The bank inspected investment firms and found many failed to meet the required standards.
Suitability requirements are in place to ensure client investments align to investment objectives and personal circumstances, the Central Bank said.
Firms were assessed for compliance with the European Securities and Markets Authority suitability guidelines.
The majority of firms inspected failed to show they were complying with the guidelines on assessing the suitability of investors for various products.
Central Bank executives said that firms could not demonstrate that policies and procedures were implemented in practice when it came to the guidelines.
Application forms did not contain fields for the collection of required information and/or were found to be incomplete.
Not all firms could demonstrate that they had effective governance structures and appropriate tools to successfully implement and assess suitability. A number of firms relied on the client’s self-assessment of their knowledge, experience and financial situation. They failed to carry out an independent objective assessment.
Governance structures for the identification and treatment of vulnerable clients were also absent or ineffective, the Central Bank said.
“The review highlighted that firms need to improve the quality of information collected and how this information is utilised the suitability process,” said Central Bank director of asset management supervision Bank Michael Hodson.