Central Bank of Ireland Reviews Tracker Bonds
The Central Bank of Ireland have conducted an inspection of the main tracker bond providers in Ireland, releasing their report online here.
It conducted a “themed inspection on key features documents for tracker bonds sold by credit institutions.”
Tracker bonds are a common investment type used in Ireland. A tracker bond is a market based investment, which tracks the progress of a particular market such as the FTSE 100 or Dow Jones.
Some of the key findings were:
- In all eight firms inspected by the review, it was judged evident that the KFD was provided to the consumer before an application form is signed as required under provision 9 of Chapter 6 of the Code.
- In all eight firms inspected, it was also evident from the consumer files examined by the Central Bank that the consumers were issued with a document as required under provision 10 of Chapter 6 of the Code.
- While the required document was issued to consumers following the start date of the product, it was not always issued within the 2 business days required by the Code. Firms advised that it is not always feasible to issue the document within 2 business days. This issue has been followed up with those individual firms. The reason for the delay is generally where the product producer is not the seller of the tracker bond. It was recognised that in this situation there can be issues regarding the timing of the provision of this document to consumers and the Review of Consumer Protection Code proposes to extend the timeframe from 2 business days to 5 business days.
- The Code requires that the KFD must include details of where the consumer’s investment goes. It should include a breakdown of the tracker bond investment into the following three components:
– The amount used to secure the promised payment;
– The amount used to secure a potential cash bonus; and
– The amount to be taken in charges.
You can read more about the Central Bank’s report here.
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