Central Bank review highlights overall improvement in retail intermediaries’ compliance with annual return reporting requirements

• Annual return submission levels have risen from 81% in 2013 to 98% in 2020.
• Further improvement needed by some firms in relation to accuracy of data submitted, producing audited accounts, and voluntary revocation when no longer trading.
• Follow-up supervisory engagement underway with firms where gaps have been identified.

The Central Bank of Ireland has published the findings of a Thematic Review of the Retail Intermediary Annual Return (RIAR) (PDF 294.79KB).

The Review forms the latest part of a multi-year supervision programme undertaken by the Central Bank to regulate the compliance of firms with annual return reporting requirements. Since 2015, the programme has targeted non-compliant firms, leading to significant improvements in the submission levels of the RIAR. Submission levels have increased from 81% as at 31 December 2013 to 98% in 2020.

This latest Review examined the accuracy and quality of data submitted, and identified some material instances of incorrect reporting across categories including:

• Financial position (net asset position);
• Gross income/turnover;
• Commission and fee income;
• Professional indemnity insurance.

The Review concluded that, in the majority of cases, incorrect reporting was due to either a lack of understanding of reporting requirements or human error.  The Central Bank has set out its expectations that firms will assess their procedures and controls to address specific issues identified and to mitigate against any further incorrect data reporting going forward.

The Review also identified a small number of investment intermediaries that were unaware of their obligation to produce annual audited accounts.  The Central Bank is proactively engaging directly with those retail intermediaries that have failed to accurately report on this requirement, including where other issues of concern have been identified.

In addition, the Review found that some investment intermediaries were not actively trading and were retaining their authorisation for future use. Following engagement with the Review team, these firms’ authorisations were put to use or voluntarily revoked.

The onus is on firms to be fully aware of and compliant with all requirements necessary to operate in the retail intermediary sector and, in particular, the timely submission of complete and accurate annual returns.

Gráinne McEvoy, Director of Consumer Protection said:

“This latest review is part of a multi-year programme of work to ensure that retail intermediaries continue to deliver on their responsibilities to act in the best interests of their customers.

“The Review highlights the positive steps the sector has taken with regard to annual return reporting, which is encouraging. The majority of firms in this sector are meeting reporting standards and the sector is on the right track - however there is more to do.

“Failure to meet reporting obligations for any reason is not acceptable.  Further improvement is needed by firms to ensure the accuracy of data submitted. Where firms are not trading, they must seek voluntary revocation of their authorisation to help maintain the accuracy of Central Bank Registers. This is important, because consumers who use professional and compliant intermediaries should be able to rely on our registers for the most accurate and up-to-date information. It also means we can ensure our regulatory and supervisory resources are appropriately allocated.

“We will continue to engage directly with those firms who currently fall short and expect them to take all remedial actions necessary. This includes making use of the full extent of our supervisory powers where required, to ensure firms are both compliant and consumer-centric in their approach going forward”.

Notes

The Central Bank of Ireland is responsible for the conduct of business and prudential supervision of approximately 2,450 retail intermediaries.

A retail intermediary is a regulated firm that engages in intermediation activities relating to certain financial products and/or provides advice in relation to those products. Further information is available on the Central Bank’s website.

In 2015, pursuant to its powers under Section 22 of the Supervision and Enforcement Act 2013, the Central Bank placed the requirement for retail intermediaries to submit an annual return on a statutory footing. Since that time, the programme has targeted non-compliant retail intermediaries and delivered a more compliant sector. As at 1 January 2020, annual return submission levels increased to 98% from a level of 81% as at 31 December 2013.

In 2016, the Central Bank conducted a targeted inspection of 325 non-compliant retail intermediary firms, resulting in 134 retail intermediaries seeking voluntary revocation of their authorisations and a further 171 meeting annual reporting obligations.