On 8 April 2019, the Central Bank of Ireland (“Central Bank”) issued a ‘Dear CEO’ letter to the management of regulated financial services providers. These are financial services providers that are regulated by the Central Bank. This regulation involves supervision of financial services providers and a credible threat of enforcement. The letter was sent to remind the firms of their obligations under the Fitness and Probity Regime.
The Fitness and Probity Regime was introduced by the Central Bank under the Central Bank Reform Act 2010 (“2010 Act”).
In 2014, the Central Bank issued Fitness and Probity Standards (“the Standards”) under section 50 of the 2010 Act which outline the obligations on regulated financial services providers. In the letter the Central Bank stated that it believes that there is a lack of awareness in the industry regarding the scope of the Fitness and Probity Regime.
Primary obligations on regulated financial services providers include ensuring that that they ‘do not allow a person to perform a controlled function unless they are satisfied on reasonable grounds that the person complies with the Standards’. Additionally, firms must ensure that persons who are permitted to perform a controlled function have agreed to abide by the Standards.
The Central Bank has taken enforcement action against firms for failure to ensure compliance with the Standards. Despite the recent enforcement action, the Central Bank state in the letter that there are still significant shortcomings.
One of the Central Bank’s concerns is that firms are recognising issues in relation to fitness and probity of an individual, and in some instances taking steps to address these issues, however, these issues are not being reported to the Central Bank.
The letter states ‘Where your firm has any fitness and probity concerns regarding a person who is performing a controlled function role, and takes action on foot of those concerns, you must notify the Central Bank without delay’.
The ‘controlled functions’ referred to in the letter include arranging a financial service for a customer of the regulated financial service provider and dealing in or with property on behalf of the regulated financial service provider.
Firms are advised that they should require persons performing controlled functions to notify the firm of any change of circumstance of that person that may affect their fitness or probity.
On foot of this letter, regulated financial services providers should review their fitness and probity policies, procedures and practices and address any shortcomings. Following on from this, the Central Bank expect firms to be in a position to demonstrate their compliance with the issues raised in the letter and any remedial action taken following receipt of the letter.