Navigating legislation. Preparing for the new Individual Accountability Regime

• Ireland

• Financial services and markets regulation - Briefings and articles

09-03-2023

Download the full report here.

Introduction

On 9 March 2023, the President of Ireland signed into law the Central Bank (Individual Accountability Framework) Act 2023 (“Act”).

For details of the new Act, see our separate brochure, “The Central Bank (Individual Accountability Framework) Act 2023: An overview”. The key provisions of the Act will not be commenced until the CBI has completed its process of public consultation on its proposed relevant implementing regulations and guidelines under the Act. Firms will, nevertheless, need to prepare now for this new regime, given its significant and imminent implications for both firms and individuals.

This briefing note sets out what firms need to do now to prepare for the new regime, how Eversheds Sutherland can help (including its Individual Accountability Regime Initial Implementation Steps offering) and why Eversheds Sutherland is ideally placed to assist firms in this area.

What firms need to do now to prepare for the new regime

The following is a brief summary of key steps firms will need to take, in the near future, to prepare effectively for the requirements under the Act.

Step 1: Create a project plan

– inform the board and get its buy-in

– appoint sufficiently senior sponsor

– set up project team, involving a range of stakeholders (eg Legal, Compliance, HR, Risk)

– consider internal communications plan

– ensure that the project is appropriately resourced

Step 2: For those firms expecting to be within scope of initial roll-out of SEAR

– commence the process of preparing Statements of Responsibilities for all individuals in a PCF role

– prepare Management Responsibility Map, documenting key management and governance arrangements

Step 3: Prepare to ensure that the proposed Conduct Standards are embedded and adhered to

– review employment contracts, HR policies and procedures, disciplinary policies and procedures

– consider “reasonable steps” senior management should take to ensure compliance with Conduct Standards and how this will be documented

Step 4: Prepare for the annual Fitness & Probity certification process

– review performance management process

– review how HR-related and compliance-related information on individuals is gathered/shared/reviewed and how compliance with Conduct Standards is to be monitored

Step 5: Internal training etc

– board and staff training – all affected persons need to be informed of new requirements and appropriately trained

– review directors & officers (D&O) policies

Points to Note

Project planning

The new regime is a significant transformation project that will require regulated firms to review and amend their current governance procedures and internal policies, together with their HR arrangements, including reviews of individual contracts of employment.

This is a major task that will take a considerable amount of time to plan and implement. It is not simply a ‘compliance’ project.

It has significant employment implications for staff and for the governance arrangements within firms. Accordingly, firms will need to ensure a wide range of stakeholders is fully involved and that the task is properly resourced.

It will be essential, in the first place, to inform the board about the transformation project and get its buy-in.

Further, it will be important to ensure that the transformation project is sponsored by a sufficiently senior individual within the firm and that the appropriate ‘tone from the top’ is set about the importance of getting this project right.

An internal communications plan will also need to be put in place, so that all staff are clear on what the new regime entails, how it might affect them individually and how they will be supported to ensure that the objectives of the new regime are met.

Employment/HR implications

These include:

– ensuring that employment contracts are suitably drafted/amended to take account of the requirements on individuals under the new regime, so that failures by an employee can be addressed under the employment contract

– ensuring that appropriate policies and procedures are in place to ensure the firm is in a position to carry out appropriate due diligence on all its CFs (including its PCFs) and certify their fitness and probity, at least on an annual basis. This will include a review of the firm’s performance management process. The new regime will be considerably more onerous than the current system, that can often amount to not much more than a ‘box-ticking’ exercise

– ensuring that the firm’s internal codes of conduct align with the requirements of the new conduct standards under the Act

– ensuring that the firm’s internal disciplinary processes and procedures meet the requirements of the Act. Firms will need to ensure that they appropriately assess and document any instances where a legitimate question may arise as to whether an individual in the firm has complied with the conduct standards under the Act

Why we are ideally-placed to assist you prepare for the new regime

We in Eversheds Sutherland have unrivalled expertise in assisting firms to prepare for the new individual accountability regime.

In particular:

– we are leading experts in financial services regulation, employment law and the overlap of regulatory and employment law in financial services

– our Consultant, Ciaran Walker, who was formerly Deputy Head of Enforcement at the CBI, has recently co-authored a major book on the new individual accountability regimes in the UK, Australia and Ireland, “New accountability in financial services: Changing individual behaviour and culture”

– we have extensive experience advising on the equivalent regime in the UK, the Senior Managers and Certification Regime (SMCR), which has been in place since 2016 and upon which the forthcoming Irish regime is largely based. We are supported by the financial services team within Konexo, the global alternative legal and compliance division of Eversheds Sutherland. Through Konexo we are able to field financial services compliance specialists and programme management personnel alongside our lawyers to provide you with a ‘one stop shop’ in circumstances where you would otherwise have to instruct separate law and consulting firms

We will therefore be able to bring you the latest thinking on the UK’s approach to SMCR, the strategies that worked and pitfalls to avoid, together with the processes and technology to support implementing the key elements of the new Individual Accountability Regime.

How we can assist you prepare for the new regime

We have a dedicated team of experts, from across our relevant areas of expertise (in particular, FS regulatory, employment law, litigation, corporate) to assist our clients prepare effectively for the new regime. We are ideally placed to guide you through this complex regime to ensure that you meet the requirements and expectations of the CBI.

We can, for example:

– provide presentations to your Board, to assist in preparing for the specifics of the new regime for your firm

– assist you to carry out a gap analysis, in relation to your governance and employment/HR requirements

– for firms within scope of SEAR, we can assist you with regard to all aspects of ensuring that appropriate Statements of Responsibilities and Management Responsibility Maps are in place

– assist you in meeting your legal requirement to ensure that all CFs (including PCFs) are appropriately trained on the relevant new requirements on them under the Act and the implications for them

Our Individual Accountability Regime Initial Implementation Steps offering

To assist firms with the initial steps of their implementation of this new regime, we are offering firms an introductory package of advices, for a specified price, that includes:

– presentation to your Board on the new regime

– separate meeting to advise on project planning for the implementation of the new regime

– meeting with our regulatory/employment law experts to discuss and advise on the specific employment/HR issues that might arise for you

If you would like further information on this package offering, please contact one of our contacts listed below or your usual Eversheds Sutherland contact.