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Practical Overview of the Central Bank’s Administrative Sanctions Process

ACOI Welcomes our Members to the 1st seminar in the ACOI lunch time CPD seminar series January - June 2012 Our Event: Practical Overview of the Central Bank’s Administrative Sanctions Process Chaired: Mr. Denis Hevey, Interim CEO

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Practical Overview of the Central Bank’s Administrative Sanctions Process

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  1. ACOI Welcomes our Members to the 1st seminar in the ACOI lunch time CPD seminar series January - June 2012Our Event: Practical Overview of the Central Bank’s Administrative Sanctions ProcessChaired: Mr. Denis Hevey, Interim CEO Speaker: Mr. Joe Beashel, Partner & Head of Regulatory Risk Management and Compliance, Matheson Ormsby Prentice,

  2. Practical Overview of the Central Bank’s Administrative Sanctions Process Joe Beashel 25 January 2012

  3. Administrative Sanctions • Part IIIC of the Central Bank Act 1942 as amended by the Central Bank and Financial Services Authority of Ireland Act 2004. Implemented on 1 August 2004 • Central Bank can administer sanctions in respect of ‘Prescribed Contraventions’ by regulated financial services providers and persons concerned in their management

  4. Prescribed Contravention • Section 33AN of the Central Bank 1942 • Contravention of: • Provision of a designated enactment or statutory instrument (Schedule 2 of CBA 1942, as amended); • Code or direction made/given under such provision; • Condition or requirement Statute, Statutory Instrument, Code or direction • Obligation Imposed by Part IIIC of the CBA 1942

  5. Number of Published Settlement Agreements

  6. Central Bank’s Enforcement Options SUSPICION EXAMINATION NO FURTHER ACTION SUPERVISORY ACTION ADMINISTRATIVE SANCTIONS INQUIRY ADMINISTRATIVE SANCTIONS SETTLEMENT AGREEMENT CRIMINAL PROSECUTIONS REFERRAL TO ANOTHER AUTHORITY OR ENFORCEMENT BODY

  7. Administrative Sanctions Procedure

  8. Sanctions • Caution or Reprimand • Direction to refund or hold money charges/paid • Monetary penalty max €5,000,000 for a financial service provider or €500,000 for a natural person • Disqualification of persons involved • Direction to cease the prescribed contravention • Direction to pay costs of investigation and inquiry

  9. Recent Developments • Peter Oakes appointed head of the Central Bank’s Enforcement Directorate on 1 October 2010 • Central Bank published its Enforcement Strategy 2011-2012 • Central Bank published CP57 on Inquiry Guidelines (“CP57”) • The Enforcement Directorate targeted a staff level of 75 by the end of 2011

  10. Settlement Agreements 2011 • 10 published settlement agreements in 2011 • 5 of these with large organisations - Scotiabank, MBNA, Aviva, Goldman Sachs & Combined Insurance (part ACE Group) • Fines ranging from €10,000 to €3,350,000 • Total fines imposed for 2011: € 5,050,000 • How 2011 sanctions processes were initiated • 5 by a firm reporting a contravention • 3 by a Central Bank inspection • 2 settlement agreement did not disclose how it was initiated

  11. How Administrative Sanctions Processes were Initiated 2010-2011

  12. Enforcement by Central Bank – The Firm’s Perspective • Arrival of examination letter(s) • Examination process / compulsory powers • Steps to be taken • Analysis required

  13. Settle Publication Fine Reprimand Negotiate alternative outcome Stay on examination Examination concluded with lesser sanction e.g. private caution Full Inquiry (CP57 published to develop appropriate procedures in advance of future inquiries) Potential Outcomes

  14. Step 1: Assess Your Position • Assemble facts and correspondence • Analyse the facts • Consider significance of issue • Consider any other circumstances • Decide on approach • Agree • Challenge • Clarify

  15. Step 2: Correspondence • Accuracy of factual statements • Full rebuttal? • Make concessions? • Correspondence will affect • Accuracy • Affect views reached by CBI • Reduce proposed fine • Improve likely proposed publicity statement

  16. Step 3: Keep Strategy Under Review • Further facts may have emerged • Initial reaction dissipates • Other issues may be relevant • Ongoing relationship with CBI

  17. Sanctions Against Individuals • Increased focus from Central Bank • Consider separate legal representation

  18. Format of Settlement Day • One day • Attendance • From CBI • From Firm • Various sessions and negotiations

  19. Outcome of Settlement Meeting • No agreement – Inquiry Stage • Conclusion of settlement • Private settlement agreement attaching • Prescribed contravention(s) • Proposed publicity statement

  20. Impact of Settlement • Notice given of Press Release • Disclosure of sanction by firm in dealings with other regulators • Disclosure of sanction by Central Bank, if compelled • Matter fully closed • unless new facts emerge not previously disclosed • Publicity could lead to litigation or discovery requests

  21. Central Bank (Supervision and Enforcement) Bill 2011 • Central Bank to have the power to require a firm to procure at their own cost, an independent expert (eg lawyer, accountant, actuary) • Central bank could appoint authorised officers to investigate a firm • Protection from civil liability for whistleblowers • Administrative sanction fines to be increased • from €5 million to €10 million for firms • from €500,000 to €1 million for individuals

  22. Central Bank (Supervision and Enforcement) Bill 2011 • The Central Bank has requested that the Bill be amended to give it the power to appoint administrators to investment firms where there is a fear that client funds are at risk • The Central Bank already has this power in relation to insurance firms

  23. Inquiry Guidelines CP57 • Details of practice and procedure to be adopted during an inquiry set out in CP57 • The Draft Inquiry Guidelines are divided into four sections; • Referral • Pre-Inquiry Procedures • Hearing • Decision • The Regulatory Decisions Unit (“RDU”) which is separate from the Enforcement Directorate will have responsibility for the proper conduct of an Inquiry

  24. Inquiry Guidelines CP57 • CP57 states that Central Bank will inform the RDU (part of the Central Bank) of its decision to hold an inquiry • RDU will appoint a panel for the Inquiry comprising of a Chairperson, internal Central Bank personnel and external advisors • The Panel will not discuss the inquiry with the Central Bank staff responsible for the case without the respondent being present

  25. Joe BeashelMatheson Ormsby Prentice70 Sir John Rogerson's QuayDublin 2T: +353 1 232 2101F: +353 1 232 3333E: Joe.Beashel@mop.ieW: www.mop.ie Contacts

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