The aim of the review is to ensure that the Irish funds sector is resilient, its frameworks are future proofed and supportive of macro-prudential stability, while ensuring international best practice standards continue to be met. A multi-disciplinary review team (the team) has been established which draws on experience from both within and outside the Department of Finance (DoF). This team will engage with industry as well as national and international stakeholders and report its findings (with recommendations) by summer 2024.
This consultation covers a wide range of topics, including:
investment funds and asset management landscape
the regulatory and supervisory framework
assessing the impact of the funds sector
taxation of investment products
the role of the REIT and IREF regimes in the Irish property market
the role of the Section 110 regime
You can read more about the specific tax aspects of the consultation here.
The DoF press office release notes that the responses to the public consultation will form the basis for a series of targeted engagements by the team with respondents and others in the third and fourth quarters of 2023.
A&L Goodbody will be preparing a response to the consultation as well as inputting into submissions being made by relevant industry bodies we are represented on. Please speak with your usual contact on our Asset Management & Investment Funds Team if you have questions around the consultation, if you would like assistance in preparing a response or if you would like your views to be reflected in an industry response.
CBI consultation on its Administrative Sanctions Procedure
The Central Bank of Ireland (CBI) has launched its second consultation in respect of implementation of the Central Bank (Individual Accountability Framework) Act 2023 (IAF Act). The IAF Act was partially commenced on 19 April 2023.
This consultation concerns the extension of CBI powers under its Administrative Sanctions Procedure (ASP). The consultation paper is accompanied by draft ASP guidelines. The consultation will close on 14 September 2023.
The IAF Act introduces a number of changes to enhance the CBI's ASP under Part IIIC of the Central Bank Act 1942. The consultation paper and draft ASP guidelines seek to clarify these various legislative amendments to the ASP and the CBI's approach to these amendments. It also reflects a number of policy amendments to the operation of the ASP that the CBI is also proposing to introduce. Additionally, the consultation paper sets out transitional guidance to provide clarity as to the practical impact of these amendments to the ASP on both new and existing investigations and inquiries.
You can read more about the key changes and the consultation generally here.
Please speak with your usual contact on our Asset Management & Investment Funds Team if you have questions around the consultation, if you would like assistance in preparing a response or if you would like your views to be reflected in an industry response.
CBI speech on the IAF Framework by Gerry Cross, CBI Director of Financial Regulation, Policy & Risk
The initial and ongoing implementation of this framework should not be approached as a compliance exercise but rather it should be internalised throughout a firms' culture, approach and practices to ensure its successful and sustainable adoption.
For all firms, the IAF will exist as part of the broader corporate governance framework. The board, among other things, is responsible for setting and overseeing the strategy for the firm, has ultimate responsibility for the management of risk in the firm, and must ensure a robust and transparent organisational structure with effective culture, an adequate and effective internal control framework and compliance with applicable legal obligations.
The role of collective responsibility and decision-making remains central to firms. This aspect must not be negatively impacted as a result of an increased focus on individual responsibilities in the new framework.
A key responsibility of individuals remains to act appropriately in the collective decision-making of firms, in line with their role. In this way, the IAF is designed to reinforce the concept of collective responsibility as a core aspect of well-functioning firms, which will assist boards and directors, both executive and non-executive in their respective roles in the governance of firms.
The standards to be met by individuals in their role as non-executive director will relate purely to their non-executive oversight functions and will be limited to what should reasonably be expected of individuals in that context.
Sharing of responsibilities/roles
Inherent and prescribed responsibilities are integral to the relevant PCF role and cannot be shared or split amongst different individuals, however the CBI recognises the importance of job sharing from a diversity and inclusion perspective.
While the default position is that each job sharing individual will have full accountability for the relevant responsibility, this will be discharged where s/he can demonstrate that s/he took reasonable steps to discharge the responsibility, including in relation to the manner in which activities and tasks were shared amongst the job sharers and in respect of their completion on that basis.
