Unit Trusts Bill, 1970: Second Stage. [Seanad.]

Question proposed: "That the Bill be now read a Second Time."

I move: "That the Bill be now read a Second Time."

At the outset I would like to say that this Bill, which deals with a complicated subject on which we have had no previous legislation in this country, has received a searching examination in the Seanad and a very large number of amendments to the original draft were tabled. I am glad to say that these amendments have improved the Bill in many important respects. In addition, I undertook to examine further a number of suggestions which were made on Report Stage in the Seanad and I propose to introduce amendments on some of these on Committee Stage. Legislation on unit trusts and similar investment schemes has also been under discussion in the Council of Europe and I have had regard in the drafting of this Bill to the consensus reached by the Council on a number of points. I propose to introduce a few further amendments to the Bill as a result of the meeting of the Council of Europe committee in October, 1971.

A unit trust scheme is an important medium of saving, particularly for people with small amounts of money to invest. The money collected from the investors is invested by the managing company in stocks, shares, gilt-edged securities and other property which are put into a fund in the custody of an independent trustee company and administered in accordance with the terms of a trust deed for the benefit of the participants. We are not concerned with private trusts but only with schemes which invite participation from the public. Each subscriber acquires a fractional interest in the fund and dividends from the investment are paid to subscribers or credited to their account in proportion to the size of their holding of units. The value of a unit will vary up and down as the value of the investments varies. As subscribers buy more units, managers acquire more securities and, conversely, if there is a net withdrawal of units the managers sell off securities. The advantage of this method of investment is that it gives a small investor the benefit of a spread of risk combined with skilled management; normally a fund should not contain the shares of any one company to the extent of more than 5 per cent of the total.

The scope of this Bill is comprehensive in that it embraces not only the normal type of unit trust scheme in which investment is confined to company shares and gilt-edged securities but also schemes for the collection of money from the public for investment in real estate, usually buildings used for flats and offices. In this I believe that I am going farther than other countries have done up to now. The growth of property schemes is a very recent phenomenon and legislation for their supervision brings up problems such as those of valuation and liquidity which are different from those encountered in the normal unit trust type of operation. I am satisfied, however, that the Bill which is before you is flexible enough to deal with diverse problems of control.

Unit trusts have been subject to regulation by legislation in Britain since 1939 and in the USA, where they are known as mutual funds, since 1940. More recently the idea has spread to the Continent of Europe where, however, the concept of a trust does not exist in the legal systems. The investment arrangement in European countries is governed by a set of fund rules and includes a managing company, but instead of the trustee there is a depositary bank which holds the investments. I am convinced that the unit trust from of collective investment is the firmest framework in which to operate the three-cornered relationship of manager, investment holder and subscribers. The development of these institutions in other countries has stimulated interest here and some schemes have been already established in this country while a number of groups are, I understand, contemplating the establishment of others. It is necessary, therefore, to provide legal safeguards for investors on the one hand, and, on the other, to provide that the money collected under schemes of this kind will, to an adequate extent, be invested in the development of our own economy.

Section 3 of the Bill provides for the registration of unit trust schemes and only registered schemes will be permitted to carry on business or advertise in this country. The conditions for registration are designed to ensure that registered trusts will be run by persons of satisfactory probity, competence and financial backing. I attach particular importance to the provision that the trustee should be independent of the manager. The trustee holds the investments in trust for the investors and it is desirable that he act in their interests and that he should not be subject to any pressure which might be exercised if he were dependent on the manager.

An application for registration may be refused, and this would arise if a manager or trustee was unable to meet one or more of the conditions for registration. Registration of a unit trust may be cancelled under section 4 for breach of a provision of the Bill or if any of the conditions under which registration was granted were no longer being fulfilled. The manager or trustee may appeal to the High Court against refusal of an application for registration or against a proposed cancellation of registration. As a safeguard for unit-holders, I will have power under section 5, in a case where cancellation of registration is contemplated, to replace the manager or trustee and, in the interim period before the new appointment takes effect, to require the manager to suspend the sale of units and the publication of advertisements. The right of appeal to the High Court also applies in relation to the exercise of this power.

