Intermediary Times Issue 5 Welcome to the Intermediary Times As you know from our previous editions, the Retail Intermediary Section has undertaken a Review of the Authorisation/Post Authorisation processes with a view to making improvements and streamlining the processes for intermediaries. This special edition of the Intermediary Times looks at elements of these processes and sets out various amendments and enhancements we have made. It also outlines a number of future improvements planned. As always, we welcome any feedback you would like to give us on the issues discussed in this edition or on any other aspects of regulation affecting your firms. Patricia Moloney Head of Consumer Protection Retail Intermediaries and Payments Institutions Contents Welcome 1 Background 2 Authorisations 3 Post- Authorisations 4 Minimum Competency Code 2011 6 Revocations 7 Developments 8 Contact Details Online Annual Return Queries brokers@centralbank.ie or 01-2244545 (Regulatory Transactions Division) Authorisations retailintermediaries@centralbank.ie or 01-2244595 Revoking an Authorisation revoke@centralbank.ie or 01-2244376 Post Authorisation changes postauthorisations@centralbank.ie or 01-2244595 Acquiring Transactions acquiringtransactions@centralbank.ie General Queries - Intermediaries brokers@centralbank.ie or 01-2244547 Online Individual Questionnaire fitnessandprobity@centralbank.ie Advertising Standards advertising@centralbank.ie Our codes can be accessed on our website at this link: Regulatory Requirements If you have feedback, please contact brokers@centralbank.ie Produced by the Consumer Protection Retail Intermediaries
2 Background The Central Bank of Ireland is responsible for the authorisation and regulation of the retail intermediary sector (insurance, investment and mortgage intermediaries) in Ireland under the relevant national and EU legislation (European Communities (Insurance Mediation) Regulations 2005, the Investment Intermediaries Act 1995 and the Consumer Credit Act 1995. In addition, regulated entities are subject to the provisions of the Consumer Protection Code 2012 (2012 Code), the Minimum Competency Code 2011 and investment intermediaries are subject to the Handbook of Prudential Requirements for Authorised Advisors and Restricted Intermediaries. As you are aware, in line with the Bank s formal risk assessment framework, PRISM, retail intermediaries are ranked as low impact firms and our regulatory approach continues to be developed accordingly. With this in mind, and given the volume of such firms in the sector (c3,100 firms), the authorisation and post authorisation process represents the main gatekeeper role for the sector and it is critical that this first line of consumer protection remains suitably robust, effective and efficient. During the course of 2012, 253 retail intermediaries (300 authorisations) were authorised. In the same period 797 retail intermediaries (972 authorisation types) either let their authorisations expire or were voluntarily/ involuntarily revoked. In addition, 38 acquiring transactions were approved and another 720 post authorisation changes were processed. Given the above volume of annual transactions, it is vital that our processes and procedures are regularly reviewed and enhanced to ensure that they remain fit for purpose and deliver an effective and efficient service. The Retail Intermediary Authorisation Section undertook a comprehensive review of its processes and procedures commencing in late 2012. We discussed our review with your representative bodies and also received their input into the planned introduction of a single consolidated Application Form. The details of this review are set out in this newsletter.
3 Authorisations The Central Bank authorises and regulates the following categories of Retail Intermediaries - Investment Intermediary (IIA) - Insurance Intermediary (IMD) - Mortgage Intermediary (CCA) Application Process The applicant should download the relevant application form and submit the fully completed form to the Central Bank. Once the application has been received, the Regulatory Transactions Division will issue login details to the firm within 5 days so that all relevant Individual Questionnaires (IQ) can be submitted in respect of holders of Pre-Approval Control Functions (PCFs) The Central Bank will only commence processing the application once all appropriate IQs have been submitted successfully. Please note that applications will be returned if all relevant IQs have not been received within 3 months. At this stage the application will be reviewed and initial comments/queries will be issued. What can firms do to help the application process? Submit a fully completed application form Submit all relevant supporting documentation (see checklist at the end of the form) Complete all relevant IQs as soon as possible following receipt of login details If the applicant already holds an authorisation, ensure all applicable levies due are paid in full Ensure Professional Indemnity Insurance and Tax Clearance Certificate documents are up to date and available, where relevant New applicants will be requested to submit their PII policy schedule prior to registration under the IMD. Therefore, applicants are advised to seek a quote prior to submitting their application. Since 1, PII levels specified in the IMR have increased to 1.25m per claim and to 1.85m in the aggregate If the applicant already holds an authorisation, ensure financial accounts are in order and that the applicant has successfully completed their reporting requirements on the On-line Reporting system (ONR) For Mortgage Intermediaries, an email is issued 6 months prior to the licence expiration date. An application for renewal of authorisation must be submitted if an applicant wishes to continue to act as a mortgage intermediary. This form must be submitted as soon as possible as we cannot guarantee authorisation before the original licence has expired if a late submission is received. Planned Improvements The Central Bank will introduce a new Single Application form for all intermediary applications by 1st September 2013 Note Applicants who wish to change from sole trader to limited company or vice versa are required to submit a new application. Average Processing Timeframe The current timeframe for processing an application is approximately 4 months. The application process only begins once the final IQ for the applicant has been submitted and all required supporting documentation has been received. Incomplete applications will be returned.
