Asset Management and Investment FundsNovember 16, 2021

With PCF regulations just issued by the Central Bank in the last month, and SEAR legislation in the works, what priorities are and should the industry be making to address the future requirements of the industry?

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SEAR, which is to be implemented as part of the General Scheme of the Central Bank (Individual Accountability Framework) Bill 2021 (the “Scheme”) will mandate regulated financial services providers (RFSP)’s to improve their internal processes by clarifying the roles of their senior executive functions (SEFs).

The list of SEFs is aligned to the list of pre-approval controlled functions (PCFs) under the CBI’s Fitness and Probity regime.

SFSPs in scope of the initial application of SEAR should prepare to require each RSFP to carry out the following in respect of each SEF:

  • determine those responsibilities that are inherent to each SEF;
  • prescribe responsibilities allocated to individuals carrying out SEFs;
  • identify and allocate other responsibilities by RFSPs to relevant SEFs;
  • impose requirements on RFSPs to provide a statement of responsibility to the CBI for SEFs setting out their role and areas of responsibility; and
  • impose requirements on RFSPs to produce a comprehensive management responsibility map documenting key management and governance arrangements.

A legal duty of care is imposed on individuals while performing SEFs within regulated entities. Such SEFs are required “to take reasonable steps to avoid their firm committing, or continuing to commit, a ‘prescribed contravention’ in relation to the areas of the business for which they are individually responsible.” The CBI will be able to take enforcement action and impose administrative sanctions on individuals who breach the duty of responsibility.

Breaches of the various conduct standards provided will be a “prescribed contravention” and will be enforceable against the RSFP/ the relevant CF/ PCF/persons in senior roles, as applicable.

The Scheme also serves to strengthen the existing obligations on firms in relation to the fitness and probity of their key personnel under the CBI’s Fitness and Probity Regime. An RSFP will be required to certify that it is satisfied that any individual performing a PCF/ CF role meets the requirements under this regime. Once implemented, the Scheme provides that the CBI can investigate individuals who the CBI suspects pose a danger to consumers or the financial system, irrespective of whether they continue to perform a CF role at the time when an investigation is being commenced.

Although implementation of the Scheme is not expected before Q3 2022, in-scope.

Please find a link to the original article here.