The operation of unregistered unit trusts is prohibited under section 6. The prohibition extends to arrangements, resembling unit trusts, which provide for the participation of persons in profits or income from securities or any other property. Such institutions may be similar to unit trusts but there is the vital difference that they do not contain any provisions for trusts, and if they are not prohibited the legislation could be very easily and completely rendered ineffective. I feel that the inclusion of a trust is desirable in the interests of investors and that any arrangement not including a trust should not be allowed.

This Bill does not prohibit investment by Irish citizens in the unit trusts or investment funds of other countries but it does provide, as I have already said, that these funds cannot carry on business here, and in addition, section 7 prohibits advertising by them. There is nothing in the Bill that affects the present position in regard to the establishment of a company, so that nonnationals will not be precluded from participating in the operation of a unit trust provided it is duly registered in this country. I would like to point out also that any unit established in this country which proposes to attract funds from abroad will face restrictions on operation of business and on advertising in other countries similar to those proposed under this Bill.

Advertisements relating to investment funds appear not only in Irish newspapers but also in a number of foreign newspapers and periodicals circulating in this country. Some of these periodicals are high-class, and specialise to such an extent that they have a relatively small readership. I do not wish the Bill to have the effect of preventing such publications from entering this country in view of their value to the commercial community and to those interested in the economy. Section 7, therefore, provides for the grant of an exemption in any case where the cost of producing a special edition of such a newspaper or magazine for circulation in this country would be unreasonably heavy. I do not intend to grant exemptions lightly and I would require adequate evidence to support a case that the production of a special edition would impose an unreasonably heavy burden on a newspaper owner.

I have been concerned to ensure that persons contemplating the establishment of a unit trust will find in the legislation as much of the requirements which they will have to meet as it is possible to put into an Act and Deputies will find these requirements set out in detail in sections 9 to 15. They will appreciate, however, that it is not possible in legislation of this kind, where it is necessary to allow flexibility, to put all the requirements into an Act and provision is, accordingly, made in the Bill under section 8 to give me power to make orders in relation to a number of other requirements which may prove to be necessary for the protection of the interests of the unit-holders. An indication is given in section 8 of the principal matters which may be provided by order.

I would like to draw the attention of the House particularly to the fact that it is proposed under section 8 to give me power to provide by order that not less than a specified proportion of a trust fund shall be invested in Irish securities or other property in the State. Deputies are well aware that an expanding economy such as ours needs investment capital and it is my intention that unit trusts should make a contribution to this investment as insurance companies do. The two Irish life insurance companies have invested in this country a substantial proportion of the amount of their liabilities to Irish policy holders. Under an informal agreement, the external life assurance companies operating here have undertaken to invest in Ireland to an extent increasing from a sum of 66? per cent of their outstanding liabilities to Irish policy holders in 1969 to 80 per cent by the end of 1977.

The Bill does not prescribe the minimum level of investment by unit trusts in Ireland but instead leaves it to me to determine by order. This method has the advantage of enabling me to vary the appropriate level of investment in accordance with changing circumstances.

I would like to point out here that a requirement to invest in domestic assets is not exceptional and, in fact, several European countries have similar requirements.

On Report Stage in the Seanad, amendments were adopted which had the effect of excluding from the scope of the Bill schemes of collective investment associated with policies of life or industrial assurance effected with assurance companies licensed under the Insurance Act, 1936. As I explained to the Seanad when I introduced the amendments, these schemes fall into two categories. The first is a fund for investment either in securities or other property which forms an integral part of the insurance company's funds. The second is an arrangement whereby a separate management company, which is a subsidiary of the insurance company, manages a separate fund under a trust deed and the investments are held by a trustee. I am satisfied that the exclusion of insurance-linked schemes will not affect the two main objectives of the Bill which, as I have already pointed out, are the protection if investors and the promotion of investment in this country. Investors in these schemes will have the protection provided for life policy holders under the Insurance Acts. If that protection is thought to be lacking in any way in the light of modern practice and modern developments, I would expect that the Committee of Inquiry into the Insurance Industry, which is sitting at present, would make recommendations for improvements or a general tightening up of the insurance law. The second main objective of the Bill, namely, investment in this country, is secured by the informal agreement to which I have already referred. I have therefore concluded that it would be unnecessary to oblige such insurance-linked schemes to be registered. At the same time, as I expect there will be some managers who will prefer to register even though not legally required, I propose to introduce later an amendment which would permit them to do so.

