The Central Bank is consulting for the second time on corporate governance requirements for MiFID investment firms (the Requirements).

It published CP 120: Second Consultation Paper on the Corporate Governance Requirements for Investment Firms and Market Operators on 10 May 2018.

Its first consultation on this topic (CP 94: Consultation on Corporate Governance Requirements for Investment Firms) began in May 2015, following the Central Bank's 2012 thematic review of corporate governance in investment firms.

When the implementation of MiFID II and MiFIR was then delayed until 3 January 2018, the Central Bank decided to reserve its position until MiFID II was implemented.

The Requirements proposed in CP 94 have been revised and pared-back to take account of responses received to the 2015 consultation (see the Central Bank's Feedback Statement on CP 94 here), the Irish MiFID II Regulations, the MiFID II delegated acts and the Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders under CRD IV and MiFID II.


» an investment firm authorised under MiFID or MiFID II,

» a market operator authorised under MiFID or MiFID II,

» a non-retail investment intermediary authorised under the Investment Intermediaries Act 1995, provided that it is classified as either High Impact, Medium High Impact, or Medium Low Impact by the Central Bank Probability Risk Impact System (PRISM).

In line with the proportionality approach taken by the Central Bank in CP94, Firms designated as Low Impact will not be obliged to comply with the Requirements, but the Central Bank will encourage them to do so. Foreign-incorporated subsidiaries of an Irish Firm will also not be subject to the Requirements, but will be encouraged by the Central Bank to adopt equivalent good corporate governance practices.


The Requirements will take effect from 1 July 2019. No transitional period is provided for.


Defined as "the ability to exercise sound judgement and decision making independent of the views of management, political interests or inappropriate outside interests", the following factors must be taken into account by a Firm when assessing whether a non-executive director is "independent":

» whether he has any financial or other obligation to the Firm or its directors;

» whether he is/has been employed by the Firm or a by group entity in the past and what post(s) he held;

» whether he recently provided professional services to the Firm;

» whether he represents a significant shareholder;

» whether he has acted as an independent non-executive director (INED) of the Firm for extended periods;

» any additional remuneration that he has received in addition to his fee, and any related directorships or shareholdings in the Firm; and

» any close business or personal relationship he may have with any of the Firm's directors or senior employees.

Separately, CP 120 clarifies that a "non-executive director" for the purposes of CP120 is a director who does not have executive management responsibilities for the Firm or, in the case of a Firm which is part of a group, who may have executive management responsibilities assigned to him or her within the group.


The Requirements proposed by CP 120 deal with:

» Board Composition

» The Role of the Chairman

» Remuneration Committees (High Impact Firms only)

» Audit Committees

» Risk Committees


The Board must be of a sufficient size, and have sufficient expertise, to enable it to adequately oversee the Firm's operations.

A majority of the Board must comprise INEDs. However, if the Firm is a subsidiary, the majority of its Board may comprise the following:

» High Impact Firms

Group directors and INEDs provided that the Firm has at least 3 INEDs (in CP94, the Central Bank had proposed a minimum INED requirement of 2 for High Impact Firms, but this was revised upwards to align the requirement with the corresponding requirement for High Impact Credit Institutions).

» Medium High Impact Firms

Group directors and INEDs provided that the Firm has at least 2 INEDs.

» Medium Low Impact Firms

Group directors and INEDs provided the Firm has at least 1 INED.

The Central Bank will have the discretion to require that a Firm have a greater number of INEDs than specified above.


The Board of each Firm must have a Chairman who must:

» be an INED (if the Firm is a subsidiary, a group director can be appointed as Chairman instead) the same requirements apply if a deputy Chairman is to be appointed;

» either have relevant financial services expertise, qualifications and experience, or be required to undertake comprehensive, relevant and timely training.


» Must have an Audit Committee.

» Must have a Risk Committee.

» The same person cannot chair the Audit Committee and the Risk Committee.

» Must have a Remuneration Committee.

  • If the Firm is part of a wider group that has a Group Remuneration Committee, it may rely on that Committee if the Board is satisfied that it is appropriate to do so, and documents its assessment of such appropriateness. The Firm must also notify the Central Bank of that decision, and the Central Bank could still require it to establish its own Remuneration Committee.
  • The Chairman of the Board cannot chair the Remuneration Committee.
  • Where possible all members (and if not all, a majority) of the Remuneration Committee must be INEDs.


» Must have an Audit Committee.

» Must have a Risk Committee.

» If its Board has ≤ 5 members, the full Board (including the Chairman and CEO) can act as Audit Committee and/or Risk Committee, provided that it has prior written approval from the Central Bank to do so, and the minutes should reflect that the Board was sitting as the relevant Committee.

» If the Firm is part of a group which has a Group Audit Committee or Group Risk Committee, it can rely on those Committees provided that the Board is satisfied that it is appropriate for it to do so, and has documented its assessment of that appropriateness.


» Only Board members can be members of Committees.

» The Firm's Board is responsible for the oversight of each of its Committees.

» Non-executive directors (and especially INEDs) should play a leading role in these Committees.

» The Audit Committee and the Risk Committee must have at least one shared member.

» The Firm's Board must be satisfied as to the relevant expertise and skills of those appointed to each Committee, and that Committee members can commit appropriate time to their role.

» Firms must review and renew Committee membership with an appropriate frequency.

» Where an individual is a member of more than one Committee, that situation must be managed by the Firm to ensure that no one person exercises excessive influence or control over the activities of one or more Committees.

» Each Board and Committee must have clear written terms of reference, which must be reviewed at least annually to ensure their continuing appropriateness. Those reviews must be documented.


» The Chairman must be an INED.

» The Committee must comprise non-executive directors, at least one of whom must be an INED. Neither the Chairman nor the CEO can be a member, and may attend by invitation only, which attendance must be managed to preserve the Committee's independence.

» The Committee as a whole must have relevant financial experience.

» At least one member must have an appropriate qualification.

» The Committee must report its activities and decisions to the Board.


» The Chairman of the Committee must be a non-executive director or an INED.

» The Risk Committee must comprise a majority of nonexecutive directors or INEDs or a combination of both.


The consultation closes on 31 July 2018. When implemented, the Requirements will be conditions of authorisation granted by the Central Bank under Regulation 8 of the Irish MiFID II Regulations, or under Section 10(3) of the Investment Intermediaries Act 1995.

Any breach of the Requirements could lead to the imposition of administrative sanctions by the Central Bank, or the exercise by it of its powers in respect of pre-approval controlled function or controlled function holders.