There are now just three months to go until the Senior Executive Accountability Regime (SEAR) under the Central Bank of Ireland’s Individual Accountability Framework (IAF) will apply to non-executive directors and independent non-executive directors ((I)NEDs) of relevant credit institutions, insurance undertakings and investment firms (in-scope entities). SEAR obligations have applied to all other executives since mid-2024. In advance of SEAR coming into force for (I)NEDs from 1 July 2025, in-scope entities must revisit their existing SEAR arrangements. Our experienced, multidisciplinary team is focused on guiding clients through the implementation of these final SEAR requirements.

A quick recap on SEAR and in-scope entities:

SEAR was introduced with the stated aim of improving governance, performance, and accountability by placing obligations on firms and senior individuals within them to set out clearly where responsibility and decision-making lies for their business and by setting out what those responsibilities entail.  SEAR defines in-scope entities as:

• Credit institutions (excluding credit unions);
• Insurance undertakings (excluding reinsurance undertakings, captive (re)insurance undertakings and Insurance Special Purpose Vehicles);
• Investment firms which underwrite on a firm commitment basis and/or deal on own account and/or hold client assets; and
• Incoming third country branches of the above.

So, what should in-scope entities and (I)NEDs be doing ahead of the 1 July 2025 deadline? For in-scope entities there are three fundamental areas which will require attention:

Review of Responsibilities

The IAF Act together with the Central Bank’s IAF Guidance (1,524 KB) defines the relevant responsibilities of (I)NEDs.  In addition to an (I)NED’s “Inherent Responsibility” of overseeing and monitoring strategy and management, there are additional Inherent Responsibilities related to roles such as chairing board committees.

“Prescribed Responsibilities” and “Other Responsibilities” must also be allocated to (I)NEDs where that individual performs them as part of their role. Prescribed Responsibilities seek to ensure that responsibilities, including the management or oversight of key risks, have been allocated to a PCF role holder, which will provide clarity as to who is responsible for the key activities of the firm.

An (I)NED’s responsibilities, should be agreed and documented in an updated Letter of Appointment.

Note: As clearly outlined in the Central Bank’s IAF Guidance, the responsibilities for which INEDs are accountable are limited to non-executive responsibilities, and considerations in respect of reasonable steps will be limited to what should reasonably be expected of individuals in that context.

Statement of Responsibilities

Having identified the relevant Inherent and Prescribed Responsibilities for each (I)NED, a documented Statement of Responsibilities must be prepared. The IAF Guidance provides a template Statement of Responsibilities specifying the type of information to be captured. In addition to including Inherent, Prescribed and Other Responsibilities of the role, it should include the effective date of the Statement of Responsibilities, together with any supplementary information relevant for the role holder. For (I)NEDs, it is important to be mindful of those additional responsibilities associated with acting as Board Chair or as Chair of Board Committees.

The distinction amongst the roles should be clearly defined on each individual’s Statement of Responsibilities and will be taken into consideration in determining whether reasonable steps were taken by an individual to discharge their responsibilities.

Management Responsibilities Map

IAF mandated the inclusion of all PCF role holders including (I)NEDs on the Management Responsibilities Maps (Maps) to ensure clarity regarding the governance arrangements within the firm with effect from July 2024. However, it is timely to revisit the Map and ensure alignment with each new (I)NED Statement of Responsibility.

Maps should accurately and comprehensively document the key management and governance arrangements and demonstrate that there are no gaps in material responsibilities across the firm. Particular attention should be paid to revisiting existing PCF roles and responsibilities to continue to demonstrate the distinction amongst the roles and alignment with each individual’s Statement of Responsibilities.  Evidence of the review of the Map should be maintained.

How can we help?

If you have any queries in relation to your SEAR readiness, the Arthur Cox team is available to support you. Please contact your usual Arthur Cox contact or a member of our Individual Accountability and SEAR or Governance and Consulting Services groups for more information on our SEAR Implementation Summary.

Our experienced team comprises specialists from across the firm, including from our Financial Regulatory Group, Litigation, Dispute Resolution and Investigations Group, Asset Management and Investment Funds Group, Insurance Group and Employment Group. We use our significant knowledge and experience of the regulatory and enforcement environment to provide strategic advice and support to our clients as they manage the transition to IAF and beyond.