On 5 May 2015, the Central Bank of Ireland (the "Central Bank") published Consultation Paper 94 on Corporate Governance Requirements for Investment Firms (the "Consultation Paper"). The Consultation Paper represents continuous work by the Central Bank to develop and strengthen corporate governance standards and practices for investment firms.
Previously, in 2012, the Central Bank attempted to alleviate certain deficiencies by issuing nine recommendations based upon findings from a thematic review of corporate governance in investment firms, however the Central Bank believes that weaknesses continue to exist. Subsequent to the 2012 recommendations and supervisory engagement regarding corporate governance matters, and in line with developments relating to corporate governance in other sectors, the Consultation Paper proposes statutory corporate governance requirements for investment firms.
The Consultation Paper proposes introducing a number of statutory corporate governance requirements (the "Requirements") for investment firms that will apply to all Markets in Financial Instruments Directive ("MiFID") firms as well as non-retail investment intermediaries licensed or authorised by the Central Bank1 that are designated as High, Medium High or Medium Low impact under the Central Bank's Probability Risk Impact System ("PRISM"). It is intended that these requirements will supplement other corporate governance requirements in MiFID or CRD IV.
Notwithstanding that the Requirements are stated not to apply to firms designated as Low Risk by the Central Bank, such firms will be encouraged to adopt the Requirements. Equally, the Requirements will not apply to foreign incorporated subsidiaries of an Irish firm, however such firms are encouraged to adopt equivalent corporate governance practices. Furthermore, a firm that falls within the scope of both the Requirements and the Corporate Governance Code for Credit Institutions and Insurance Undertakings 2013 will be obliged to comply with the latter.
Certain additional requirements, outlined in Appendix 1 of the Consultation Paper, are imposed on firms designated as High or Medium High Impact under the Central Bank's PRISM which are not detailed below.
An outline of some of the key requirements is provided below.
Size and Composition of the Board: The firm shall ensure that the board is of sufficient size and expertise to oversee operations. The board must have a...