18 Dec 2017 | 12.21 pm
Merrion Stockbrokers Hit With €200,000 Fine
Broker failed to observe fitness and probity standards
18 Dec 2017 | 12.21 pm
The Central Bank has fined Merrion Stockbrokers €200,000 for breaching Section 21 of the Central Bank Reform Act 2010 by not having adequate controls to ensure that its staff dealing with customers complied with the bank’s Fitness and Probity Standards. This is the first case against a firm for a breach of its Section 21 obligations.
The 2010 Act provides that individuals performing “certain influential and customer facing roles in regulated entities” are considered to be performing controlled functions (‘CFs’). The most significant of these roles are pre-approval controlled functions (‘PCFs’), in respect of which Central Bank approval is required before appointments are made to the role.
The Central Bank said that its “enforcement investigation identified that Merrion failed to introduce adequate systems or controls to ensure that individuals holding CFs and PCFs complied with the Fitness and Probity Standards”.
“The breach occurred from the introduction of the Fitness and Probity Regime on 1 December 2011, and persisted for more than four years. During this period, Merrion failed to:
- Introduce adequate systems or procedures to ensure compliance with its obligations under section 21 of the 2010 Act; and
- Take reasonable steps to satisfy itself that its CFs and PCFs complied with the Standards.”
Merrion introduced a programme of compliance improvements following a management buyout and the appointment of a new board in 2014. Following the Central Bank’s inspection in 2016, the board took steps to ensure that the inadequacies in its policies and procedures were addressed.
Merrion Stockbrokers is now trading as Merrion Private and Merrion Fixed Income, part of the Merrion Capital Group.
Merrion Capital Group Ltd had turnover of €14m in 2016 and booked an operating loss of €1.3m. Net worth at year-end was €13.2m, including balance sheet cash of €12.1m. The company had 89 people on the payroll through 2016, up from 77 the year before.
Central Bank head of enforcement investigations Brenda O’Neill said: “Under the Fitness and Probity regime, the Central Bank acts as a gatekeeper for individuals in senior positions at supervised firms, known as pre-approval controlled functions. However, it is firms who have the ultimate responsibility for ensuring that the wider population of individuals working in financial services, namely those in controlled functions, are suitable.
“This is an obligation that firms have when appointing individuals to roles. It is also an ongoing obligation for firms to ensure individuals continue to meet the Standards. If circumstances arise to suggest that an individual no longer satisfies the Standards, firms must be in a position to identify this and, if necessary, report any such circumstances to the Central Bank. Firms must take these obligations seriously as the risks posed by failing to do so are significant.
“In this case, Merrion did not meet its obligations under the Fitness and Probity regime. Until April 2015, there was an absence of any written procedures. In addition, Merrion failed to correctly categorise a number of employees performing controlled functions and failed to understand that its obligation to monitor the Fitness and Probity of individuals does not stop once initial due diligence has been completed. The fine must reflect the significance of these failings.”