Prudential Risk

MiFID Corporate Governance Code: what is needed from firms?

Ciaran Rogers Ciaran Rogers

Following the publication of the new Central Bank Corporate Governance Requirements for Investment Firms and Market Operators in November 2018, MiFID investment firms, non-retail investment intermediaries, and MiFID market operators are now subject to the requirements with effect from 1 July 2019.

The requirements apply to firms authorised by the Central Bank that are designated as High, Medium High or Medium Low Impact within PRISM. Although they do not apply to firms designated as Low Impact, such firms are being encouraged to adopt similar requirements.

With a consistent inflow of MiFID firms into Ireland as result of Brexit and a continuous focus on best practice when it comes to corporate governance, the four areas below outline what is expected from firms in order to be compliant with the new CBI requirements. It is also noted that there are exemptions that could be applied, to the below, based on firms being subsidiaries of a group and/or the firm’s PRISM rating.

Composition of the Board

Boards of Directors should have a sufficient size and expertise to adequately oversee the operations of the firm; additionally, the majority of the boards should consist of independent non-executive directors (‘INEDs’).  If the firm is a subsidiary of a group, group directors and INEDs can make up the majority.

Chairperson

The Chairperson should possess, as prescribed by the CBI, relevant financial services expertise, qualifications and experience, or be required to undertake comprehensive, relevant and timely training.

Furthermore, the Chairperson must be an INED or a group director in the case of a subsidiary.  

Committees of the Board

For High Impact firms, they must establish an audit committee,  risk committee and a remuneration committee. This requirements is diluted for firms with lower PRISM ratings and the oversight of the committees remains a direct responsibility of the board.

Firms should ensure that adequate challenge is expected and provided by INEDs.

Why Grant Thornton?

Grant Thornton’s prudential risk experts assist a diverse range of investment firms. Our team has extensive knowledge of the legislation and guidance underpinning corporate governance arrangements and how these can be embedded in the decision-making process of the firm.

Our experts could help your firm assess its regulatory requirements in this area and advise on the optimal governance structure level aligned with the CBI requirements.

 

 

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