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Regulator warns fund management firms
Central Bank Pic: RollingNews.ie

20 Oct 2020 / regulation Print

Regulator warns fund management firms

A Central Bank inspection has found that a “significant number” of fund management companies (FMCs) have not fully implemented guidance from the regulator on how they should be run.

Expressing serious concerns about the findings, the regulator has urged all such firms to examine the findings of the review and prepare an action plan by the first quarter of 2021.

The bank introduced a framework — known as CP86 — for the governance, management and oversight of FMCs in 2016, and existing firms were expected to have complied by 1 July 2018.

The rules were aimed at protecting investors, ensuring the integrity of the market, and promoting stability.

Shortcomings

A Central Bank review, however, found that many previously authorised FMCs were able to show the introduction of only limited changes following implementation of the framework.

It found that “a large number” of firms had not appropriately increased resources to ensure effective implementation of the rules.

The regulator also identified “significant shortcomings” in relation to how some designated persons, who monitor compliance with regulatory obligations, discharged their roles.

Gender imbalance

There were also deficiencies in some firms’ risk management frameworks, while not all firms could show that their boards had approved the launch of new funds or strategies.

The review also found a "significant gender imbalance” on the boards of FMCs, with only 16% of director roles held by women.

The Central Bank says it has started to engage with some FMCs about its specific concerns and is reviewing some of the more serious findings.

The regulator has warned that it “will have regard to the full suite of tools available under the Central Bank Act 1942 and the Central Bank (Supervision and Enforcement) Act 2013 to resolve the matters identified in this review”.

'Unacceptable'

Director general of financial conduct Derville Rowland described the lack of attention to issues that affect good governance as “unacceptable”, adding that it raises serious concerns for the Central Bank.

“The Central Bank will be following up with the firms where we identified specific shortcomings,” she added. “We are also requiring all other firms to consider the findings of this review as a matter of priority and to take immediate action to ensure that they meet our expectations.”

The regulator also warned firms to note that this was not a one-off review.

Gazette Desk
Gazette.ie is the daily legal news site of the Law Society of Ireland