Paschal Donohoe (Dublin Central, Fine Gael)
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I will continue from where the Minister of State, Deputy Fleming, left off. I believe he made reference to the Bill's policy background and was on the verge of going into the key provisions.

Part 1 deals with technical matters such as the interpretation provisions and the commencement of the Bill. As the Minister of State referenced, the Central Bank will be undertaking a consultation process on the individual accountability framework.

Part 2 provides for individual accountability and standards. It amends the Central Bank (Supervision and Enforcement) Act 2013 to provide the Central Bank with a new regulation-making power. In regulations, the bank will specify those responsibilities that are inherent to each pre-approval controlled function for the purposes of the senior executive accountability regime, SEAR, and prescribe other responsibilities that firms must allocate to appropriate senior individuals. There will be also a provision allowing firms to allocate other responsibilities to senior individuals so that all relevant responsibilities within the firm are appropriately assigned. The arrangements that firms will be required to adopt will include documenting how these responsibilities are assigned within the firm. This process will provide the Central Bank with a clear picture of how each firm is operated.

The Central Bank Reform Act 2010 will be amended to provide a new power for the bank to prescribe business standards with which regulated firms must comply. This regulation-making power will allow the Central Bank to provide clear details of what is expected of firms to ensure they act in the interests of customers and the integrity of the market, that they act honestly, fairly and professionally, and that they act with due skill, care and diligence. Amendments to the 2010 Act will also insert a duty of responsibility on senior executives subject to SEAR to take any reasonable step to ensure the affairs of the regulated firm for which they are responsible are conducted in such a way as to avoid a contravention of financial services legislation. A similar duty will be imposed on all persons performing controlled functions to ensure they abide by the common conduct standards. These standards will be spelled out in the legislation together with some examples of the expected behaviour. These examples are intended to assist those subject to the common conduct standards to understand what is required of them. In addition to the common conduct standards, senior individuals in regulated firms will have a similar duty to ensure they abide by additional conduct standards in accordance with the firm's obligations under financial services legislation. The Bill sets out factors that the bank must take into account when assessing the reasonableness of the steps taken.

Part 3 will make a series of amendments to Part 3 of the 2010 Act, which deals with the Central Bank's fitness and probity regime. These amendments will extend the regime to certain categories of holding companies and persons performing controlled functions relating to them. The extension of the regime to financial holding companies in their own right will make the regime available to the Central Bank as a supervisory and enforcement tool. The amendments will also make changes to the operation of the regime to make it more efficient and effective and to ensure it conforms to the required standards of fairness in the administration of justice in light of the Zalewski case.

Regulated financial service providers, RFSPs, and holding companies will be required to certify that they are satisfied that each person performing a controlled function relating to them is fit and proper. The power of the Central Bank's deputy governor and head of financial regulation to conduct an investigation into the fitness and probity of a person performing a controlled function will be extended. It will now apply to any person who performed a controlled function within the six-year period before the commencement of the investigation. This will ensure that a person who anticipates being the subject of an investigation cannot thwart it by resigning before the investigation commences.

The maximum period a person can be suspended by the head of financial regulation from performing a controlled function is extended to six months. Under the Bill, the period for which the suspension can be further extended by the High Court is 24 months. This will allow for a maximum suspension period of 30 months from the time the head of financial regulation confirms the suspension. That decision to confirm a suspension notice will be appealable to the Irish Financial Services Appeals Tribunal, IFSAT.

Where a person is prohibited by the Central Bank or the Governor from performing a controlled function either for a specified period or indefinitely, the bank or the Governor will be required to apply to the High Court for confirmation of the prohibition. This requirement will not apply where the bank or the Governor enters into an agreement with the prohibited person whereby the person agrees to abide by the terms of the prohibition notice. The existing legislation allows for a prohibition of up to two months without court confirmation. The greater oversight role for the High Court is in line with the Zalewski decision. The Bill also provides that the Central Bank, the Governor or the prohibited person can apply to the High Court for an order to vary or revoke a prohibition notice where this would be justified by a relevant change in circumstances since the prohibition was confirmed. The Bill introduces additional safeguards to ensure the independence of decision makers in respect of the fitness and probity process.

Part 4 will make a series of amendments to the Central Bank Act 1942, in particular Part IIIC of that Act, which deals with the Central Bank's administrative sanctions procedure, ASP. These amendments will make changes to the operation of the ASP to clarify the processes involved, to ensure it conforms to the required standards of fairness in the administration of justice, and to adapt the ASP to provide for individual accountability. A number of the changes to Part IIIC are necessary to break the "participation link". This will facilitate individual accountability by removing the requirement that, before taking action against an individual, the Central Bank must first establish that a prescribed contravention has been committed by an RFSP in which the individual participated. As under the individual accountability framework, there will be much broader individual accountability. It is necessary to break the link and, to a large extent, do away with the concept of a person concerned in the management of an RFSP. Participation in a prescribed contravention by a regulated firm will, however, continue to be a stand-alone contravention for which an individual can be held accountable.

The Bill makes changes to Central Bank procedures in an inquiry to determine whether someone committed or participated in a prescribed contravention.

The Bill also makes changes to the requirements for confirmation by the High Court of a decision of the Central Bank to impose a sanction following an inquiry. Every such decision or, where the decision is appealed, any decision of the appeals tribunal in relation to such a decision, must be confirmed by the High Court before taking effect. The High Court shall confirm such a decision unless there was a manifest and fundamental error of law or the sanction is manifestly disproportionate.

The Bill introduces additional safeguards to ensure the independence of decision makers in relation to the operation of the ASP. This will ensure that the same person does not perform functions or exercise powers of the Central Bank such as could result in unfairness to any person concerned. There will be an appointment process for inquiry members involving the bank and the Minister. A new chapter 4 will be inserted into Part IllC of the Act to provide that proceedings of an investigation or inquiry under that Part shall be absolutely privileged.

Part 5 will make amendments to the Central Bank (Supervision and Enforcement) Act 2013 regarding the treatment of privileged legal material. These amendments will provide for a process whereby a person may agree to provide privileged material to the Central Bank for specific purposes without waiving the privilege to any other person. This process will provide a legally robust and clear mechanism to facilitate this limited disclosure to the Central Bank should a person voluntarily wish to disclose legally privileged material for the purposes of the performance of the Central Bank's functions under financial services legislation, and should the Central Bank agree to such disclosure.

Part 6 provides for various miscellaneous amendments to the Central Bank Reform Act 2010, the Central Bank (Supervision and Enforcement) Act 2013 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011.

Part 7 includes savings and transitional provisions to ensure there is certainty as to the provisions that apply to any investigation or inquiry already under way at the time certain provisions are commenced.

The general scheme of the Bill has been considered by the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. I thank the members of the joint committee for the time and effort they put into the preparation of its report. While broadly supportive of the measures included in the Bill, that report made several recommendations. I have written to the joint committee concerning these recommendations. I look forward to the House's engagement on this legislation. I commend the Bill to the House.