Central Bank of Ireland unveils new rules for commission disclosures by financial intermediaries

The Central Bank of Ireland has earlier today published a set of new rules to be included in the Consumer Protection Code 2012 on the payment of commission to financial intermediaries.

The rules involve new requirements on transparency for consumers and prohibitions on certain types of commission arrangements. The purpose of these rules is to ensure transparency of commission arrangements between financial intermediaries, such as brokers and financial advisers, and product producers, such as banks and insurance firms, and to reduce the risk of conflicts of interest relating to commissions.

Under the new rules, intermediaries will be required to publish details of the commissions they receive from product producers on their websites. Furthermore, the Central Bank will no longer allow intermediaries to label themselves and their regulated activities as ‘independent’ if they accept and retain commission when providing advice.

Commission linked to targets that do not consider a consumer’s best interests will be considered a conflict of interest and will be prohibited. Free “hospitality perks” for intermediaries such as golf trips and sporting event tickets will not be permitted under the new rules. Any commission received in the form of non-monetary benefits must demonstrably enhance the quality of the service to the consumer in order to be permitted.

Gráinne McEvoy, Director of Consumer Protection, commented:

“These amendments to the Consumer Protection Code will reduce the potential for bias on the part of financial intermediaries and will provide consumers with access to more information about how intermediaries are paid. Consumers will also be able to have confidence that when they receive advice that is marketed as being independent, that this advice is truly independent.”

The new rules are set to come into effect on March 31, 2020.