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EMEA Individual Accountability Regimes Regulations SEAR

The Delay of Ireland’s Senior Executive Accountability Regime (SEAR) for NEDs and INEDs: What Compliance Professionals Need To Know

After the Central Bank of Ireland’s Individual Accountability Framework (IAF) was signed into law in March 2023, a three-month consultation process took place to provide clarity and guidance to role-holders on responsibilities and accountability. The outcome highlighted industry concerns over the number and people in scope for its prescribed responsibilities, particularly for both non-executive directors (NEDs) and independent non-executive directors (INEDs) within the Senior Executive Accountability Regime (SEAR).

As a result, the Central Bank deferred the application of SEAR for both NEDs and INEDs by 12 months until 1 July 2025. The regulator cited that this delay will give both the Central Bank and regulated firms time to learn more about its implications, and the impact the new individual accountability framework will have on executives – for example, the issues with the overlap of other laws and the reconciliation over certain decision-making responsibilities.

Imminent, Outstanding Requirements

However, the delay does not mean that firms can continue as they are until SEAR comes into effect in 2025. Other parts of the IAF will apply to both NEDs and INEDs from 29 December 2023, including:

  • Common Conduct Standards – basic standards, such as acting with honesty and integrity, care and diligence, and in the best interest of customers
  • Additional Conduct Standards for NEDs, INEDS and other Controlled Functions (CFs) – ensure an organisation’s business functions are controlled and managed effectively, in accordance with obligations, and have a delegated structural oversight
  • Pre-Approval Controlled Functions (PCFs) – senior managers that need to be certified by the regulator to carry out their roles and responsibilities

And afterwards, firms must think ahead to the deadline for the Management Responsibilities Map on 1 July 2024. This will apply to all PCFs (including NEDs and INEDs) to clearly demonstrate the procedures and processes in place regarding the governance arrangements of the organisation. When firms do develop their Management Responsibilities Map, it will need to identify all the individuals in PCF roles, with the allocation of their responsibilities to ensure there are no gaps, and be kept up to date. The Central Bank has reiterated that this will be regularly reviewed and will need to be made available upon request.

Key Changes and Amendments to IAF

The feedback from the consultation has also led to a multitude of changes and amendments to the obligations of PCFs under IAF. One of the topics flagged was the clarity around the sharing/splitting of roles and responsibilities. To combat this, the Central Bank has outlined the following examples of PCF roles that could be shared based on the business line:

  • Head of Underwriting taking into consideration retail and corporate business lines
  • Head of Investment (applicable to insurance undertakings)
  • Head of Trading
  • Chief Investment Officer (applicable to investment firms) taking into consideration different investment types (e.g. equity and bonds)

Nevertheless, the regulator stressed that the most senior individual should be solely accountable and responsible for the relevant responsibilities.

The allocation of Prescribed Responsibilities for senior managers was also a cause of concern following the consultation, with the Central Bank implementing the following changes:

  • The removal of the responsibilities that consider the impact of key business initiatives and strategic decisions on customers, as well as the development of a framework for and monitoring the implementation of the conduct requirements
  • The merging of responsibilities for overseeing the adoption of the firm’s policy on diversity and inclusion (D&I), leading the development of the firm’s culture (including D&I) by the Board, and managing the adoption of the firm’s culture (including D&I) in day-to-day operations
  • Moving the responsibilities for managing treasury management functions and associated, as well as the responsibilities for a firm’s compliance with client asset requirements, to the Sector or Circumstance Specific list

It’s important to note that no Prescribed Responsibilities were changed for PCFs, and editorial changes were made throughout the list to address comments received over the clarity of each.

Additionally, the nature of the IAF certification requirements was highlighted as potentially onerous when certifying if Controlled Functions are fit and proper to carry out their roles. To reduce the administrative burden on firms, the Central Bank has amended its guidance to limit the scope of the enhanced due diligence aspect for PCFs, CF1s and CF2s, and to facilitate a self-certification in respect of CF3 – CF11.


Comply with Confidence

While the delay of SEAR for I(NEDS) may be welcomed by some, the changes outlined in the IAF will need to be enacted quickly by compliance professionals to ensure firms have adequate time to prepare. The good news is that regtech solutions are keeping pace with these changes to enable compliance professionals to establish and maintain a comprehensive individual accountability framework – keeping them ahead, while ensuring senior managers understand and meet their roles and responsibilities.

StarCompliance’s Individual Accountability Regime (IAR) IAF solution is designed to meet the latest guidance by the Central Bank of Ireland, and the flexibility of our platform helps firms stay future-ready with any subsequent changes in the lead up to SEAR’s new implementation date. Our software simplifies operational processes and provides complete traceability to give firms the confidence that all regulatory obligations have been met.

For example, Star’s IAF solution helps firms manage maps and statements of responsibility across all entities and provides the tools that make it easy for senior executives to document reasonable steps. It also streamlines IAF Fitness and Probity (F&P) workflows, allowing businesses to be proactive on the personal development of senior managers so that they can continue performing their roles with integrity and competence.

For more information on Star’s IAR solution for IAF and SEAR, download our brochure or contact us to arrange a demo.