IRELAND: Central Bank of Ireland Announce Plans to Strengthen the Protection of Client Assets

Friday March 23 2012

Fund-Axis would like to draw your attention to a recent press release as issued  by the Central Bank of Ireland which outlines its recommendations to strengthen the protection of client assets and its publication of the ‘Review of the Regulatory Regime for the Safeguarding of Client Assets’.  The review contains wide-ranging recommendations, covering internal operational and structural issues for firms, revision of the regulatory framework and amendments to the existing legislation.

In August 2011, the Central Bank commissioned a task force to review the regulatory regime for the safeguarding of client assets.  There were a number of drivers for this review: the roll out in 2012 of the Central Bank’s new supervisory risk model (PRISM); experience of cases (including Custom House Capital) both in Ireland and elsewhere where client asset issues have arisen; pending changes to European directives and feedback from industry that the current rules for the safeguarding of client assets should be reviewed.  On 13 February 2012 the Central Bank published its enforcement priorities for 2012, which included non-compliance with client asset requirements.

Deputy Governor of the Central Bank of Ireland, Matthew Elderfield stated “Good client asset regulation is a critical protection for investors.  Where it hasn’t been effective – like Custom House Capital and Morrogh Stockbrokers in Ireland or MF Global in the US – the costs can be significant.  We have today set out a comprehensive plan to strengthen client asset protection through tougher supervision, better rules, stronger audits, assumption of new powers and more accountability for firms’ directors”

The key recommendations contained in the report include:

• The establishment of a Client Asset Specialist Team (CAST) with cross-sectorial ownership of client asset risk, which will operate a risk-based approach with pre-determined triggers for intervention;

• The introduction of a Pre-approval Control Function (PCF), which is expected to be at director or senior management level with accountability for client asset matters;

• A revised approach to external audit reports which would be replaced by an annual Client Asset Examination (CAE) using the firm’s Client Assets Management Plan (CAMP) as the starting point for the review combined with spot checks during the period; and

• Where there are serious problems of a financial nature and/or the interests of clients are at risk, the Central Bank should be given the power to apply to the High Court for the appointment of an administrator or a person with equivalent powers.  

Full details of the press release can be located at the following link:

Central Bank Proposals to Strengthen the Protection of Client Assets

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