The Central Bank has published the CP 120 Second Consultation Paper on the Corporate Governance Requirements for Investment Firms and Market Operators setting out proposals to finalise the range of corporate governance requirements for Firms proposed by CP 94 (the Requirements).

The Requirements have been updated (the revised Requirements) to take into consideration the final provisions of European Union (Markets in Financial Instruments) Regulations 2017 (S.I. No. 375 of 2017) (the MiFID II Regulations), the delegated acts issued under MiFID II (the Delegated Acts) and the joint EBA and ESMA Guidelines on the assessment of the suitability of members of the management body and key function holders dated 26 September 2017 (including the additional ESMA Guidelines on the management body of market operators and data reporting service providers dated 28 September 2017) (the EBA and ESMA Guidelines). The revised Requirements therefore should be read in conjunction with the MiFID II Regulations, the Delegated Acts and the EBA and ESMA Guidelines.

In addition, the responses received in relation to CP 94 have been taken into consideration. The proportionality approach has remained as per CP 94, therefore the revised Requirements will apply to Firms authorised by the Central Bank that are designated as High, Medium High or Medium Low Impact under the Central Bank’s Probability Risk Impact System ("PRISM") and will not apply to Firms designated as Low Impact. However, Low Impact Firms are encouraged to adopt these revised Requirements consistent with best practice.

It proposes rules relating to:

  • Composition of a board. In particular, it requires that the board is composed of a majority of independent non-executive directors, subject to certain exceptions where Firms are subsidiaries of groups. The concessions proposed for subsidiaries vary depending on the PRISM impact of the Firm;
  • Appointment of a chairman who has sufficient expertise, qualifications and experience and who is an independent non-executive director. Again there is an exception to this requirement in the case of a Firm that is a subsidiary to allow the chairman to be a group director; and
  • The establishment and composition of certain committees of a board.

The Central Bank welcomes feedback on CP 120 from all stakeholders, in particular relating to the appropriateness of the proposed requirements set out in this CP and also regarding the scope of the revised Requirements and the application of the principle of proportionality.

Responses should be submitted no later than 31 July 2018.

The revised Requirements shall apply to relevant Firms with effect from 1 July 2019.