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Central Bank of Ireland (“CBI”) bans former mortgage intermediary executive director for ten years

  • Ireland
  • Financial services and markets regulation - Briefings and articles
  • Financial services disputes and investigations

20-07-2020

Introduction

On 16 July 2020, the CBI published a Prohibition Notice prohibiting a former executive director of an authorised mortgage intermediary from performing any controlled function in a regulated financial service provider for a ten-year period. 

The Prohibition Notice, which runs to 23 pages, was issued on 4 July 2019 and was confirmed by the High Court in October last year following an application from the CBI (in accordance with the requirements for High Court confirmation of prohibitions for more than two months, under the Central Bank Reform Act 2010). 

Background to the Prohibition Notice

The mortgage intermediary firm was authorised by the CBI as a mortgage intermediary under the Consumer Credit Act 1995 on 15 October 2015. As part of the application for authorisation, the individual in question submitted an Individual Questionnaire (“IQ”) to the CBI seeking approval for his appointment as an executive director, a pre-approval controlled function (“PCF”) under the CBI’s Fitness and Probity Regime.

During the course of its subsequent ongoing supervision of the firm, the CBI identified information which indicated that certain information provided by the individual as part of his IQ may have been false or misleading. This prompted the CBI to launch an investigation into his fitness and probity in late 2017.

Throughout the course of the CBI investigation, the individual proved difficult for the CBI to engage with, regularly ignoring email and hard copy correspondence and not returning phone calls. He also failed to comply with several evidentiary notices requiring him to attend for interview with the CBI, only attending on the fourth request, and to provide certain documentation which he had referred to at interview. In addition, despite being granted numerous extensions to the deadline for submitting observations on the CBI’s investigation report produced at the conclusion of the investigation, he chose not to make any submissions.

The individual admitted that he had outsourced the completion of his IQ to a third party on his behalf and said that it was “unlikely” he had read the form or the answers provided therein at the time it was submitted. He also admitted that he had very little knowledge of the CBI’s Fitness and Probity regime or classification of PCF roles.

The failures to meet fitness & probity requirements

The CBI found that the individual had failed to meet minimum standards in two respects.

Provision of false or misleading information

Firstly, he had provided information to the CBI which he knew or ought to have known was false or misleading in his IQ. He:

  • informed the CBI that he had never been the subject of a bankruptcy despite having been declared bankrupt in Northern Ireland in 2012;
  • failed to disclose numerous shareholdings in other financial entities and that he had been a director in a number of companies that had been involuntarily struck off – this type of information is required in the IQ;
  • failed to declare that he had been found in contempt of an order of the High Court and that he had a number of unsatisfied judgements entered against him on various dates in 2009 and 2010.

The CBI noted that outsourcing the completion of an IQ to a third party does not remove the applicant’s obligation to ensure that the information provided is correct, full, fair and accurate and not misleading.

Failure to co-operate

Secondly, the individual had failed to co-operate with the investigation subsequently conducted by the CBI into his conduct. The CBI also noted that he had failed to provide an acceptable explanation for his lack of engagement, deeming the excuses he had provided, such as emails being blocked as spam and deleted before he could read them, not to be credible.

The CBI noted that his lack of co-operation and engagement raised serious concerns in relation to his fitness and probity.

Prohibition

The CBI stated that the prohibition was necessary in the present case for a number of reasons: first, the gatekeeper function is crucial to the integrity of the Fitness and Probity regime, the protection of the public interest, and to ensuring public trust and confidence in the financial system. Second, the prohibition was necessary to protect users of financial services by maintaining standards. Third, it was necessary to prevent serious damage to the financial system by maintaining trust and confidence. Fourth, it was necessary to ensure that persons conducting controlled functions do so honestly. Fifth, it was key to the gatekeeper function of the Central Bank that it can rely on the information provided in the course of an application and expect good faith from those engaging with the Central Bank.

Implications of the CBI decision

This is the eighth Prohibition Notice to be published by the CBI under the fitness & probity regime.  The period of the prohibition and the length and detail of the Notice reflect the seriousness with which the CBI view the PCF approval process and the completion of the IQ. It is also interesting to note that the CBI deemed the fact that the Firm had never actually traded or had any customers as irrelevant.

The fact that the CBI identified a potential issue some two years after the IQ was submitted demonstrates its focus on the individuals holding CF roles within regulated entities as well as the entity itself in the context of its ongoing supervision activities while also serving as a reminder to individuals to engage fully and with absolute candour and honesty in any dealings with the CBI.

For further information on this CBI decision or on how we can assist regulated entities to ensure they meet all of the regulatory requirements and expectations on them, please contact

Pamela O'Neill, Partner and Head of Dispute Resolution & Litigation - pamelaoneill@eversheds-sutherland.ie

Ciaran Walker, Consultant in Financial Services Regulation & Governance - ciaranwalker@eversheds-sutherland.ie

David McKeating, Associate in Pensions & Commercial - davidmckeating@eversheds-sutherland.ie