The Central Bank of Ireland has confirmed to the Minister for Finance Simon Harris it will take account of a scathing judgment on its handling of a fitness and probity investigation into a fund manager when drafting new guidelines on how its officials seek to bar finance executives from regulated firms.
However, the Minister rejected a call for a compensation scheme to be set up for individuals who suffer loss arising from wrongful Central Bank prohibitions or from investigations that are ultimately discontinued, according to a response to a parliamentary question from Social Democrats deputy leader Cian O’Callaghan.
The Minister said the regulator has informed him it will “take into account the judgment” when finalising guidance in the coming months on prohibition notices.
He said the work will also reflect recommendations from the European Central Bank’s former banking supervisory chairman, Andrea Enria, who reviewed the regulator’s executive vetting system in 2024.
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That was after the Irish Financial Services Appeals Tribunal in 2024 criticised the bank’s decision-making process in another case, where a funds sector executive was stopped from taking on a role. The tribunal described the bank’s process in that case as “flawed” and said it denied that individual fair procedures “at every stage”.
Harris said: “I have been informed by the Central Bank that it takes the High Court judgment seriously and is in the process of thoroughly mapping the judgment against its current procedures to identify what changes are required and will make all the necessary changes to incorporate the judgment into its processes and procedures.”
“Furthermore, since the decision was made by the Central Bank in this investigation [in 2022], it has also introduced enhanced scrutiny and oversight on [fitness and probity] cases in the pipeline to ensure that fair procedures are provided to all persons the subject of an investigation that are consistent with the findings of the judgment.”
High Court president Judge David Barniville said in his ruling, published on April 17th, that the investigation into the funds industry executive was “irretrievably tainted” by errors.
The man – who was not named in the ruling and who wished to retain anonymity in an interview with The Irish Times last month – was an executive director of an Irish investment fund management company that oversaw sub-funds that fed into master funds managed by a sister company in the UK.
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The Central Bank contended the man should have informed it when he learned that the UK fund manager in charge of the master fund – referred to as GH – was the subject of an internal investigation that would result in him being suspended on July 31st, 2018.
The Irish investigation concluded that the man was “not candid and truthful and was not full, fair and accurate in all respects in his dealings with the Central Bank” – even though he was acting on legal advice on what should be disclosed and when.
Indeed, a Central Bank frequently asked questions document published in 2018 on fitness and probity, stated that firms should “take a practical approach and investigate such matters before going to the Central Bank with potentially unrealised concerns”.
The former Irish executive told The Irish Times that he has run down his pension pot as he has struggled to find work since he was essentially forced to resign in 2020 as the investigation was going on, is behind on mortgage payments and in danger of losing his family home. He provided evidence backing up these statements.
Responding to O’Callaghan’s question of financial redress for someone like the executive, Harris said: “I do not see a basis on which the compensation mechanism proposed by the deputy could operate efficiently or effectively. There would need to be a strong policy rationale to consider such a change in the law.”
He added that such an approach could likely have implications for other State entities.
