22 November 2021
The European Banking Authority (EBA) published today its revised Guidelines on internal governance for investment firms under the Investment Firms Directive (IFD).
The IFD contains specific governance requirements for investment firms in parallel to and consistently with the ones already applicable under the Capital Requirements Directive (CRD). These specific provisions apply to class 2 investment firms. All investment firms must also comply with the governance requirements under the Markets in Financial Instruments Directive (MiFID).
The Guidelines provide further details on how the IFD governance provisions should be applied by Class 2 investment firms, specifying the tasks, responsibilities and organisation of the management body, and the organisation of investment firms, including the need to create transparent structures that allow for supervision of all their activities. The Guidelines also specify requirements aimed at ensuring the sound management of risks across all three lines of defence and, in particular, set out detailed requirements for the second line of defence (the compliance function and the independent risk management where applicable) and, the third line of defence (the internal audit function), where applicable.
These Guidelines have been developed on the basis of Article 26 of Directive (EU) 2019/2034, which requires investment firms to have robust governance arrangements, including a clear organisational structure with well-defined, transparent and consistent lines of responsibility, processes and mechanisms and mandates the EBA to develop Guidelines in this area. The Guidelines have been developed in cooperation with the European Securities and Markets Authority (ESMA).
The EBA Guidelines will apply to Competent Authorities across the EU, as well as to credit institutions and investment firms on an individual and consolidated basis. The Guidelines will enter into force on 30.4.2022.
 i.e. investment firms that are non-systemically relevant investment firms which do not qualify as small and non-interconnected investment firms either and to which the IFD and the Investment Firms Regulation (IFR) applies without limitation
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