Insurance Intermediaries
The activity of “referring” or “introducing” in respect of an insurance product is not contained within the IDR and therefore does not fall with the definition of regulated activities. The result of this is that a fee, commission, other reward or remuneration may be paid for referrals/introductions FOR INSURANCE PRODUCTS ONLY.
This does not apply to investment or mortgage introductions or referrals, which continue to be subject to Chapter 3.25 of the Consumer Protection Code, as follows.
(a) A regulated entity may only pay a referral fee, commission or other reward to the following:
(b) another regulated entity;
© a certified person;
(d) an individual for whom a regulated entity has taken full and unconditional responsibility under the Investment Intermediaries Act 1995 e.g. a Tied Agent;
(e) an agent, branch or entity to which activities are outsourced in accordance with the European Communities (Payment Services) Regulations 2009; where the regulated entity remains fully liable for the acts of that agent, branch or entity to which activities are outsourced;
(f) a distributor, agent, branch or entity to which activities are outsourced in accordance with the European Communities (Electronic Money) Regulations 2011; where the regulated entity remains fully liable for the acts of that distributor, agent, branch or entity to which activities are outsourced;
(g) an entity specifically exempted by law from requiring an authorisation, licence or registration to carry out the regulated activity in respect of which the fee, commission, other reward or remuneration is to be paid e.g. a Solicitor;
(h) a credit intermediary;
(i) a person no longer providing a regulated activity where the fee, commission, other reward or remuneration is in respect of a regulated activity that the person provided when the person fell within any of the descriptions above.
Mortgage Intermediaries
An important change that was made to the definition of a Mortgage Intermediary was made in the Central Bank & Financial Services Authority of Ireland Act, 2004 (CBFSAI Act) to amend the Consumer Credit Act, 1995. The definition of a ‘Mortgage Intermediary’ is now as follows:
This change came into effect on the 1st of January 2005 and means that mortgage introducers i.e. people or firms who introduce clients to Mortgage Intermediaries in return for a payment, are themselves classified as Mortgage Intermediaries.
This means that if you remunerate a third party for the introduction of mortgage business, the third party must now be authorised as a Mortgage Intermediary. In addition, if you receive remuneration for the referral of mortgage business you must be authorised as a Mortgage Intermediary.
Commission Sharing
Where an arrangement is being drafted between authorised intermediaries for introducing business, some items to consider and include are:
(a) Set an agreed time period for which the agreement will be in place and when it will be subject to review.
(b) Ensure you can get out of the agreement at short notice.
© The relevant commission sharing percentages or amounts must be stipulated. For Mortgage Brokers, consider what might happen if you receive retrospective commissions based on achieving certain business levels with particular lenders.
(d) What will happen with override, renewal, top-up, and indexation commissions?
(e) Who owns the client for future contact – you or the introducer?
(f) Clarify if the introducer will get commission for all future new business placed with you or if this might apply for say the first two years.
(g) Ensure both parties cover their respective Data Protection obligations and confirm that they will also obtain client consent for the sharing of information.
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