Amendment No. 1 is in the name of the Minister and amendments Nos. 8 and 9 may be related amendments. Amendments Nos. 1, 8 and 9, by agreement, to be discussed together.
Committee on Finance. - Unit Trusts Bill, 1970 [Seanad]: Committee Stage.
SECTION 1.
I move amendment No. 1:
In subsection (1), page 3, to delete lines 1 to 5.
This amendment is consequential on the amendment introducing a new section 9 preventing a unit trust scheme from investing in another scheme of collective payment.
The deletion of these five lines is consequential on the action in amendments Nos. 8 and 9. Is it in order for us to take amendments Nos. 1, 8 and 9 as agreed?
They must be taken in order.
Amendment agreed to.
I move amendment No. 2:
In subsection (1), page 3, lines 17 to 20, to delete "but does not include any such arrangement participation in which is obtained by effecting a policy of assurance upon human life with the holder of a licence under the Insurance Act, 1936".
Amendment No. 7 is related, so amendments Nos. 2 and 7 can be taken together.
The effect of this amendment which should be considered together with the amendment to section 6 (4) is to make assurance linked unit trust schemes eligible to register under the Bill. These schemes were completely excluded from the scope of the Bill as a result of amendments introduced by me on Report Stage in the Seanad in response to representations by the insurance companies at that time. It is now proposed to allow them the option of either registering or remaining free from control under the legislation.
It is believed that some schemes will see advantage in having the status of a registered unit trust scheme on the basis that the public would have confidence in any scheme which was authorised by the Minister and subject to regulation by him. Clearly it would be undesirable that anyone wishing to register a scheme and have it subject to regulation under the Bill should be prevented from doing so. Therefore this amendment arises from the arrangement I made previously in the Seanad to enable unit trust schemes linked with assurance companies to remain excluded from the umbrella of the Bill but to enable them to register if they so desire and get, if you like, the imprimatur of being declared a registered unit trust scheme.
On Second Reading the Minister indicated that in future Irish insurance companies would have a very high percentage of their investments in Irish securities. Will this investment in the unit trust schemes also be included in the minimum amount guaranteed by the insurance companies?
I think it is on its way to 80 per cent now of Irish investment, by arrangement. This is one of the reasons why we felt it would be wrong to tie them in. One of the main objects was to ensure that we would have this home investment in Irish securities. We have this commitment and this is why we have this relaxation for Irish assurance linked unit trust schemes.
Amendment agreed to.
Section 1, as amended, agreed to.
Section 2 agreed to.
SECTION 3.
I move amendment No. 3:
In subsection (1), page 3, line 42, after "State" to insert "the amount of the capital of which that is paid up in cash is not less than £25,000 and the assets of which are sufficient to meet its liabilities (including liabilities in respect of its paid up capital)".
The purpose of this amendment is to ensure that the managing company is financially sound. This is particularly important when a new scheme is being launched. A managing company should have resources to cover the initial cost of getting the scheme into operation. If the company had little capital it would be depending upon the subscriptions of the unit holders to launch the scheme and the risk of failure involving the loss of money by subscribers would be great.
The amount of capital paid up in cash is not less than £25,000. Does this mean that the subscribers have paid up £25,000 in cash or that there is £25,000 in cash from some other source?
Subscribers.
In other words, a scheme must be of the volume and size of £25,000 paid up before it can get off the ground?
Yes.
Is this wise? Bearing in mind the work of the credit union people I am wondering whether, as long as a scheme is viable, there should not be provision for smaller units. I am not taking a strong line on this, but I am wondering whether this figure of £25,000 is the result of representations from strong and powerful bodies.
Is the Deputy asking is it necessary to insist on this minimum amount?
It was not necessary until this amendment was brought forward at a very late stage in the proceedings.
Provision of this kind is included in the draft rules on investment funds of the Council of Europe. We have been in touch with them constantly in negotiations on this legislation. We have been studying the situation that operates in the US, the UK and in Europe. This amendment is necessary because, to ensure that the scheme can be got off the ground, £25,000 must be paid up. It would be very wrong to think that any worthwhile unit trust scheme could be got off the ground without having that volume of money involved in the first instance.
Does that mean that if Deputy Tully, the Minister, Deputy Clinton and I were private persons outside this House and we came together with the idea of starting a unit trust scheme, we would have to be able to say: "Between the four of us we have £25,000 to put into this scheme. We will underwrite it." The issue of shares in a public company is underwritten by a commercial bank or another financial institution so that, if the public do not put up the money, it is put up, minus a fairly large commission, by the people who underwrite it. It would seem to me that if some institution or some persons decided to set up a unit trust scheme they would either have to find £25,000 or have it themselves.
I am wondering if this amendment might stop unit trusts from being formed. They have helped the small investor because they give him the spread of investments right across a number of companies that he could not possibly have himself because he has not got enough money to go around them all. He can have a smaller slice of each one of them by participating in a unit trust investment. I am wondering whether, in our situation, £25,000 is too much.
