Central Bank of Ireland outlines new minimum competency standards in tune with MiFID II
The new rules specify, inter alia, that at least one key staff member involved in the design of a retail financial product will be required to meet a prescribed standard of minimum competency.
The Central Bank of Ireland continues with its efforts to adapt its existing regulations to the Markets in Financial Instruments Directive II (MiFID II), which is set to come into force in January 2018.
On Friday, September 1, 2017, the Irish financial regulator said it was introducing new minimum competency standards in tune with the new MiFID II requirements. These standards have been a longstanding feature of the regulatory regime in Ireland. In their essence, they represent the statutory minimum professional standards for staff of financial service providers when they are dealing with consumers in relation to retail financial products.
In summary, the changes to the above-mentioned documents include:
- In addition to obtaining a relevant recognised qualification, a requirement on a regulated firm to ensure that staff have obtained the competence and skills appropriate to the relevant function, through experience or training gained in an employment context.
- A requirement for at least one key staff member involved in the design of a retail financial product to meet a prescribed standard of minimum competency.
- A requirement of six hours of continuous professional development each year for board members of a mortgage credit intermediary.
- A requirement on regulated firms to carry out an annual review of staff members’ development and experience needs.
The amendments to the Minimum Competency Code and the Minimum Competency Regulations 2017 are introduced shortly after the Central Bank of Ireland published an Addendum to the Consumer Protection Code 2012, also in line with the upcoming MiFID II rules. The changes affected the chapters on Provision of Information and on Advertising. For instance, in cases where a regulated entity providing MiFID Article 3 services offers information about the past performance of the advertised product or service, the company should make sure that the information is not selected so as to exaggerate the success or disguise the lack of success of the advertised product or service and guarantee that this information is based on actual performance. Moreover, the period should be stated clearly and it must cover the preceding five years, or the whole period for which the advertised product or service has been provided, where less than five years.
Last week, the Central Bank of Ireland published a “Dear CEO” letter, in which it provided a summary of the findings of a recently completed themed review of suitability processes of investment firms. That review has provided an insight into how firms were progressing with the significant challenge of preparing for MiFID II. The review focused on the information-gathering phase of the suitability process and the firms were assessed for compliance with the ESMA “Guidelines on certain aspects of the MiFID suitability requirements”.
The Bank has found that most of the inspected firms failed to fully comply with the ESMA Guidelines.