The appearance of unit trusts in Ireland in recent years and the prospect of the development of the movement on a larger scale render it necessary to legislate for their regulation. I feel that the enactment of this Bill would provide a suitable framework of control, and that it will be welcomed by Deputies. I am anxious that it should provide for the establishment of a system of control which will be at once effective and conductive to the growth of unit trust schemes in this country and I shall be open to suggestions from Deputies on all sides of the House as to how it might be further improved.

I commend the Bill to the House.

This Bill has been dealt with in great detail in the Seanad and those of us who have read the Seanad debate will realise that quite a lot of the work which would have had to be done here was done there. Therefore our burden is somewhat lighter this morning and, the matter having been dealt with here on the Second Stage, there will probably be less to do on Committee Stage on what would have been, without doubt, a Committee Stage Bill.

I do not think the Minister mentioned that the minimum capital which he indicated in the Seanad for such a unit trust would be £500,000. I would not be competent to say what is the correct minimum amount but I presume that experience and investigation has indicated to the Minister and his Department that this is the correct amount.

With regard to the safeguarding of the rights of investors, whether a small or medium-size investor invests in a unit trust fund or in an industrial share he is at risk anyway. What is being done in the safeguarding clauses of this Bill is, first to make certain that not too great a risk is taken with his money and, secondly, that the managers will operate along a certain set of rules clearly defined, which will safeguard the investor, who very probably is somebody who neither has the time nor the opportunity to examine carefully exactly what is happening when he invests his money in a unit trust fund. That is a good thing. I am sure the headline was taken from the operation of unit trust funds in other countries. If unit trust funds have operated in Britain since 1939, in the USA since 1940 and are now developing in Europe, then a great deal of experience must have been gained.

The Minister mentioned that the Council of Europe has taken an interest in this matter and that he will be introducing amendments here based on the conclusions arrived at at meetings of that body. He made it clear also that we are not concerned with private trusts. Then he said that normally shares in any one company in a trust fund should not be more than 5 per cent. An extremely well-placed safe industrial share is something that might be included as to far more than 5 per cent and shares that might appear to be more speculative could be supported within the 100 per cent holding of the unit trust fund by the fact that quite a large slice of the fund was taken up by almost gilt edge if not properly so-called gilt edge investment.

At first sight, it may appear that the greater the number of units and the greater the spread the less the risk. At the same time, areas of great safety can support areas of risk. Perhaps the figure of 5 per cent indicated by the Minister is not the sort of figure that would be wise in our situation where there are certain industrial companies —perhaps not more than ten—which could be regarded as of great safety because of the nature of our economy and also because of their size and the nature of their manufacture. It may be that these could be included at more than 5 per cent.

The Minister tells us that he has gone one step further than anybody else in allowing the inclusion of real estate in a unit trust fund. In this city the demand for new offices appears to be insatiable. I suppose the same will apply in the case of Cork in a few short years. One can visualise many offices being built in our cities. These offices are taken up immediately they are available. There is always a risk in regard to office property in that a person who is not the owner cannot set it and the income disappears and the value of the office drops but experience has been that the value of office blocks has not dropped but has increased. All the modern office blocks built in the last ten years have increased in value and also in rental and that seems to be the trend.

I should like the Minister to indicate when replying the percentage of a unit trust fund that he would like to see tied up in real estate. If there were 100 per cent of a trust fund in real estate in this city what would happen in the unlikely event of there being too many offices and of their being empty?

On entry to the EEC, for instance.

Every investment that is not gilt edge is a risk. If this occurred it might be a case of having all our eggs in one basket, whereas the Minister is quite definite that he does not want all the eggs to be in one basket in relation to company shares and would consider that normally 5 per cent is the correct maximum.

