Market abuse
The Central Bank has published a series of findings and expectations from its industry-wide review of compliance with the EU’s market abuse regulation. The review found some good practices but identified a need for significant improvements.
Beneficial ownership
The Registrar of Beneficial Ownership of Companies and Industrial and Provident Societies (RBO) has published its 2020 annual report. It shows that 81% of companies and 64% of societies had registered by the end of December 2020.
Of the 53,000 beneficial ownership submissions received by the RBO, 21% were rejected, mainly due to data validation failures – for example, personal public service numbers not exactly matching names. The form used for foreign beneficial owners had a rejection rate of 8%. Almost a third of all beneficial owners were identified as ‘senior managing official’, which would refer in particular to companies limited by guarantee.
Discrepancy notices are filed where a relevant person or a designated person becomes aware that the beneficial ownership is not as recorded in the register. Two discrepancy notices were filed – one by a competent authority (eg the Central Bank) and one by a designated person (eg an accountant or bank).
Failure to file with the RBO is referred to as ‘non-compliance’ rather than a discrepancy. Seven non-compliance reports were made during 2020. No enforcements or prosecutions were initiated in 2020.
Designated persons are now required to check new clients’ details on the RBO, and in 2020 13,000 so-called restricted searches were made by designated persons. A further 200 unrestricted searches were made by supervisors and authorities such as the Gardaí.
Corporate enforcement
The Office of the Director of Corporate Enforcement (ODCE) recently published its annual report for 2020. ODCE is in the process of transitioning from being an arm of the Department of Enterprise to an independent corporate enforcement authority with enhanced powers and wider scope.
The 2020 annual report notes a different corporate enforcement environment than in previous years, caused by the effects of Covid-19 legislation and restrictions on the work of liquidators. Over the year, 669 liquidators’ reports were received, down almost a quarter on 2019. ODCE expects there to be some catch-up and return to normal levels once Covid-19 restrictions have been fully lifted.
ODCE’s follow up on unliquidated companies being struck off with debts still outstanding resulted in 18 company directors being disqualified. During the course of the year, 1,266 companies were struck off, which equates to a prosecution rate of about 2%.
There were 75 (2019: 105) category 2 offence reports made by auditors.
Audit monitoring
The Irish Auditing and Accounting Supervisory Authority (IAASA) has published its 2020 annual report. It was a busy year, and the publication includes quality assurance reports on public interest entity auditors, details of fines and sanctions handed down following audit monitoring failures, a new revised ethical standard for auditors, and details of IAASA’s review of 47 sets of financial statements of public interest entities.
International audit
The International Forum of Independent Audit Regulators (IFIAR) has published a report on internationally relevant developments in auditing. Five audit policy topics are identified:
- auditor appointment and tenure
- joint audits
- combination of audit and non-audit services
- transparency of audit-related information
- audit firms’ governance and culture.
The report highlights key facts and figures, insights about regulations and requirements, and measures that have been implemented in various jurisdictions.
UK inspections
The UK’s Financial Reporting Council (FRC) has published its annual inspection and supervision results for 2020/21 covering the seven largest UK audit firms: BDO, Deloitte, EY, Grant Thornton, KPMG, Mazars and PwC. The 2020/21 results show that nearly one-third of audits inspected by the FRC still require improvement. KPMG, BDO and Mazars came in for specific criticisms.
Pensions
The Pensions Authority has published its annual report and accounts for 2020. During the year, it concluded six prosecutions and opened 35 new investigations. Of the six prosecutions, four resulted in convictions: two for not replying to requests for information, one for not remitting employee pension deductions, and one for late remittance of employer pension contributions.
The report notes that 13% of defined benefit pension schemes were not in compliance with the funding standard. Of the 566 such schemes in the country (down from 597 in 2019, and 614 in 2018), only 12 (seven in 2019, six in 2018) do not have a funding proposal in place.
Note that funding standard compliancy does not mean that a scheme is fully funded on a fair value or IFRS 19/FRS 102 basis. The funding of defined benefit schemes is particularly problematic in an environment where government and corporate bond rates are at historic lows.
