Kinsale Capital Management fined €275,000 over breaches
Offences relate to a failure to carry out adequate assessments of certain clients
The Central Bank of Ireland has fined Dublin-based Kinsale Capital Management €275,000 and reprimanded it for breaches of EU financial markets regulations.
The breaches relate to a failure to carry out adequate assessments of certain clients who elected to be treated as professional clients between June 7th, 2011, and July 31st, 2015.
The breaches concern its failure to implement appropriate policies and procedures for client categorisation between April 6th 2010 and March 2015. In addition, Kinsale Capital provided investment services to three retail clients in breach of the terms of its authorisation between December 14th, 2011, and July 31st, 2015.
No clients of Kinsale Capital suffered any financial loss as a result of the breaches.
Commenting on the fine, the Central Bank’s director of enforcement, Derville Rowland, said: “The level of investor protection that firms are required to afford to each client depends on that client’s categorisation – retail clients being afforded the highest level of protection.
“Failures in that categorisation process, such as the miscategorisation of retail clients as professional clients, can have very serious impacts, including a client being exposed to elevated levels of investment risk and a loss of eligibility to investor compensation.
“Kinsale is not authorised to provide investment services to retail clients. Therefore, it is especially concerning that the firm did not put in place and adhere to robust procedures to appropriately assess and categorise prospective clients requesting to be treated as professionals so as to ensure that the firm did not provide investment services to retail clients.”
In a statement, Kinsale Capital said it “fully accepts” the Central Bank’s findings relating to its miscategorisation of a “small number” of retail clients who elected to be treated as professional clients.
“The firm took steps to comprehensively address the breaches identified and to become fully compliant,” it said. “The firm has not received a single client complaint since its establishment in 2004.”
Ms Rowland said the Central Bank expects investment firms to give “high priority” to compliance with client categorisation requirements. Failure to do so would result in “vigorous investigation and enforcement action”, she added.
Between November 1st, 2007, and September 2nd, 2016, Kinsale Capital was authorised as an investment firm under the MiFID (Markets in Financial Instruments Directive) regulations. It was authorised to receive and transmit orders and to provide portfolio management and investment advice to eligible counterparties and professional clients.
Since September 2nd, 2016, it was authorised as an alternative investment-fund manager under EU regulations. It remains authorised to provide the investment services but only to eligible counterparties and professional clients, not to retail clients.
In October 2014, the Central Bank conducted an on-site inspection of the firm’s client categorisation procedures as part of a thematic review. This inspection and the subsequent follow-up steps by the Central Bank identified a number of issues in respect of compliance with the MiFID Regulations, which prompted an enforcement investigation.