Intermediary Times
Issue 3 | September 2014
Welcome to the Intermediary Times
The months since the last edition of the Intermediary Times have
seen a number of developments in the sector, most notably the
publication of a new Prudential Handbook for Investment
Intermediaries in July, which comes into effect from 1 October
2014 - the main changes for investment intermediaries are
outlined below.
If you have any queries on these or other topics, please don’t
hesitate to contact the Retail Intermediaries team using the
details below. We hope you find this newsletter useful and value
your feedback to brokers@centralbank.ie.
Patricia Moloney
Head of Consumer Protection: Retail Intermediaries &
Payments Institutions
Contents:
Handbook of Prudential Requirements for Investment Intermediaries…………………………….. 2
Amendment of Professional Indemnity Insurance Levels………………………………………………… 3-4
ICCL Levy……………………………………………………………….…………………………………………………………. 4
Un-contactable Intermediaries…………………..…………………..…………………..…………………………… 5
Information for Auditors…………………..…………………..…………………..…………………..………………… 6
Regulatory Disclosure Statement…………………..…………………..…………………..………………………… 6
eDay – National Payments Plan…………………..…………………...…………………..…………………..……… 7
Contact Details
Produced by the Retail Intermediaries and Payment Institutions Division, Central Bank of Ireland
brokers@centralbank.ie
or May
01-2244545
(Regulatory Transactions Division)
Published in February,
and December
Email: brokers@centralbank.ie
retailintermediaries@centralbank.ie
or 01-2244595
Online Annual Return Queries
Authorisations
Revoking an Authorisation
Amending an Authorisation
General Queries - Intermediaries
Online Individual Questionnaire
Advertising Standards
revoke@centralbank.ie or at 01-2244375
retailintermediaries@centralbank.ie or 01-2244376
brokers@centralbank.ie or at 01-2244547
fitnessandprobity@centralbank.ie
advertising@centralbank.ie
Our codes can be accessed Produced
on our website
at this link:Investments
Regulatory
by the Insurance,
andRequirements
Intermediaries Division, Central Bank of Ireland
Published in February, May and December
If you have feedback, please contact brokers@centralbank.ie
Email: emailaddress@centralbank.ie
Intermediary Times Newsletter
September 14
2
Handbook of Prudential Requirements for Investment Intermediaries
The Handbook of Prudential Requirements for Investment Intermediaries (“the Handbook”) is replacing the
Handbook of Prudential Requirements for Authorised Advisors and Restricted Intermediaries introduced in
July 2006. These changes are effective from 1 October 2014.
The Central Bank has imposed a requirement on all retail investment intermediaries to comply with the
Handbook as a condition of their authorisation. This requirement was imposed pursuant to Section 14 of the
Investment Intermediaries Act, 1995 (the “IIA”).
A copy of the Handbook is available here on the Central Bank’s website.
Some of the main changes in the Handbook include:





Multi-agency intermediaries and authorised advisors will now be defined as investment
intermediaries;
An investment intermediary must at all times be in a position to meet its financial obligations in full as
they fall due;
Goodwill and other intangible assets are to be excluded from the calculation of a firm’s balance sheet
assets for regulatory reporting purposes1;
The requirement to hold Professional Indemnity Insurance has been imposed directly on investment
intermediaries (this mirrors the requirement for insurance intermediaries set out under the Insurance
Mediation Regulations, 2005); and,
An investment intermediary shall notify the Central Bank in advance where it proposes to outsource
any important operational function.
The above changes should not be considered an exhaustive list of amendments or a legal interpretation of
the Handbook. All firms that fall within the scope of the “investment intermediary” definition should
immediately familiarise themselves with the Handbook. Directors and management must ensure that all
required changes have been made prior to 1 October 2014.
If your firm has a specific query on the Handbook, please contact brokers@centralbank.ie.
Please note that a failure to comply with a requirement imposed under a statutory provision may expose an
investment intermediary and/or the management thereof, to a number of consequences. These include,
without limitation, administrative sanction or revocation of the firm’s authorisation under the IIA.
