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The Evolving CAR

The protection of client assets continues to be a priority for the Central Bank of Ireland. The client asset regime which was introduced in 2007 (Client Asset Requirements ), and revised in 2015 (Client Asset Regulations (CAR)), ultimately aims to maintain public confidence, minimise the risk of loss/misuse of client assets and protect investors in the event that an investment firm was to become insolvent.

The post-Brexit Irish financial services industry is evolving as a whole, and more particularly the client asset environment, with ever increasing values of client assets being held by increasingly complex investment firms. With the emergence of new, more complex firms, carrying out more sophisticated activities, the Central Bank is of the opinion that it is prudent to propose a number of enhancements to ensure that client assets held by investment firms, or credit institutions are appropriately safeguarded.

The Central Bank issued a consultation paper in December 2020, seeking views from stakeholders on the proposed enhancements to CAR . The consultation period will run until 10 March 2021.

The main proposed enhancements include:

  • Extending the scope and application of the CAR to include credit institutions undertaking MiFID investment business;
  • Introducing new requirements regarding client disclosure and consent, including enhancements applicable to investment firms that have obtained client consent to the use of client financial instruments and investment firms providing prime brokerage services;
  • Introducing new CAR guidance to clarify the Central Bank’s expectations as to how client funds should be segregated;
  • Introducing new requirements, and placing some existing CAR guidance on a legislative footing, in relation to the performance of reconciliations and the treatment of client asset discrepancies and reconciliation differences, and shortfalls and excesses; and
  • Introducing new requirements and CAR guidance on the contents of the Client Asset Management Plan (the CAMP).

Read more on the enhancements and their key impacts here.

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