The Central Bank's investigation into Custom House Capital Ltd (in Liquidation) and persons concerned in its management has been on-going since the publication of the Final Report to the High Court by Court Appointed Inspectors dated 19 October 2011. Following consultation with An Garda Siochána, the Central Bank's investigation has been deferred pending completion of investigations by An Garda Síochána.
Upon presentation of the Final Inspectors' Report on Custom House Capital Ltd (CHC) to the High Court in October 2011, Justice Hogan ordered that CHC be wound up immediately. It should be noted that copies of the Final Report have been provided to other relevant state authorities for their consideration i.e. the Minister for Justice and Equality, to the Director of Public Prosecutions, to the Director of Corporate Enforcement, to the Revenue Commissioners and to the Garda Commissioner.
The Central Bank provides regular updates on Custom House Capital on its website.
In relation to enhancing the investor protection legislative framework, I can assure the Deputy that the Central Bank has been provided with extensive new powers since the onset of the financial crises to prevent the loss of client assets as occurred in the case of Custom House Capital. The principal developments are set out below:
Client Assets Regime
An independent review of the Regulatory Regime for the Safekeeping of Client Assets was published by the Central Bank in 2012 and is available on the Central Bank website. The Central Bank fully accepted the specific recommendations contained in this independent review and established a process of implementing all of the necessary changes required. In 2013 the Central Bank published on its website a Consultation Paper on Client Assets Regulations and Guidance, which will replace the existing client assets requirements (issued in 2007). The Review set out the following three objectives as the foundation of any client asset protection regime:
- The maintenance of public confidence in the client asset regime;
- The mitigation of the risk of misuse of client assets whether as a result of maladministration or fraud; and
- The provision of a system which in the event of a firm's insolvency will enable the expeditious return of available client assets to the owner at lowest cost.
It is envisaged that the new rules for the Safekeeping of Client Assets will be in place before the end of the year.
New rules in respect of key management positions
I have already brought forward a very wide range of statutory powers to enable the Central Bank to deal with such an issue across the financial service sector under the Central Bank Reform Act 2010, which sets out a far-reaching regime for the Central Bank to set out and enforce standards of fitness and probity across the financial service sector, including standards of honesty, integrity and ethical judgement, which apply to those in key management positions. The Act provides for sanctions, at the discretion of the Central Bank, of suspension, or even, prohibition orders, following an investigation and due process. In terms of addressing poor management, the code applies similar requirements in respect of skills and experience.
Enhanced monitoring and enforcement powers for the Central Bank
The Central Bank (Supervision and Enforcement) Act 2013 also sets out a number of new provisions that are relevant. The fitness and probity provisions are reinforced by the whistleblower protections, which place an onus on those performing pre-approval controlled functions to disclose information relating to offences, prescribed contraventions, and breaches of Irish financial services legislation or the destruction of evidence. The Act also provides for the Central Bank to commission, as part of the proper and effective regulation of financial service providers, an independent expert report at the cost of the financial service provider. It strengthens the authorised officer regime, enables the Central Bank to secure assurances from auditors of regulated financial service providers. It strengthens the enforcement powers of the Central Bank through enabling it to apply to the High Court for (i) an order to restrain a party from engaging in conduct that contravenes financial services legislation and (ii) an order for restitution where a person has been unjustly enriched as a result of contravening financial services legislation. It provides for a substantial increase in monetary penalties: for a corporate body, the maximum penalty is increased to the greater of either €10m or 10% of the turnover of the corporate body for its last complete financial year before the finding is made. For an individual, the maximum penalty is increased to €1m. The Central Bank also has the power to suspend or revoke a regulated entity's authorisation following an Inquiry.