I am thinking of things like a credit union. Credit unions have now reached the stage where I am sure that if the credit union central body in Ireland decided to set up a unit trust for the benefit of its members it could easily provide £25,000. Getting subscriptions for that amount would be a very easy matter when you go around all the credit unions in the country. I am sure the Minister will agree that there was a time not too long ago when the credit unions would consider £25,000 quite a large sum to set up a unit trust for the benefit of its members. I do not want in any way to express strong views about this because if the Minister and his Department are at the moment in contact, as he says they are. with the Council of Europe and various other sources of information on unit trusts and if this is the view widely held. I suppose we should stick by it. At the same time, it does pose a question mark in my mind whether, in our conditions, £25,000 is not too large a sum, and if the truth is that other financial safeguards should be built into the Bill, to make sure that the investors do not lose their money except in the bad luck of ordinary non-giltedged investments going down on the market. I wonder is a sum of £25,000 too much? In most cases it is not, I agree.
If you look at it in the general overall, the situation is that further down in that section, you will see that the trustee company itself must have at least £250,000 paid up by its shareholders. We accept this is for the trustee company but here we have the managing company which I am suggesting must have at least £25,000 paid up by the shareholders —only one-tenth of the sum required for the trustee company. You may suggest that there are so many built-in protections later on, but I still think that in the context of this, the demand I make on the trustee company in relation to what the trustee company must have, spelling out that the managing company must have at least £25,000 paid up by its shareholders who may not purchase units at all is a small sum and from that point of view is pretty well justified.
Amendment agreed to.
I move amendment No. 4:
In subsection (1), page 3, lines 46 to 51, to delete subparagraph (i) and to substitute the following subparagraph:
" (i) has assets that are sufficient to meet its liabilities (including liabilities in respect of the repayment of its paid up capital) and has a capital (in stock or shares) for the time being issued of not less than £500,000 of which an amount of not less than £250,000 has been paid up in cash, or"
Amendment agreed to.
Section 3, as amended, agreed to.
NEW SECTION.
I move amendment No. 5:
In page 4, before section 4, to insert the following section: "(1) Within 21 days after the making of alterations in the deed in which are expressed the trusts of a registered unit trust scheme, the manager under the scheme shall deposit with the registrar a copy of the deed as so altered or containing the alterations.
(2) Within 21 days after the making of a change in the name of a registered unit trust scheme the manager under the scheme shall deposit with the registrar particulars of the change.
(3) Where the manager under a unit trust scheme fails to comply with subsection (1) or (2) of this section, he shall be guilty of an offence."
Amendments Nos. 5 and 14 are related.
There could not be any objection to this.
This is an amendment to transfer from section 15 (1) (D) to a new section the provisions relating to notification of a change of name of a scheme and alterations in the terms of the trust deed. It is a technical amendment.
It is a proper safeguard.
Amendment agreed to.
SECTION 4.
I move amendment No. 6:
In subsection (2) (b), page 5, line 7, to delete "and" and to substitute "or".
This is a drafting amendment.
Amendment agreed to.
Section 4, as amended, agreed to.
Section 5 agreed to.
SECTION 6.
I move amendment No. 7:
In subsection (4), page 8, to delete lines 11 to 14 and to substitute "any arrangement which is made for the purpose or has the effect, solely or mainly, of providing facilities for the participation by the public, as beneficiaries, under a trust or otherwise, in profits or income arising from the acquisition, holding, management or disposal of securities or any other property whatsoever and which is administered by the holder of a licence under the Insurance Act, 1936, and for participation in which a policy of assurance upon human life is required to be effected, and ‘manager' and ‘units' shall be construed accordingly".
Amendment agreed to.
Section 6, as amended, agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill."
I had an amendment down for Report Stage to this section and it was really to make the point that in considering what papers or publications the Minister may grant exemption and allow foreign unit trusts to advertise in, he should have regard to the general content of the publication, with particular reference to papers dealing mainly with financial matters. I feel that we may get through with this Bill tonight and my amendment is not within the statutory two-day period. In that situation, could the Minister give an assurance that in deciding on exemption in this regard, he will consider papers distributed here which have a content related to financial matters? I am thinking of the Financial Times.
I am conscious of the Deputy's worry in this regard, and in fact I took the liberty of endeavouring to get a copy of his amendment——
I am only asking the Minister to have regard.
I am doing so and am anxious to have regard, but the peculiar thing about it is that the amendment would tie my hands more than the exemption I propose to make here. I take it we are referring specifically now to section 7 (2) relating to the prohibition of certain advertising in relation to unregistered unit trust schemes. This paragraph set out
Whenever it is shown to the satisfaction of the Minister, in the case of a newspaper or magazine printed outside the State, that compliance with this section would necessitate the production for circulation in the State of a special edition of the newspaper or magazine and that the cost of such production would impose a burden on the owner of the newspaper or magazine that would be unreasonably heavy in all the circumstances, the Minister may exempt from the application of this section advertisements published in the newspaper or magazine.
