Requirements).
The final Requirements were published this week, following two consultations (CP 94 in 2015, and CP 120 in 2018).
The Requirements are almost identical to those proposed by CP 120, which were summarised in our May 2018 Briefing: Corporate Governance Requirements for Investment Firms: 2nd Central Bank Consultation. The only small change relates to Audit Committees.
CP 120 proposed that the Audit Committees for all in-scope firms (High Impact Firms, Medium High Impact Firms, and Medium Low Impact Firms) comprise non-executive directors, at least one of whom must be an independent non-executive director (INED). The Requirements instead stipulate as follows:
- Medium Low Impact Firm: the requirement is as stated in CP 120 (i.e. the Audit Committee must comprise non-executive directors, at least one of whom is an INED);
- Medium High Impact Firm: the Audit Committee must comprise non-executive directors, the majority of whom are INEDs; and
- High Impact Firm: the Audit Committee must comprise nonexecutive directors, the majority of whom are INEDs.
As mentioned above, the Requirements will apply from 1 July 2019. There will be no transitional period after that date. Low Impact Firms are not obliged to comply, but the Central Bank has encouraged them to do so. Foreignincorporated subsidiaries of in-scope firms also need not comply, but are encouraged by the Central Bank to adopt equivalent corporate governance practices.