On 14 December 2015, the Central Bank of Ireland (Central Bank) published its programme of themed inspections in markets supervision for 2016. The inspections represent both supervisory priorities and anticipated areas of emerging risk, with the Central Bank noting that the underlying theme for many of these reviews is to strengthen firms’ regulatory compliance culture.
Twelve themed inspections are planned as follows:
- Outsourcing Arrangements: This will involve an inspection of the service level agreements and operational arrangements with outsourcing providers for Investment Firms, Fund Managers and Fund Service Providers.
- AIFM Programme of Activities: A review of AIFMs’ adherence to their programme of activity will be conducted.
- Client Assets: There will be a focused review of Client Asset Management Plans for Investment Firms.
- Investment Funds Production Costs: An analysis of the production costs of investment funds will be carried out. This will be a desktop statistical review, using Total Expense Ratio (TER) data of funds that are similar in terms of type/strategy to identify outliers.
- Director Time Commitments: There will be a continued focus on various issues around director time commitments.
- Risk Function: The focus will be on the risk culture within firms including governance arrangements, risk ownership and responsibility.
- Financial Indices: The use of financial indices as eligible investments for UCITS investment funds will be reviewed.
- Information Technology Risk: The focus will be on the resilience of firms’ IT systems.
- Suitability: Review of the suitability assessment of clients.
- Conduct: Examination of the information provided to clients on an on-going basis.
- Hedging Arrangements: Hedging arrangements at share class level for investment funds will be reviewed.
- Market Integrity: The practices of firms when dealing with insider information and their compliance with Market Abuse Regulations will be reviewed.
A number of the themed inspections either build on previous reviews carried out by the Central Bank or are driven by recently implemented rules and regulations. We will keep you informed of any issues identified by the Central Bank in the inspections they carry out over the course of 2016.
Contributed by Niall Crowley.