Investment Funds Update: Central Bank Issues Second Consultation on Corporate Governance for Investment Firms

08 June 2018

The Second Consultation paper issued by the Central Bank on corporate governance and investment firms details some proposed changes to the operations of High, Medium High or Medium Low Impact Investment Firms under the Central Bank’s risk-based framework - PRISM.

The new rules relate to composition of boards, the chairman appointed, and committees of the board.

Composition of the board

  • Investment firms must ensure their board is composed of a majority of independent non-executive directors.
  • Where a firm is a subsidiary of a group, there is limited exception to the general rule whereby a board majority may be made up of a combination of group directors and independent non-executive directors. This is subject to a minimum number of independent non-executive directors, based on the firm’s PRISM designation ranging from a minimum of three for High Impact Firms to one for Medium Low Impact Firms.
  • The Central Bank retains the discretion to require that a firm have a greater number of independent non-executive directors than specified in the paper.


  • A chairman must be appointed to the board.
  • This chairman must have relevant financial services expertise, qualifications, experience and/or training, to the extent that they can comprehend (i) the nature of the firm’s business activities and risks; (ii) their own responsibilities and those of the board; and (iii) the firm’s financial information.
  • The chairman must be an independent non-executive director. Exception is made where a firm is part of a group and the proposed Chairman is a group director.


  • At a minimum, firms must establish an audit and risk committee. A remuneration committee must also be established by any firm which is at the High Impact level on PRISM, though a group remuneration committee can be relied upon if the firm is a subsidiary and its board deems such reliance to be appropriate.
  • Each committee must have an appointed chairman, in addition to clear written terms of reference outlining the authority, functions membership and reporting lines of the committee. Practical considerations regarding meetings and voting must be provided for also.
  • Committees must comply with specific independent non-executive director membership levels, with audit committees also required to exclude the firm’s chairman and CEO from membership.


Any contravention of the requirements may result in the Central Bank using any of its supervisory or enforcement powers. The exercise of these powers is on a discretionary basis.


Responses to the consultation are encouraged and interested stakeholders should submit these to the Central Bank by no later than 31 July 2018. The new rules are due to take effect from 1 July 2019. Upon the introduction of the new rules, investment firms will need to analyse their corporate governance structures to ensure compliance. 

For more information on how your firm can achieve full compliance, contact a member of our Investment Funds team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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