The SEAR introduces a duty of responsibility for individuals performing PCFs at in-scope firms to take reasonable steps to ensure that their areas of responsibility conform to legislative and regulatory requirements. Reasonable steps also apply to Conduct Standards. CBI has provided guidance on the meaning of “reasonable steps".
The concept of reasonable steps is likely to be already embedded in an individual's day-to-day actions in managing their areas of responsibility. In assessing the steps that an individual took, the CBI will consider what steps an individual, in that position, could reasonably have been expected to take at that point in time. This will include, for example, taking account of whether the individual is a recent appointment to the role and their overall level of experience in the context. This will depend on the overall circumstances and environment - and regulatory expectations - as they existed at the time rather than applying standards retrospectively.
CBI's approach to supervision
CBI is not approaching the IAF/SEAR as a new set of rules. The IAF will support the supervisory relationship rather than representing something to be separately supervised.
The IAF is about enhancing the governance and leadership of, judgement and decision-making within, financial firms. When CBI is supervising firms, the things that the IAF is getting at – clarity, quality, coherence, etc. – will form part of that supervisory engagement.
Submission of documents: CBI does not propose to impose initial or regular/periodic reporting requirement on firms in respect of Statements of Responsibilities and the Management Responsibilities Map. Firms will prepare these materials on implementation and keep them updated. They should be available to the CBI on request. For consistency within the F&P Regime, firms will be required to submit a Statement of Responsibilities with new PCF applications.
Annual certification: The IAF introduces a number of improvements to the F&P Regime including that firms will need to certify annually the ongoing compliance with F&P standards of individuals carrying out CF roles. CBI does not propose to require firms to submit details regarding such certification, though this information should be available to CBI on request. As part of the existing annual PCF return, firms will required to confirm the completion of the certification process.
Supervisory evolution: The more that firms and leaders can demonstrate that they have internalised their obligations, and that they, culturally and in their decision making, have embedded an alignment with regulatory objectives, then the less CBI need to be focused on compliance and the more CBI can engage about outcomes. That would be a real maturing of the supervisory relationship. The IAF with its focus on governance quality and accountability can make a significant contribution in this respect.
New regulations amending the European Union (Anti-Money Laundering: Beneficial Ownership Of Corporate Entities) Regulations 2019
The amendments concern the question of access to beneficial ownership registers following the CJEU's ruling on Article 30 of 4AMLD last November (discussed here). There has been no change of law at EU level; Ireland is taking this action to provide clarity on the legal position domestically.
All Irish central registers of beneficial ownership are available for inspection by:
certain public bodies (unrestricted)
relevant competent authorities (unrestricted)
designated persons (restricted)
As regards "public access", the 2023 Regulations provide as follows.
Only those with a "legitimate interest" will have a right of inspection of the register of beneficial ownership of companies. It is up to the registrar to determine how this legitimate interest is proven – it will be demonstrated by the person making a submission and, if required by the registrar, "supplying information or documents relating to that person's previous activities, if any, in the prevention, detection or investigation of money laundering or terrorist financing offences". The test for 'legitimate interest' requires satisfaction of all of the following criteria:
the person seeking access is engaged in the prevention, detection or investigation of money laundering or terrorist financing offences
the person is seeking to inspect the information for the purposes of the prevention, detection or investigation of money laundering or terrorist financing offences, such activity need not necessarily relate to cases of pending administrative or legal proceedings in respect of the relevant entity concerned
the relevant entity concerned is connected with persons convicted (whether in the State or elsewhere) of an offence consisting of money laundering or terrorist financing, or holds assets in a high-risk third country.
The registrar may permit or refuse access upon submission.
The 2023 Regulations also carry over to the central register of beneficial ownership of Irish collective asset-management vehicles, credit unions and unit trusts in Ireland maintained by the CBI pursuant to the European Union (Modifications of Statutory Instrument No. 110 of 2019) (Registration of Beneficial Ownership of Certain Financial Vehicles) Regulations 2020 (S.I. No. 233 of 2020). This forms part of the Central Beneficial Ownership Register of Certain Financial Vehicles.