First-step analysis: fintech regulation in Ireland

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Financial regulation

Regulatory bodies

Which bodies regulate the provision of fintech products and services?

There is only one financial services regulator in Ireland, the Central Bank, which is responsible for authorising and supervising all providers of regulated financial services. The Central Bank is responsible for both prudential supervision and conduct of business supervision of regulated entities that it has authorised. Where a regulated firm has been authorised by a supervisory authority in another EU or EEA jurisdiction, the home state regulator will be responsible for prudential supervision but the Central Bank will be responsible for conduct of business supervision in Ireland. The Single Supervisory Mechanism at the European Central Bank also directly supervises significant credit institutions and has exclusive competence for the authorisation of credit institutions (other than branches of third-country credit institutions).

Regulated activities

Which activities trigger a licensing requirement in your jurisdiction?

Whether or not a fintech business needs to hold a financial services authorisation will depend on the nature of the activities that the firm engages in. As far as investment-related activities are concerned, Directive 2014/65/EU (MiFID II) was transposed into Irish law by the European Union (Markets in Financial Instruments) Regulations 2017 (the Irish MiFID II Regulations). Engaging in any of the investment services and activities listed in MiFID II, such as providing investment advice or executing client orders, is a regulated activity requiring authorisation. Other parts of the MiFID II package also have direct effect in Ireland. 

Engaging in ‘banking business’ requires authorisation under the Central Bank Act 1971. The European Union (Capital Requirements) Regulations 2014 transposed the Capital Requirements Directive 2013/36/EU (CRD IV) into Irish law and the requirements for obtaining an Irish banking license are based on the transposition of the CRD IV package. Other parts of the CRD IV package also have direct effect in Ireland. ‘Banking business’ means taking deposits or other repayable funds from members of the public and granting credit for own account. There is a restriction in the 1971 Act, in the absence of an exemption from the Central Bank, which prohibits anyone from using the term ‘bank’ in their name or holding themselves out as a bank without holding the necessary authorisation. Ireland also has a regime for authorising branches of credit institutions established in third countries (third-country branches) under section 9A of the Central Bank Act 1971. 

Consumer lending

Is consumer lending regulated in your jurisdiction?

Subject to very limited exceptions, providing cash loans to individuals (not just consumers) in Ireland is a regulated activity requiring authorisation as a retail credit firm under the Central Bank Act 1997, unless the lender is otherwise authorised to provide such credit, for example, a bank. This is an Irish domestic licensing regime and does not derive from an EU law obligation.

Multiple aspects of consumer lending are also regulated (at a conduct of business level) under the Consumer Credit Act 1995 and the European Communities (Consumer Credit Agreement) Regulations 2010, which regulate the form and content of credit agreements. The 1995 Act and the 2010 Regulations implement the provisions of Directive 87/102/EEC as amended, and Directive 2008/48/EC. 

The Central Bank’s Consumer Protection Code 2012 and associated addenda (the CPC) are also relevant. The CPC applies to all financial services providers who are authorised, registered or licensed by the Central Bank, as well as financial services providers authorised, registered or licensed in another EU or EEA member state when providing services in Ireland on a branch or cross-border basis. The CPC essentially requires regulated entities to adhere to a set of general requirements such as to provide terms of business to consumers, conduct KYC, to establish the suitability of the product, and adhere to lending and advertisement requirements.

There are also separate requirements for mortgage lending to consumers, including the ‘housing loan’ requirements under the Consumer Credit Act 1995, European Union (Consumer Mortgage Credit Agreements) Regulations 2016, implementing the provisions of Directive 2014/17/EU and the Central Bank’s Code of Conduct on Mortgage Arrears.

Secondary market loan trading

Are there restrictions on trading loans in the secondary market in your jurisdiction?

Part V of the Central Bank Act 1997 regulates credit servicing, which includes holding the legal title to loans made by regulated financial services providers to individuals and SMEs. Credit servicing is a regulated activity requiring authorisation by the Central Bank of Ireland. Acquiring the beneficial interest in such loans is not, however, a regulated activity, although there are associated licensing requirements applicable to entities that provide administration or servicing in respect of such loans. Trading in non-SME corporate loans is not, generally speaking, a regulated activity in Ireland. 

There may also be data protection issues and general contractual issues that need to be addressed, irrespective of the nature of the loans being traded.

Collective investment schemes

Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.

Investment funds are authorised and regulated by the Central Bank, and may be regulated as:

 

UCITS, RIAIFs and QIAIFs may be organised through a number of legal structures, the most popular of which are the Irish collective asset-management vehicle (ICAV), the investment public limited company (the investment company) and authorised unit trusts. It is an offence to carry on business as an ICAV, investment company or authorised unit trust unless authorised by the Central Bank. 

Fintech companies, whether providing alternative finance products or otherwise, would not typically fall to be regulated as investment funds. However, fintech firms that fall within the definition of alternative investment funds would require authorisation. Fintech companies that provide services to investment funds may require authorisation if they are providing regulated depositary or administration services. Depositaries and administrators to investment funds may also engage fintech firms, in which case applicable Central Bank outsourcing requirements may apply, although in general, the finte
ch service providers would not themselves require authorisation.

Alternative investment funds

Are managers of alternative investment funds regulated?

The Central Bank authorises and regulates Irish alternative investment fund managers (AIFMs) under the AIFM Regulations, as well as regulating UCITS management companies in accordance with the UCITS Regulations, and non-UCITS management companies (a residual category post-AIFMD). Most fintech companies would be expected to fall outside the scope of the AIFM Regulations and the UCITS Regulations. 

Peer-to-peer and marketplace lending

Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.

There is currently no distinct regulatory regime for peer-to-peer or marketplace lending in Ireland. Some of the regimes described in this chapter (eg, retail credit) may, however, be relevant depending on the nature of the specific activities engaged in and a regulatory analysis of the proposed process flow is therefore always advisable.  

Crowdfunding

Describe any specific regulation of crowdfunding in your jurisdiction.

Regulation (EU) 2020/1503 (the Crowdfunding Regulation) and Directive (EU) 2020/1504 (the MiFID II Amending Directive) were recently published to provide a common EU legislative framework in respect of crowdfunding.

The Crowdfunding Regulation will become directly effective from 10 November 2021, and member states were required to implement the MiFID II Amending Directive into national law by 10 May 2021 and to apply those measures from 10 November 2021. European Crowdfunding Service Providers (ECSPs) are excluded from MiFID II by the MiFID II Amending Directive, and ECSP’s will instead be covered by the Crowdfunding Regulation. 

The Crowdfunding Regulation will apply to peer-to-peer crowdfunding platforms facilitating ‘business…

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