On 5 November 2018, the Central Bank of Ireland (the "Central Bank") published its Corporate Governance Requirements for Investment Firms and Market Operators 2018 (the "CG Requirements")1.
The CG requirements should be read in conjunction with the ESMA Guidelines on the management body of market operators and data reporting service providers of September 28, 2017, as well as the relevant legislative framework.
Who is in Scope?
The CG Requirements will apply to:
(i) all firms and market operators authorised by Central Bank under - The European Union (Markets in Financial Instruments) Regulations 2017; and
(ii) non-retail investment intermediaries authorised under the Investment Intermediaries Act, 1995 (as amended)
provided that the relevant firm is designated as either high impact, medium high impact or medium low impact by the Central Bank's Probability Risk Impact System ("PRISM") (each a "Relevant Firm").
Firms designated by the Central Bank as low impact are not obliged to comply with the CG Requirements, although the Central Bank encourages them to do so. Similarly, the CG Requirements will not apply to foreign subsidiaries of Irish firms. They are encouraged to adopt equivalent good corporate governance practices.
Timing and Legal Basis
The CG Requirements will apply to Relevant Firms from July 1, 2019, and are stated to be conditions to which Relevant Firms are subject. We assume that the Central Bank will write to currently authorised Relevant Firms formally imposing such conditions in due course.
What do the CG Requirements provide?
The CG Requirements impose new rules relating to board composition, the chairperson and board committees. The main obligations are addressed below.
Board Composition: The Central Bank requires the board of a Relevant Firm to be of "sufficient size and expertise to adequately" oversee the operations of the Relevant Firm. It also requires that the board be made up of a majority of independent non-executive directors;
The CG Requirements define "director independence" as "the ability to exercise sound judgement and decision making independent of the views of management, political interests or inappropriate outside interests". The following criteria should be considered and given reasonable weight when assessing a director's independence:
any financial or other obligation the individual may have to the Firm or its directors; Whether the individual is or has been employed by the Firm or a group entity in...