ANDORRA Law and Practice Contributed by: Miguel Cases and Laura Nieto, Cases & Lacambra
The internal audit function is entitled to prepare an annual report establishing its opinion regard - ing the efficiency and design of the internal con - trol and risk management systems of the entity. This report is addressed to the management body for its review. A copy of this report must also be addressed to the AFA within the first semester following the closing of the exercise. Law 7/2024 also establishes as a general prin - ciple that banking entities shall take all neces - sary measures in order to detect and prevent any conflict of interest that may arise during the per - formance of activities by any employee, director or assistant, which may cause any prejudice to clients. In addition, according to the proportionality prin - ciple, banking entities may have the following committees:
Technical Communication 163/05, issued by the AFA, highlights some rules on ethics and profes - sional behaviour that apply to Andorran bank - ing entities – namely, the prohibition on carrying out own-account operations under identical or better conditions than those of clients to the lat - ter’s detriment, and the prohibition on providing incentives and compensation to clients with rel - evant influence on the entity. The Andorran Banking Association published a Code of Conducts in 2017, which was updated in 2022 and reflects the minimum professional standards and recommendations for the bank - ing sector. In terms of diversity, Law 7/2024 states that the board of directors of banking entities must be formed by individuals with an appropriate mix of skills, diversity and experience. 4.2 Registration and Oversight of Senior Management Law 7/2013 sets a limit on the number of direc - torships that may be held by a member of the management body in a banking entity, taking into account individual circumstances and the nature, scale and complexity of the entity’s activities. In this vein, banking entities may not hold more than one of the following combinations of direc - torships at the same time: • one executive directorship with two non- executive directorships; and • four non-executive directorships. Moreover, board members must be persons of recognised commercial and professional honour, and must also possess adequate knowledge and experience in order to exercise their duties.
• audit committee; • risk committee; • appointments committee; and • remuneration committee.
The committees must be composed of members who do not perform executive functions, and the chairpersons must be independent directors. Law 7/2024 also provides for the possibility of combining the audit and risk committees and the appointments and remuneration commit - tees, according to the proportionality principle and upon the AFA’s authorisation. Banking entities must also develop adequate procedures for employees to notify possible infringements internally (ie, whistle-blowing channels). These procedures must guarantee the confidentiality of both the reporting person and the offender.
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