I now come to the question of foreign trust funds not being advertised here. The Minister says that if at first sight this may appear somewhat unfair the fact must be taken into consideration that other countries do precisely the same thing. We have then got to consider our size in relation to other countries and whether or not small and inexperienced investors should not have the advantage of seeing advertisements of foreign trust funds in the daily papers such as The Irish Times or the Irish Independent or The Irish Press.

The Cork Examiner.

Yes. We are a very small nation and investment opportunities within the nation have some limits. I could not agree more with the Minister when he says that we want to get all the investment at home that is humanly possible and do not want money going out of the country. There is a possibility that we might be operating unfairly as far as the small investor is concerned, the person who does not read the Financial Times every day. That matter must be balanced against the need to keep money at home.

The Minister is taking pretty strong powers in this regard. He has told us that in relation to the Irish Life Insurance Companies he has an informal agreement, not backed by legislation, that, by 1977, 80 per cent of their liabilities to their policy holders will be invested in Ireland. That is a fair proportion. In the case of unit trusts the Minister will, by order, specify the percentage by volume that will be invested in Ireland. Will the Minister tell us if he has in mind what that percentage will be or if, as in the case of the insurance companies, it is progressive and whether, in the first instance, it might not be possible for unit trusts if they arrive here in large number and large financial size, suddenly to get into the Irish market and successfully make a large volume of investment without distorting prices and buying from investors, therefore, at a bad price? I should like to know the percentage the Minister is thinking about. He makes it quite clear that he does not prohibit investment by Irish citizens. He could not. It would be unconstitutional and the flow of money from one nation to another is a matter that it is difficult to restrict. To prohibit Irishmen from investing in a British security is something that would have very serious repercussions. It is something that would be unlikely to occur.

As I have said, an excellent job was done on this Bill in the Seanad. It is quite clear from reading the debate in the Seanad that there was no disagreement or difficulty as between the Minister and the learned Senators. It was a case of everybody trying to help. The debate is well worth reading That debate did a great deal to make the Bill a satisfactory one. Therefore, particularly on Second Reading, there is not much point in carrying on a protracted debate here.

The Minister's Second Reading speech here was largely on the lines of what he said in opening the debate in the Seanad. He referred to the changes that were made. So far as we are concerned this Bill is a necessary piece of legislation which we accept and welcome. Although much Committee work has been done on it, the Minister will be introducing amendments and we might also introduce amendments.

As Deputy Donegan has said, the spade-work on this Bill was done in the Seanad and we are glad to see the good Senators doing a bit of work for a change. Perhaps it is an example that might be followed with other complicated Bills; many of the Senators may be better equipped the Dáil Members to deal with the backbreaking work involved in Committee Stage—I include myself in that.

Unit trusts are a good idea for small investors. The only snag I see is that directors could have their arms twisted by some of their friends to make investments that might not be sound. I hope the Bill will help in a small way to ensure that this cannot be done on a large scale. We are dealing mainly with the small investor. A loss of a few hundred pounds to him is of far greater moment than the loss of a few thousand pounds to a richer man.

I agree with the Minister that the idea should be to encourage investment in Irish industry. It is a pity that so much of our money is invested abroad. We hear sweeping statements about repatriating external assets but I do not know how we could do that except in the small way envisaged here. I should like to see an effort made to try to ensure that this could be done with other classes of investors also rather than only with the small investor who is putting money into unit trusts. The scope here is more limited than in Britain and, for that reason, there is a greater risk here than in Britain. Deputy Donegan has said that real estate may be an outlet which is not normally accepted as being appropriate for unit trusts and even though there is a danger of our entry into the EEC I think the office blocks are a good investment.

I object to legislation by ministerial order. This is wrong because, where possible, the details should be written into a Bill even though they may sound very complicated. There is one man who was a Minister—he is no longer a Member of this House—who made a habit of introducing ministerial orders on various matters. Frequently a Bill which was passed in this House turned out to have a completely different effect when that Minister and his draftsmen had finished with it. It is a pity that any Minister should have wide powers to change the contents of a Bill simply by making a ministerial order. Even though they are supposed to be put before this House, usually these orders go through without anyone noticing them.

