The Central Bank of Ireland has revealed in its “Strategic Plan 2013 – 2015” how it proposes to effectively regulate financial institutions in Ireland over the next three years. The plan indicates that the Central Bank intends to continue to protect consumers “through risk-based supervision underpinned by a credible threat of enforcement.” The Central Bank has said it will continue to use its enforcement powers to the fullest extent. This means holding both individual employees and institutions accountable for regulatory non-compliance. The Central Bank says that if an individual is “at the core” of a suspected breach, they will be held accountable personally.
A range of administrative sanctions are available to the Bank where an individual has committed a regulatory breach. The most severe of these are suspension or removal of the individual from the institution. Criminal sanctions are also available. However, while individuals should ensure that they are fully aware of their statutory obligations, it is likely that the Central Bank will only prosecute an individual in cases involving very serious breaches.
New Legislation to increase fines and encourage whistle-blowers
The Central Bank expects legislation to be introduced in Autumn of this year enabling suspension of a firm for 12 months or the revocation of its ability to practise on foot of a regulatory breach. Financial penalties for breaches will double from €5 million to €10 million or 10% of turnover. The legislation will also provide protection for whistle blowers.
The plan for supervision and enforcement
The Central Bank’s Strategic Plan reveals that it will continue to proactively supervise firms through its Probability Risk and Impact System (PRISM) framework. This means that it will continue to focus its attention primarily on “high impact” firms that are likely to have an influence on the stability of the financial system or the consumer. Themed inspections of smaller firms will also continue.
New Director of Enforcement, Derville Rowland, who replaced Peter Oakes on 11 April 2013, was critical of the failures by two firms who have entered into settlement agreements so far this year to have adequate and effective systems and controls in place to ensure compliance.
The firms in question were reprimanded and fined €65,000 and €90,000 for:
- a failure to comply with requirements contained in the Consumer Protection Code (2006) and the Handbook for Authorised Advisors and
- a failure to maintain insider lists in accordance with the Market Abuse Regulations (SI 342/2005).
It is noteworthy that this is the third settlement agreement arising from a breach of the Market Abuse Regulations and Market Abuse Rules. The first two settlements occurred in late 2012. This shows that the Central Bank is focusing attention on market abuse. Prior to 2012, the Irish Stock Exchange was responsible for monitoring compliance in this area, but it now falls within the competence of the Central Bank.
Regulated firms and those who work for them should bear in mind the Central Bank’s established approach, which is to take into account whether the firm self-reports the issue, the level of cooperation and the steps taken to remedy the breach, when penalising errant firms and individuals.