Response to the Law Reform Commission Issues Paper “Regulatory Enforcement and Corporate Offences”

• Central Bank response to Law Reform Commission Issues Paper published
• Recommendations made based on Central Bank’s experience of regulatory enforcement in recent years
• Critical that regulators have a toolkit of varied and adaptive methods to promote a culture of ethical compliance by firms and individuals.

The Central Bank of Ireland today publishes its response to the Law Reform Commission’s Issues Paper “Regulatory Enforcement and Corporate Offences”.

The response contains observations on the Central Bank’s enforcement powers and recent legislative reform, and some specific observations on criminal powers, individual responsibility for regulatory breaches and reckless decision-making. It then sets out some experience-based responses to the issues covered in the LRC paper, specifically the standardisation of regulatory powers, civil financial sanctions, the coordination of regulators and jurisdiction for regulatory appeals.

The Central Bank response contains a number of recommendations including:

• That reforms strengthening the accountability of senior personnel in regulated entities be adopted in this jurisdiction. Such reforms would permit the Central Bank to require senior managers to submit a statement of responsibilities that clearly states the matters for which they are responsible and accountable. These requirements would assist in assigning responsibility to individuals in a regulatory context and decrease the ability of individuals to claim that the culpability for wrongdoing lay outside their sphere of responsibility.
• The extension of the period for which individuals can be suspended from senior positions in regulated firms as part of the fitness and probity regime.
• That the legislative framework be strengthened to include a criminal offence of egregious recklessness by those in charge of financial firms that fail.
• The embedding of certain core common standards within a legislative framework. These standards would be used to guide regulated entities, and the individuals who exercise influence and authority over them, as to what is expected of them. Core standards can sit alongside prescriptive rules, and can be enforced where entities or individuals fall below them. Such core standards could include the requirement on entities and individuals that they conduct themselves with honesty and integrity, possess the competence and capability to conduct their business properly and co-operate with relevant regulatory authorities.

The response also indicates the Central Bank’s support for the creation of a dedicated division within an existing criminal agency to investigate white collar crime. This reform would allow for more effective investigation and prosecution of white collar offences.

With regard to the specific issues covered in the Issues Paper itself, the Central Bank:

• Supports the enactment of a single Act setting out the full suite of inspection and investigation powers of regulatory agencies.
• Notes that, in its experience, civil financial sanctions act as a powerful deterrent to unlawful behaviour.
• Supports measures designed to facilitate coordination and cooperation between regulators.
• Encourages the establishment of a specialised appeals body akin to the Competition Appeals Tribunal in the UK.

Director General, Financial Conduct Derville Rowland said:

“Regulators require a coherent, robust and well-drafted legislative framework that allows for adaptive responses to suspected breaches of regulatory requirements. This submission is based on the Central Bank’s extensive experience with enforcement since the crisis. A well-stocked enforcement toolbox is vital to ensuring the Central Bank can safeguard stability and protect consumers and we are committed to continually reviewing our powers and requesting amendments where we see them as enhancing the framework.”