The Minister has suggested certain safeguards with regard to investment outside the country and outside investors in this country. Is the Minister satisfied that in the event of our entry into the EEC he can operate the regulations laid down in this Bill? Personally I do not see how he can. If we are unfortunate enough to go into the EEC all these things will be swept aside. Overnight we will find that the contents of a Bill such as the one we are discussing will be useless. Perhaps the amendment to the Constitution will allow the Government to say that this was what the people decided they could do when they voted. Perhaps the Minister would tell us if this is so.

Deputies on this side of the House represent most of the people who have small investments. Every effort should be made to encourage them to invest and to protect their investments. If that is the object of the Bill we support it fully.

With regard to advertisements, the Minister has stated:

Section 7, therefore, provides for the grant of an exemption in any case where the cost of producing a special edition of such a newspaper or magazine for circulation in this country would be unreasonably heavy.

I am not clear about this. Quite a number of English papers are sold here. I have mixed views about them; some of them are all right but the same cannot be said for others. Many of the English Sunday papers and the Financial Times contain advertisements for unit trusts. Is it suggested that they should be precluded from including these advertisements? Are these the matters the Minister says he can exempt? For instance, will he require the management of the Financial Times to make a statement saying that it would cost too much to print a special edition omitting the advertisements and asking for an exemption? I am not clear on this point and I would ask the Minister to clarify it.

I have not had the advantage of reading the Seanad debate on this Bill, which I understand from my colleague has been informative. Therefore, I must apologise for my lack of briefing on the matter. There are a few points I should like to put to the Minister and perhaps he might give me the information I seek.

The unit trust movement has received a tremendous impetus in the last decade, particularly in Britain. It was the first time that the small investor could dabble on the Stock Exchange without undue risk and without having a very informed background. He was not forced to go to a broker who, in any event, usually was not interested in the small investor. The unit trusts have a huge amount of money at their disposal and they have the finest financial advice available.

This was how the unit trust movement started in Britain. A similar movement entitled "mutual funds" has been in operation in America; in fact, in that country the Stock Exchange system has been more open to the public than in Britain or this country. The unit trust movement has started here and presumably it will develop.

In so far as it encourages saving it is desirable. Britain has found it necessary to introduce legislation in the past decade to govern this movement and it is appropriate that we should move on the same lines. The Minister mentioned that apparently there is not the same control over unit trust movements on the Continent. We have all read about the different speculators on the Continent in the last few years who have made large fortunes. This Bill may achieve the purpose of control and thus prevent any such occurrence here.

In the development of the unit trust movement here, it is appropriate that we should try to secure as much investment as possible in our country. The unit trust movement should not be used as a means of siphoning away such investments to other countries. At the same time, a unit trust movement must have a large, diversified portfolio. The ordinary small investor has the safeguard of a large spread of investment.

I should like the Minister to clarify a point in his speech. He said that the Bill would provide that unit trusts and investments funds of other countries could not carry on business here and that neither could unit trusts here, which propose to bring in money from outside, be allowed to do so in an uncontrolled way. He said:

I would like to point out also that any unit trust established in this country which proposes to attract funds from abroad will face restrictions on operation of business and advertising in other countries similar to those proposed under this Bill.

I do not quite understand this. Will the restrictions come from here or outside? I am sure my failure to understand this is due to the fact that I have not read the debate in the Seanad and, had I done so. I probably would not be seeking an explanation of this paragraph.

On the question of advertising in Irish newspapers, we have all the cross-Channel papers coming in as well as American and continental papers, all containing financial articles and articles about unit trusts. Some are general newspapers and some purely financial papers. I do not know what restrictions the Minister has in mind. I am sure he does not propose to restrict the movement of that type of newspaper or take any special control over their movements. Perhaps he would clarify what particular advertising for investment funds he intends to restrict.

Finally, on the question of restricting the movement of money into or out of the country, in the long term would the Minister tell me how he will reconcile the purpose enshrined in the Bill with the Rome Treaty? If we enter the EEC, the fundamental concept is free movement of men, money and materials. I know there will be a short period during which money from here will not be allowed to move freely but I think after five or six years—I forget the actual date—there will be free movement of funds. We are moving into a common fiscal and taxation structure and perhaps we may have a common currency. How will the Minister reconcile the restrictions, which appear to be basic to some of the points made in his speech, with the concept of freer money movements which the Rome Treaty will bring to us? The movement from gilts and equities, the movement to control unit trust investment in real estate is interesting because up to now the unit trust movement has been largely confined to gilts and equities. I once heard Deputy Donegan say that the only safe investment in the world was gilts. Is that right?