Produced by the Retail Intermediaries and Payment Institutions Division, Central Bank of Ireland
Published in February, May and September
Email: brokers@centralbank.ie
Intermediary Times Newsletter
September 14
3
Amendment of Professional Indemnity Insurance Levels
As part of the on-going prudential supervision of insurance/reinsurance intermediaries registered under
the European Communities (Insurance Mediation) Regulations, 2005 (the “IMR”) the Central Bank of
Ireland ( the “Central Bank”) monitors the requirement for intermediaries to hold adequate PII.
A review to adjust the previous PII limits, by reference to the European Index of Consumer Prices, took
place in 2013. The revised levels of €1.25m per claim and €1.85m aggregate cover per annum, were
imposed on all new policies / renewals implemented after 1 August 2013.
Professional Indemnity Insurance Requirement
Requirement 4.2 of the Handbook requires an investment intermediary to provide cover for €1.25 million
per claim and €1.85 million in aggregate per type of regulated activity. The table below sets out the
minimum level of cover required by an intermediary for each of its regulated intermediation activities.
These requirements are in addition to any other legal requirements to hold PII. For example accountants,
estate agents or quantity surveyors may be required to hold PII cover in relation to those activities.
Type of Activity
Minimum Individual Claim Cover
Investment Intermediary –
Investment Intermediaries Act,
1995
Insurance Intermediary - Insurance
Mediation Regulations, 2005
Debt Management Firms - Part V of
the Central Bank Act, 1997
Any other Activity whether
regulated by the Central Bank or
not
Minimum Aggregate Claim Cover (RingFenced)
€1.25 million
€1.85 million
€1.25 million
€1.85 million
€1.25 million
€1.85 million
Any other PII cover held should not impact
the minimum ring-faced cover in relation to
each activity outlined above.
Firms are required to hold minimum aggregate cover of €1.85 million in relation to investment and
insurance business with effect from 1 October 2014. On renewal over the next 12 months, firms must
ensure that their PII covers the minimum levels to be ring-fenced - €1.85 million aggregate cover for
insurance business and €1.85 million aggregate cover for investment business. Debt management firms
will be required to maintain segregated cover in relation to this activity as at the time of their
authorisation.
Professional Indemnity Insurance Themed Inspection
The Central Bank is in the process of contacting all insurance/reinsurance intermediaries that have
reported a breach of their PII requirements (i.e. levels lower than those imposed with effect from 1 August
2013) in their most recently submitted online Annual Return. This forms part of the current thematic
review of PII cover held by these intermediaries. Firms with new or renewed PII policies in place since 1
August 2013 will be required to amend their PII cover in instances where this does not meet the required
levels.
Produced by the Retail Intermediaries and Payment Institutions Division, Central Bank of Ireland
Published in February, May and September
Email: brokers@centralbank.ie
Intermediary Times Newsletter
September 14
All insurance and/or
reinsurance
intermedaires
that
report PII levels below
€1.25m per claim and
€1.85m in aggregate
per annum, and have a
policy
commencing
after 1 August 2013.
Firms will be allowed 6
weeks to submit an
amended
schedule
from their PII insurer,
indicating that the
firm's PII cover meets
the
amended
requirements.
4
Where the amended
confirmation
is
received within the 6
week timeframe, the
Central Bank does not
propose to take any
further action.
Consequences of non-compliance
Registered insurance/reinsurance intermediaries should note that a failure to comply on an on-going
continuous basis with Regulation 17 of the IMR constitutes:
- an offence under Regulation 32 of the IMR;
- a prescribed contravention for the purposes of Part IIIC of the Central Bank Act, 1942 which could lead to
the commencement of an administrative sanction procedure against you or your firm by the Central Bank;
and
- grounds for revocation of the firm’s registration under the IMR pursuant to Section 11(1) of the IMR.
