Litigation and Enforcement

Author: Clerkin Lynch

Date Published 16/03/2022

Central Bank Enforcement Plans

The Central Bank of Ireland (the “Central Bank”) has confirmed that it will carry out a defined plan of work with its Enforcement division in 2022 which will include both specific cases from right across the areas under its auspices as well as the assessment and investigation of further matters, in particular in relation to suspected market abuse.

Background

Although the Central Bank has traditionally been seen to be reluctant to conduct enforcement actions, in particular in relation to the asset management sphere, this situation has been changing in recent years. By the end of September 2021, the Central Bank had concluded 144 enforcement actions, imposing fines amounting to over €166.5 million. Furthermore, they disqualified 26 individuals from senior roles in firms. These figures are viewed as illustrating the Central Bank not merely posing a credible threat of enforcement but going beyond this to effectively use relevant enforcement powers to address wrongdoing. This revised approach was flagged by the Director General of the Central Bank, Derville Rowland, in a speech was delivered on 13th October 2021 entitled “The Central Bank’s Evolution of Enforcement”, clearly outlining their new outlook.

Recent Updates

The Central Bank published its second annual “Securities Markets Risk Outlook Report” (the “Report”) in February 2022. This is designed to inform stakeholders of the key risks perceived by, and areas of focus for, the relevant section of the CBI, the Securities and Markets Supervisory Directorate (“SMSD”), in 2022. It also seeks to assist regulated entities by setting out its expectations regarding their responsibilities regarding mitigating and managing relevant risks.

The Report notes that 2022 will see a defined plan of work with the Enforcement team, to include ongoing collaboration with An Garda Siochana (the Irish police service) and other regulatory authorities. This reflects the Central Bank’s supervisory priorities for the coming year which stem from its conduct risk identification process, learnings taken from previous supervisory assessments, work with peer regulators and ESMA as well as its new Strategic Plan. They are aimed at furthering its five principles for a proper and effectively supervised securities market through a number of targeted actions designed to address the key conduct risks perceived.

Future Developments

The General Scheme of the Central Bank (Individual Accountability Framework) Bill was published in 2021. This contains four central components aimed at achieving key behavioural, cultural and regulatory objectives which were outlined in the Central Bank’s Culture Report. Once implemented it will significantly increase the level of accountability applicable to senior executives. Key elements will include:

• A Senior Executive Accountability Regime requiring firms to set out clearly and comprehensively where responsibility and decision-making lie.
• Enforceable Conduct Standards setting out the behaviour expected of firms and staff, including obligations to act with honesty and integrity, to use due skill, care, and diligence, and act in the best interest of consumers.
• The Central Bank’s Fitness and Probity Regime will be enhanced.
• The Central Bank’s Administrative Sanctions Procedure will be strengthened to ensure that individuals can be pursued directly for any misconduct.

Clerkin Lynch’s experienced Litigation and Financial Services solicitors are well placed to assist both firm’s and senior individuals in defending themselves in related proceedings.