Gilt-edged, yes.

In our modern inflationary world it must be one of the worst forms of investment.

Yes, but it is safe.

I shall not ask the Minister, however, to become our financial adviser on these matters.

In my introductory remarks I paid tribute to the Seanad for the manner in which this legislation was polished up there. The Bill, as it emerged from the Seanad, was quite different from what I introduced. The Deputies who have spoken suggested that perhaps the Seanad was better equipped to deal with such a Bill than this House. If the Senators had said that we might feel insulted but there is no doubt that I am indebted to the Seanad for its contribution in regard to this Bill and it would be improper if I did not give due credit to Senator Alexis FitzGerald for the major contribution he made. It came from the Seanad as a far better and more comprehensive, although perhaps no less compact, Bill as a result of his contribution. This is a type of legislation in which I am wide open to suggestions from all sides of the House. The three Deputies who contributed here said that the best way in which this House could deal with this measure would be in Committee when we get down to details. I can fully accept that.

The Bill is generally welcomed for the two purposes for which it is specifically introduced, the protection of the investor in the first instance and also to try to ensure that the maximum amount of investment can be reserved for investment and development within the State. As regards whether the legislation was examined to find out if we have the power in an EEC situation to maintain the effectiveness of the controls we propose to impose, I should say that this has been done and nothing contained in this measure conflicts in any way with the present manner of applying the Rome Treaty.

Would the Minister explain how the simple arrangement of free movement of men, money and materials would be reconciled with his proposals?

You have the situation whereby a number of the items at present written into the Rome Treaty, as such, have never got to the actual implementation stage. Certainly, as far as insurance companies and various other financial institutions of this nature in regard to which the free movement is envisaged in the Treaty. are concerned, there is the situation still whereby there are effective controls operated within the Community in this regard. There is nothing to prevent me from making regulations. I say this in reply to questions by Deputy Donegan as to whether I could indicate the amount of money I would insist on unit trusts reinvesting within the State.

In regard to advertisements and the power I want to take in this Bill to control the advertising of outside unit trusts in this country which encourages small investors to invest outside the State, at the present time, as Deputies Hogan and Tully said, many of the popular daily and Sunday newspapers in the UK come in here carrying such advertisements. I was asked whether I seriously think I could make arrangements to prevent them coming in carrying such advertisements. That is my intention. I said in my introductory remarks that I intend to be extremely rigid on this. The exception would be financial periodicals which are important sources of information to business people here. They might be exempted. Most of the popular newspapers which come in are Irish editions. They carry so many pages dealing with Irish soccer and rugby——

The Minister is speaking about their news content. Their advertising content might very well contravene the provisions of the Bill and customs might have to open them——

We can deal with these matters more appropriately on Committee Stage. Deputy Hogan referred to this passage from my introductory statement:

I would like to point out also that any unit trust established in this country which proposes to attract funds from abroad will face restrictions on operation of business and on advertising in other countries similar to those proposed under this Bill.

He queried this in an effort to find out whether this restriction is built into the Bill. At the moment an Irish unit trust or a European trust cannot advertise in an English newspaper and surely it is not unreasonable to ask that we would have similar arrangements to protect Irish trusts in this country.

Is it that they cannot or that they do not?

They are restricted by legislation.

Will the Minister give a further guarantee on the question of his right to prevent funds from being invested outside? I question his reply on this because I do not think he is interpreting correctly the EEC agreement.

The details can be dealt with on Committee Stage. I claim to have positive knowledge in that respect. Deputy Donegan asked a question on which I was pressed very strongly in the Seanad. He asked if I were yet in a position to indicate the ceiling I propose to put on outside investment, on the amount that can be invested outside the State. I have said we have had an informal arrangement with the external insurance companies who have been willing to invest here from 66.66 per cent to 80 per cent of their liabilities to Irish policy holders by 1977.