Insurance/reinsurance intermediaries are reminded that it is the firm’s continuing responsibility to ensure
that its PII policy satisfies the requirements of Regulation 17 of the IMR. Insurance/reinsurance
intermediaries should ensure, when incepting or renewing a PII policy that it meets the current
requirements set out in Regulation 17 of the IMR.
Have you paid your ICCL Levy?
The ICCL’s new funding year commenced on the 1 August 2014 and annual
invoices have been issued to all member firms. It is the legal responsibility of
the intermediary to ensure that their contribution is paid on time annually. The
due date for invoices was 12 September 2014. If your levy has not been paid,
please pay online at http://www.icclpayments.com/home or contact the ICCL payments team on (01) 224
4955.
Further information on the ICCL is available at www.investorcompensation.ie.
Produced by the Retail Intermediaries and Payment Institutions Division, Central Bank of Ireland
Published in February, May and September
Email: brokers@centralbank.ie
Intermediary Times Newsletter
September 14
5
Un-contactable Intermediaries
Over the last 2 years, the Central Bank has undertaken a project to remove from our public register of
regulated firms, inactive and un-contactable intermediaries including dissolved firms and firms in
liquidation/receivership. If a firm falls into either of these categories, it should contact the Central Bank
immediately regarding the revocation of its authorisation.
In respect of ‘un-contactable intermediaries’, the
Central Bank investigates whether these
intermediaries have ceased trading before
making a decision on whether to proceed to
revoke their authorisation on an involuntary
basis. The Central Bank’s public register of firms
authorised to undertake retail intermediation
should only include active intermediaries
thereby contributing to consumer protection, by
providing reliable information to the public. An
intermediary may be deemed un-contactable if,
for example, the Central Bank has been unable
to contact it regarding the submission of the firm’s online annual return or if it has failed to respond to
communications from the Central Bank.
It is, therefore, very important that intermediaries complete the annual return and ensure that the Central
Bank is provided with up to date contact details. If firms are no longer active they should complete a
revocation form when their business is being wound up. The Central Bank makes reasonable efforts to
contact intermediaries (e.g. by letter, e-mail, telephone etc.). Where contact is not made, and it appears
that the intermediary may have ceased trading, a ‘minded to revoke’ letter is issued to the intermediary’s
principal business address as recorded with the Central Bank. If the intermediary fails to contact the
Central Bank, a decision may be made to revoke its authorisation on an involuntary basis. During the
project, circa 300 intermediaries were identified as un-contactable. Approximately 190 of these have now
been removed from the register, 43 of which were on an involuntary basis. Over the last two years, the
Central Bank has also revoked the authorisations of 48 companies that were in liquidation/receivership
and 33 dissolved companies.
One of our other regulatory priorities relates to intermediaries that fail to engage appropriately with the
Central Bank, for example, due to a suspected failure to comply with regulatory requirements such as the
submission of annual online returns. It should be pointed out that both these projects are resourceintensive and add to the costs of supervising intermediaries.
Produced by the Retail Intermediaries and Payment Institutions Division, Central Bank of Ireland
Published in February, May and September
Email: brokers@centralbank.ie
Intermediary Times Newsletter
September 14
6
Information for Auditors
Auditors of a firm authorised under the Investment Intermediaries Act, 1995 (IIA), are required:
•
To submit a Statutory Duty of Confirmation (SDC) to the Central Bank in relation to the authorised
entity. Template copies of SDCs are available from the auditor’s accountancy body. A scanned copy of the
SDC should be submitted by e-mail to brokers@centralbank.ie within 1 month of the date of the audit
report. The report must state whether or not circumstances have arisen that require the auditor to report
a matter to the Central Bank under a prescribed enactment.
•
To submit a copy of any report issued to management arising from the audit. This should be
provided to the Central Bank at the same time it is provided to management and should be submitted by email to brokers@centralbank.ie.
•
To submit a copy of any report made to Office of the Director of Corporate Enforcement (ODCE), to
the Central Bank at the same time as making the ODCE report.
