Retail Intermediaries Regional Events 2014

Pensions Themed Inspection Central Bank disappointed with the level of compliance shown Issues arose with over half of the files reviewed, with a pattern of issues emerging Central Bank’s view is that an intermediary should be able to evidence/demonstrate compliance with the Code In a number of cases intermediaries did not hold relevant information on file at the time of the inspection Firms provided redress to consumers where relevant 2

Pensions Themed Inspection – Next Steps Follow up with individual firms to rectify issues to ensure that the best outcome is achieved for the consumer Results of the review will be published in a Special edition Intermediary Times Further work to be considered: Possible further inspections Further work with relevant firms Discussions with Product Providers in relation to commission options available to intermediaries 3

Handbook of Prudential Requirements for Investment Intermediaries Change to definition of firm types Requirement to hold Professional Indemnity Insurance Requirement to notify the Central Bank when outsourcing any important operational function Changes to regulatory reporting requirements Firms required to be in a position to meet their debts as they fall due Treatment of Goodwill and other Intangible Assets Requirement to submit Annual Return via Online reporting system 4

Advertising monitoring common case issues 4.10 regulatory disclosure statement 9.2 (ad) clear, fair, accurate and not misleading 4.1 (info) should be clear, accurate and up to date 9.6 key information 9.7 qualifying criteria 4.7 regulatory disclosure use

Fees and Charges Make full disclosure of all relevant information, to include charges NB: A regulated entity must display in its public offices, in a manner that is easily accessible to consumers, a schedule of fees and charges imposed by that regulated entity. If the regulated entity has a website, its schedule of fees and charges must also be made publicly available through placing this schedule on its website. 6

The Central Bank’s enforcement role

‘Enforcement’ Powers of the Central Bank of Ireland The Central Bank’s ‘enforcement’ powers: – administrative sanctions; – fitness and probity regime; – revocation and refusal of licences; – summary criminal prosecution. Also, reports to other agencies (e.g. Gardaí, Revenue Commissioners, Competition Authority) 8

Who might face enforcement action? Regulated Financial Service Providers, including: – Intermediaries; – Credit Institutions; – Insurers; – Investment Firms; – Stockbrokers; – Licenced Moneylenders; – Credit Unions Those concerned in the management of a regulated financial service provider. 9

What is an Administrative Sanctions Procedure (ASP)? Most visible aspect of the Central Bank’s enforcement actions. Investigation into whether a regulated entity has failed to comply with relevant: – Legal obligations imposed by statute or statutory instrument e.g. Consumer Credit Act, 1995, The European Communities (Insurance Mediation) Regulations, 2005; – Code of Conduct e.g. Consumer Protection Code; and – A direction by the Central Bank. 10

Public Enforcement Actions and Penalties (2006 – 2014) Settlement Agreements€31,324,765 in fines

Flow Diagram of Investigations 12

The ASP Settlement Process and Settlement Meetings Voluntary process. Is run in parallel to the Investigation/Inquiry. Full information to be provided by regulated entity in response to any questions raised in Investigation Letters. Settlement is conducted in private. Settlement conducted on a “without prejudice” basis. Only one settlement meeting. 13

Settlement Meeting – On the Day Introduction by Central Bank. Central Bank sets out facts of case, legal issues and any preliminary issues. Central Bank sets out seriousness and proposed terms of settlement. Reply from regulated entity. Agreement in principle. Publicity statement. Aim is to agree: – settlement agreement; and – publicity statement. 14

Publicity Statements Contains: – name of the regulated entity; – the prescribed contraventions; – the facts of the case (including relevant background); – the sanctions imposed, including any discount; – any mitigating factors; – any aggravating factors; and – an industry message. 15

Enforcement Priorities for 2014 Banking & Insurance Prudential requirements Systems & controls Markets Prudential requirements (with a focus on large exposures) MiFID conduct of business rules Client Asset Requirements Timeliness and accuracy of information submitted to the Central Bank Systems & controls Credit Unions Prudential requirements (with a focus on reserves, liquidity, lending & investments) Timeliness and accuracy of information submitted to the Central Bank Systems & controls Governance Consumer Protection Code of Conduct for Mortgage Arrears Prudential requirements for retail intermediaries and debt management firms Professional indemnity insurance Firms which fail to engage appropriately with the Central Bank All Sectors Fitness and probity obligations of the Central Bank Reform Act 2010 Anti-Money Laundering (AML)/Counter Terrorism Financing (CTF) compliance 16

Developments – Legislation Central Bank (Supervision and Enforcement) Act, 2013 – amendments to authorised officer powers and information gathering powers. – 3 rd party reviews. – protected disclosure / whistle-blower regime. – restitution orders. – amendments to Part IIIC of the Central Bank Act 1942 penalties of suspension and revocation of authorisations increased monetary sanctions offences of failing to comply 17

Industry Funding Levy Karen O’Leary, Industry Funding Manager November 2014

Purpose Levy in place since 2004 Enabling legislation: Central Bank Reform Act, 2010 Industry Funding Regulations: made on an annual basis by means of a Statutory Instrument Funding arrangements: under review by Dept of Finance Introduction

Basis for Calculation of Levy Revised calculation methodology introduced in 2013 Retail intermediaries fall into low impact category Levies payable by Retail Intermediaries are determined with regard to the firm’s impact score under PRISM In 2014, there were 7 bands and Industry Funding levies varied between €515 and €26,500

How is Impact Score Calculated Determined by application of a model to certain key information provided as part of the firm’s OnLine Regulatory Return (ONR), namely -Turnover -Number of Retail Clients -Number of Customer Facing Advisors

Default levies Issued to those RIs who do not have an impact score because they failed to complete their ONR Default levies are cancelled and replaced with an actual invoice following submission of the ONR

Payment Methodologies Electronic Funds Transfer Direct Debit – single/recurring Impact of E-Day

Further Questions Guide to Industry Funding Levy/FAQ which are published on our website Helpline :

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