In the Seanad Senator FitzGerald asked me whether I would write that into the Bill. On this point, we did not have legislation of our own to go back on so we looked at legislation covering unit trust schemes in Britain and the US and we looked at reports of discussions in the Council of Europe. Even at this stage I am not in a position to spell out the kind of ceiling I should lay down. On the one hand, the manager of a unit trust, in his effort properly to invest and to do the best with his investors' money, might be restricted to reinvest totally in Irish securities, thus limiting his ability to do the best for his investors. We must here try to determine a proper balance, the objective being to reserve as much money for investment in the country as possible but at the same time to give the manager of a trust sufficient scope to be able to play the market for the benefit of his investors.

In the Seanad I was asked whether I would fix on a percentage of 30, 50 or 70. I was not very anxious to give a positive indication. On this matter I should welcome a straightforward across-the-House discussion in the Dáil on Committee Stage and what I have vaguely in mind at the moment might be thrown out.

I should like to know the restrictions placed on British unit trust funds in relation to State investment.

I do not think there are any, although I am not positive.

Which countries impose restrictions?

A number of European countries do but I can see a number of reasons why it would not suit them to do so in Britain.

So can I—their size.

That is the point. They want to attract investment and it would not be attractive from their point of view to have restrictions. The European countries have restrictions at this stage. Deputy Donegan asked me about the 5 per cent limit. I mentioned this in my opening remarks. That is not built into the Bill. It was an expression of opinion on my part. I look on this limit of 5 per cent as being primarily designed to provide security for a fund to prevent too many eggs being put into the one basket. There is no doubt that the range of properties and shares available in this country is wide enough to make it practicable for a trust fund to find attractive outlets without any hope of being more than 5 per cent.

In relation to gilt edge Deputy Donegan said it might be no harm to have more than 5 per cent interest or involvement. The value of gilt edge might not justify that high investment. Deputy Tully objected to the question of legislation by ministerial order in relation to the question of 5 per cent, which I already said is not written into the Bill. That could be fixed by order. We have only three unit trust operations within the country at the present time. To introduce legislation for the protection of investors that might turn out to be too strictly aimed at protecting them, might have the effect of preventing the development of this within the country. The aim should be to make it more attractive to the small investor. We should not have the type of legislation which will act as a deterrent.

Has the Minister at the back of his mind that the Treaty of Rome regulation may be brought in and, therefore, it might be necessary by regulation to alter the whole thing?

A straight answer is that I am not influenced by that in endeavouring to have certain sectors of this controlled by order rather than by legislation. I believe we want flexibility here whereby with development it should be possible for the Minister to change arrangements by order rather than have to change the legislation to meet it. I spoke about the 5 per cent maximum investment of a fund in one company and I spoke about the question of a ceiling for investment outside the State. In section 7 it is mentioned that it is necessary to have a degree of flexibility to be able to deal with the situation as it develops. I agree that very often orders are brought into the House and the House may not be aware of a particular thing until it has happened.

I am willing and anxious to make the fullest use of an open Committee Stage discussion in order to improve this legislation. The Seanad were very helpful and there is no reason why, collectively, in this House we cannot be equally co-operative. I have no preconceived ideas in relation to this matter. This Bill is a pretty comprehensive measure having the dual purpose of protecting the investors and aiming at maximum reinvestment in the State. I will welcome anything the House can do in relation to this on Committee Stage.

What is the position of investors in foreign unit trusts at the present time? A number of firms have, in fact, invested in unit trusts outside the country. What will happen in that case?

Is the Deputy talking about the three that we have at the present time?

We can have no active unit trusts here unless they are registered here. If they are registered here they have to be registered under this Bill.

If they have investments abroad will they have to withdraw them?

There is no question of unit trusts here having investments abroad and having to withdraw them. We have not that sort of arrangement. We have not those unit trusts at the present time.

There are unit trusts who are investing abroad.

The Deputy must be talking about private unit trusts and they are not affected by this Bill at all. There certainly will not have to be any withdrawals of money of that nature.

Question put and agreed to.
Committee Stage ordered for 16th May, 1972.