The Central Bank requires a firm authorised under the IIA to prepare audited accounts within 6-months of
its financial year-end. Please inform your auditor of the above requirements.
Incorporated Entities
A company that is registered as an insurance intermediary under the Insurance Mediation Regulations,
2005 and / or authorised under the Consumer Credit Act, 1995 is not required by the Central Bank to
submit audited accounts. The auditor of such a company does not have an obligation to submit to the
Central Bank a Statutory Duty of Confirmation report or a copy of any report issued to management
arising from the audit.
However, such firms may not avail of the audit exemptions under Section 32 of the Companies
(Amendment) (No.2) Act 1999. Details of the specific criteria required to avail of an exemption are
located here.
Regulatory Disclosure Statement
An entity which is regulated by the Central Bank of Ireland must use a regulatory disclosure statement
in the following format, as set out in Provision 4.10 of the Consumer Protection Code, 2011:
“[Full legal name of the regulated entity, trading as (insert all trading names used by the regulated
entity)] is regulated by the Central Bank of Ireland”;
A regulated entity must not insert additional text into the wording of the regulatory disclosure
statements as set out above. Firms should no longer refer to their authorisation status (i.e. that they
are authorised under the Investment Intermediaries Act, 1995 or act as investment intermediaries /
multi-agency intermediaries / authorised advisors) in the regulatory disclosure statement. This
information should be included in a firm’s Terms of Business. In recent inspections of intermediaries, a
number of errors were found in their regulatory disclosure statements.
Produced by the Retail Intermediaries and Payment Institutions Division, Central Bank of Ireland
Published in February, May and September
Email: brokers@centralbank.ie
Intermediary Times Newsletter
September 14
7
e-Day by Ronnie O’Toole of the National Payments Plan
With the recent passing of e-Day, Ronnie O’Toole of the National
Payments Plan asks if your business is ready to stop using cheques.
Last Friday, September 19th, was e-Day. This was the day that central
Government, local authorities and State agencies stopped issuing and
accepting business cheques. So if your firm traditionally pays its
Industry funding levy or ICCL (Investor Compensation Company Ltd.)
levy by cheque, or if you deal in any other way with a government
agency by cheque, it’s time to change the way you administer your
accounts.
e-Day is part of the National Payments Plan (NPP), an initiative designed to reduce costs and improve cashflow in the Irish economy. If Ireland were to match best payment practice in Europe, savings of around
€1bn per annum could be made, with benefits directly flowing to small businesses.
SMEs issue and receive more than 60 per cent of all cheques in Ireland, and they are a particular focus of
the e-Day project.
Cheques are disproportionately expensive for small businesses to use. A recent study by payments
company Sage found that a small business sending and receiving just six cheques a week could save almost
€5,000 per year by switching to electronic payments. Moving your payments to direct debit, for example,
will help reduce money spent on bank charges, stamp duty costs and time lost lodging cheques.
One of the primary motivations for e-Day is to tackle Ireland’s late payments culture for once and for all.
The payment cycle in cheque-intensive countries is a whole month slower than it is in countries where
cheques are no longer in widespread usage. Some businesses report that they like cheques because they
help manage cash-flow. However ‘managing cash flow’ for one business is just a late payment for another.
This practice needs to be ended.
The NPP’s target is to double Ireland’s number of e-payments per capita by 2015, thereby reducing our
cash and cheque usage to the EU average. e-Day is intended to remove over 1.7 million cheques from our
banking system in the coming year, and they will be replaced by swifter, less expensive and more secure
payments for our business community.
Your business should find out how each public sector body you engage with will make and receive
payments after September 19th. The options are Electronic Funds Transfer (EFT), direct debit or card
payments, and your system will need to match theirs.
Ronne O’Toole is Programme Manager of the National Payments Plan. Ronnie.otoole@centralbank.ie
Ronnie.otoole@centralbank.ie
Produced by the Retail Intermediaries and Payment Institutions Division, Central Bank of Ireland
Published in February, May and September
Email: brokers@centralbank.ie