4 Post-Authorisations After an authorisation has been granted, firms must keep the Central Bank informed of any relevant changes in relation to their authorisation. We have identified several recurring issues which lead to discrepancies between the Central Bank s records and the information submitted by regulated entities via the ONR. The following are the most common issues: Sale/purchase of client book Where a firm sells its client book to another regulated entity (i.e. not an acquiring transaction as set out in the IIA), the firm must notify the Central Bank of this proposal prior to the completion of the transaction. In addition, the firm must comply with the relevant provisions of section 3.11 of the 2012 Code with regard to client notification. The purchasing firm must ensure that it has the appropriate level of authorisation and agency agreements to allow it to carry out the transferred business. Where the selling firm proposes to cease trading it must seek the revocation of its authorisation/registration and complete all of the relevant revocation requirements. Incorrect trading names A number of firms are using trading names which have not been previously notified to the Central Bank. It is essential that when a trading name is used that the trading name is notified to the Central Bank, as this information is contained on the public registers maintained under the relevant legislation. All trading names must be registered with the Companies Registrations Office (CRO) and the trading names used must reflect those registered with the CRO. Firms should check the relevant registers on our website to confirm that their correct names are recorded. The Central Bank should be informed of such changes by emailing postauthorisations@centralbank.ie including a scanned copy of their CRO cert confirming any additional name(s) Contact Details Many firms have failed to notify the Central Bank of changes to their contact details (addresses, phone numbers and general contact details), or have failed to notify the correct details. This means that the Central Bank has difficulty in contacting these firms. In respect of un-contactable intermediaries, the Central Bank will investigate whether these intermediaries have ceased trading, with a view to removing them from our register of regulated firms. This will ensure that the relevant registers correctly reflect the live population of regulated entities, and provide accurate up to date information to the public, thereby enhancing consumer protection and confidence. An intermediary may be deemed un-contactable if, for example, the Central Bank has been unable to contact it regarding the submission of the online annual return. It is, therefore, very important that intermediaries complete the annual return and inform the Central Bank of any updated contact details. Any queries in relation to post authorisation changes can be addressed to postauthorisations@centralbank.ie
5 Acquiring Transactions Firms authorised under the Investment Intermediaries Act, 1995 (IIA) are required to notify the Central Bank in advance, and seek approval, for certain shareholding changes, as outlined in Section 38-48 of the IIA. A review of the information submitted by firms in the ONR has identified that there were potentially 886 unapproved acquiring transactions i.e. changes in shareholdings where relevant thresholds (10, 20, 33 or 50%) are reached or exceeded but approval notifications were not submitted in advance from the Central Bank. We are currently in the process of writing to the firms identified to advise them of the potential breach. It is the firm s responsibility to ensure that they are in compliance with the requirements as set out in the IIA and that the correct shareholding has been properly notified to and approved by the Central Bank. Due to the number of cases involved we will not be issuing reminder/follow up letters on these issues. The Central Bank cannot provide retrospective approval of such transactions. However, on 1, the Central Bank (Supervision and Enforcement) Act 2013 (Act) was enacted. Section 75 of the Act, outlines additional provisions that have been made for persons who failed to notify the Central Bank of a proposed transaction, by means of making an application to the courts. If a firm suspects that they may have carried out a shareholding change without the necessary prior approval, they may contact the Central Bank in order to check the shareholding against our records. A failure to have such transactions properly approved could result in potential legal issues surrounding the proper title to those shares. In addition, if it is identified that a previous transaction has occurred without the prior approval of the Central Bank, any future proposed transactions cannot be progressed until the outstanding issue has been resolved. Where such issues are identified, a firm should seek its own professional advice. In order to assist firms in relation to the acquiring transaction process, we are designing an application form for this purpose, which will be available in October 2013. Any queries relating to acquiring transactions or to check the Central Bank s record of the shareholding of your firm e-mail acquiringtransactions@centralbank.ie Processing Timeframe Section 40 of the IIA outlines the processing time for Acquiring Transactions applications, i.e. 3 months from when the supervisory authority first receives a notification under section 39 or where the supervisory authority requests further information. Please allow for adequate processing time when submitting your application.
