The Bill introduces:
- Updates to Standards of Conduct
- Updates to the Fitness and Probity Regime
- The Senior Executive Accountability Regime (SEAR)
- Reform and Expansion of the Regulatory Powers of the CBI.
i. Standards of Conduct
The CBI has cited the need to ensure that, in the public interest, individuals occupying key positions within Regulated Entities exercise their responsibilities with competence, diligence and integrity.
The Bill introduces:
- Business Conduct Standards
ii. Updates to the Fitness and Probity Regime
Regulated Entities will be required to verify, by way of a 'certificate of compliance' that they are satisfied that every person performing both 'controlled functions' and 'controlled executive functions'within their organisation are fit and proper to do so.
The CBI will also be granted authority to investigate the fitness and probity of each person falling within the scope of the regulations, for a time period of up to six years before the commencement of any investigation.
- Common Conduct Standards
- Additional Conduct Standards
Regulated Entities will be responsible for integrating these standards into their architecture, with the CBI being empowered to take enforcement action against firms and individuals who act in breach of the standards.
iii. The Senior Executive Accountability Regime ("SEAR")
The Bill empowers the CBI to require regulated entities to clearly delineate where responsibility and decision-making authority lie in their organisations. The goal of the regime is achieve transparency as to the responsibilities of each individual within regulated entities.
- Where the CBI considers that certain responsibilities must be assigned to senior executives, regulated entities will be required to assign those responsibilities only to senior executives within their organisations. Statements must also be produced by the Regulated Entity, clearly setting out the responsibilities assigned to each of the senior executives within their organisation.
- Regulated Entities will now be required to make clear the management structure of their organisation, in a way that identifies the lines of authority and accountability,.
- Persons who have an allocated responsibility for 'controlled functions' within a Regulated Entity will also have to take 'all reasonable steps in the circumstances' to ensure that the aspect of the affairs of the Regulated Entity for which they are responsible will not be carried out in contravention of existing financial services legislation. Persons found to have been responsible for breaches of this responsibility will be subject to potential enforcement action by the CBI.
iv. Reform and Expansion of the Regulatory Powers of the CBI.
The Bill also includes updates to the system of administrative sanctions available to the CBI.
The Bill makes provision for High Court oversight of administrative sanctions, including sanctions arrived at by way of inquiry, appeal, or agreement.
Building on the requirements of SEAR, pursuant to the Bill, the CBI will no longer be required to draw a 'participation link' between the alleged wrongdoing and the 'controlled function' holder before the imposition of administrative sanctions. This requirement had previously required the CBI to first conclude that the controlled entity itself had committed a regulatory breach, before it could pursue individuals within the controlled entity.
The Bill also sets out procedural guidelines for inquiries and the imposition of sanctions, as well as the relevant considerations for the CBI when imposing sanctions. These guidelines are derived primarily from pre-existing policy documents drafted by the CBI.
It will likely be late 2023 by the time the new regime takes full effect.
Please do not hesitate to contact James Roche, Eimear Burke, or Barry Fagan with any queries.
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