Ireland’s financial regulator has criticised an undisclosed number of financial firms for failing to be consumer focused enough when it comes to dealing securities.
The Central Bank of Ireland (CBI) said some firms have not been able to demonstrate good ‘best execution’ practices that stem from the EU’s MiFID II regulations.
Best execution requires investment firms that are in-scope under MiFID II to take sufficient steps to ensure price, costs, speed and likelihood of execution and settlement achieve the best results for customers.
CBI said the requirements play a “critical role in the investor protection framework and are fundamental to the delivery of positive outcomes for clients”.
Publishing the results of a thematic review, the CBI said some firms failed to demonstrate effective oversight, monitoring, and assurance of how best execution requirements were fulfilled.
The CBI said it was particularly concerned at the lack of evidence of “oversight and challenge” in the best execution process from boards or committees.
It is also concerned that some staff demonstrated poor awareness of their firm’s best execution policies and procedures and said there should be better training.
In many cases, the root cause stemmed from a lack of investment in resources in compliance functions, which in some cases led to key compliance roles being vacant for “prolonged periods and gaps in best execution second line capabilities”.
The bank has engaged directly with those firms where issues have been identified, the CBI said.
Gráinne McEvoy, director of consumer protection, said: “The best execution requirements under MiFID play a critical role in ensuring that consumers are protected as they oblige firms to take all sufficient steps to obtain the best possible result for their customers. The findings of this review do not reflect the consumer-focused culture that the Central Bank expects to see embedded in firms.”
The director added: “Consumer-focused cultures must be evident throughout a firm’s structure, from robust oversight and challenge by board and/or committee to comprehensive training for staff. This is vital to enable consumers to make confident, secure choices when availing of investment services.”
MiFID II, or the Markets in Financial Instruments Directive, governs how investment services in financial instruments are provided and it applies to investment firms, wealth managers, broker dealers, product manufacturers, and credit institutions authorised to carry out MiFID activities.
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