6 Minimum Competency Code (2011) The Central Bank considers that the on-going monitoring and compliance with the MCC is a crucial step in its overall mission to protect consumers. It is one of the post authorisation Key Risk Indicators in assessing a firm s potential risk to consumers. In this regard, we have designed a questionnaire for completion by Retail Intermediaries for the purposes of assisting us in assessing their compliance with the MCC. This questionnaire will be issued to firms where relevant issues are identified, but it also may be issued on an ad-hoc basis to assess overall compliance or as part of a future theme on compliance with the MCC. The questionnaire seeks information in relation to a number of areas as outlined in the MCC: Overview of retail financial products offered by the firm Staff profile within the firm Maintenance of the required register under the MCC New entrant arrangements Prescribed script function Grandfathering arrangements and certification Continuing Professional Development Declaration by the firm Points to Note When completing the questionnaire, firms should refer to the MCC for a full explanation of its requirements. The Central Bank reserves the right to investigate or seek additional documentary evidence of the firm s compliance with the MCC. A regulated entity may be exposed to financial penalties and other sanctions under Part IIIC of the Central Bank Act 1942, if it allows a person to carry out relevant functions without being satisfied, on reasonable grounds, that the person complies with the MCC.
7 Revocations We have recently updated the Application Form for Revocation of Authorisation / Registration of Investment, Insurance /Re-Insurance and Mortgage Intermediaries. As part of this review, we have implemented a number of changes in order to simplify the Revocation Process for all Retail Intermediaries. The main changes are as follows: Firms will be asked to confirm that they are not aware of any legal or regulatory issue regarding the firm that should be brought to the attention of the Central Bank prior to the firms revocation. If firms are aware of any such issues, they are required to set out details of the circumstances surrounding the issue separately. Firms will be asked to confirm that affected consumers are notified in accordance with the 2012 Code or that no consumers are adversely affected by the revocation/cancellation of the firm s authorisation / registration. In the latter case, firms are required to set out the reasons why no consumers will be affected. This may occur in a situation where a firm has already transferred its book of business or if the firm has never traded. Firms will no longer be required to submit copies of the letter(s) sent to the affected Clients and/or their Product Producers. This is still a requirement under Chapter 3.11 of the Consumer Protection Code and Section 31 of the IIA. However, under the revised application form this is covered by the signing of the declaration to confirm compliance with these requirements. It should be noted that submitting an Application for Revocation will not avoid potential enforcement action being considered by the Central Bank, and in such cases the revocation process may be delayed until any issues are resolved. Incomplete Revocation Applications It is important to ensure that all applications are complete. Incomplete applications will result in a delay in the processing of the revocation and may expose the firm to continued regulatory or other levies by reason of the delay.
8 Planned Developments To complement the above improvements and to further develop the authorisation/post authorisation /revocation processes, the following changes are planned for the remainder of the year and for 2014: Introduce the single application form for Authorisation September 2013 Introduce the Acquiring Transaction application form - October 2013 Update our website to include guidance on these processes and Frequently Asked Questions - October 2013 Develop and introduce an On-line process for the consideration of authorisations, post authorisation changes and revocations 2014. Introduce service standards for the sector 2014. Please refer to our recent Press Release Consultation on Authorisation Services Standards. We would welcome your feedback to this Consultation. To keep abreast of other regulatory matters we recommend that you review the latest edition of the Regulatory Transactions Review which was issued recently by the Regulatory Transactions Division