The Deputy was asking to insert after that "In considering the kind of exemption, the Minister shall have regard to the general context of the publication exempted, with particular reference to publications dealing mainly with financial matters". I am conscious of the fact that it is basically in financial matters that I do not want to deprive business interests of getting what we call financial expertise and industrial and business information. I did say in introducing the Bill—certainly when speaking in the Seanad on this Bill—that it was my intention where magazines and papers with specialised information for business people were coming in and where a special arrangement could not be made economically to have an Irish edition, I would make special provisions to enable those to come in.
On the other hand, I did also say that I would be rather strict in regard to the application of this. I know that the Deputy mentioned specific papers. In relation to giving exemptions I am anxious that the papers would make application for the exemption and endeavour to justify it on the basis that it would be economically impossible for them to get out a special Irish edition, that it would be imposing a hardship on them to have a special Irish edition which would exclude advertisements for unit trusts. Therefore, I do not want specifically to spell out here that I propose to give exemption to paper A or magazine B, but certainly I can say that in relation to what the Deputy is endeavouring to achieve in his amendment, that I would be hoping to meet this. However, the amendment would restrict me specifically to publications dealing mainly with financial matters and one could pick out a paper such as the Financial Times. If I were to accept this amendment and find that the Financial Times had a literary section and an arty part, and did not deal mainly with finance, I might find myself forced to exclude it. I am far better off with the provision I have made in section 7 (2) (a) in dealing with the problem than by accepting the amendment. However, if I thought the amendment would be helpful, I would try to accept it.
Will the Minister give me an assurance that he will consider these cases sympathetically?
Acting Chairman
That can wait for Report Stage.
Question put and agreed to.
SECTION 8.
I move amendment No. 8:
In page 8, before section 8, to insert the following section:
"The property for the time being subject to any trust created under a registered unit trust scheme shall not consist of or include rights or interests (described whether as units or otherwise) acquired under an arrangement made for the purpose, or having the effect, solely or mainly, of providing facilities for the participation by the public in profits or income arising from the acquisition, holding, management or disposal of securities or any other property whatsoever."
Amendment agreed to.
I move amendment No. 9:
In page 10, lines 5 to 51, to delete paragraphs (c) and (d), and to substitute the following paragraph:
"(c) Securities held under any trust created under a registered unit trust scheme shall, to the extent specified in this paragraph, but no further, be deemed, for the purposes of this section, to be Irish securities:
(i) in case any of the securities are shares or debentures, or rights or interests (described whether as units or otherwise) in any shares or debentures, of a body corporate carrying on a business the whole of which is, in the opinion of the Minister, carried on in the State, the whole of those securities shall be deemed for the purposes of this section to be Irish securities,
(ii) in case any of the securities are shares or debentures, or rights or interests (described whether as units or otherwise) in any shares or debentures, of a body corporate carrying on a business a proportion only of which is, in the opinion of the Minister, carried on in the State, such proportion of those securities as, in the opinion of the Minister, is equal to the proportion of the said business which, in the opinion of the Minister, is carried on in the State shall be deemed, for the purposes of this section, to be Irish securities,
(iii) in case any of the securities are securities other than shares or debentures, or rights or interests (described whether as units or otherwise) in any shares or debentures, of a body corporate carrying on a business, such of the securities as are issued in the State shall be deemed for the purposes of this section to be Irish securities."
Amendment agreed to.
Section 8, as amended, agreed to.
NEW SECTION.
I move amendment No. 10:
In page 11, before section 9, to insert the following section:
"The proceeds of the sale by the manager of a unit trust scheme of any units of the scheme and any income in respect of the assets of the scheme that is not distributed to the holders of those units shall be assets of the scheme and be subject to and be dealt with by the manager in accordance with the trusts created under the scheme."
[Acceptance of this amendment involves the deletion of section 9 of the Bill.]
The reason for this amendment is that in the Seanad some Senators had difficulty in understanding section 9 and the amendment was designed to improve the wording of the section. The section states that the first principle of the unit trust scheme is that money subscribed should be used for the purpose for which it is subscribed and not for any other purpose.
Amendment agreed to.
Section 9 deleted.
Section 10 agreed to.
SECTION 11.
I move amendment No. 11:
In page 12, line 30, before "buy" to insert ", as soon as maybe,".
The purpose of this amendment is to ensure that section 11 does not expose the manager of a scheme to unreasonable demands from unit holders. When the Bill was being debated in the Seanad some Senators were of the opinion that a manager would be committing an offence if he was unable to pay unit holders immediately even if circumstances rendered this course impossible. It is not agreed that this section should have the effect of putting a manager in that position but the amendment is expected to satisfy any Deputy who might hold that view.
Amendment agreed to.
Section 11, as amended, agreed to.
SECTION 12.
I move amendment No. 12.
In page 12, after line 38, to insert the following subsection:
"(2) A body corporate that is a manager under a unit trust scheme or is a subsidiary or a holding company of the manager shall not——
(a) borrow money on behalf of the scheme for the purpose of acquiring securities or other property for the scheme, or
(b) lend money that is subject to the trusts of the scheme to a person to enable him to purchase units of the scheme, or
(c) mortgage or charge, or impose any other incumbrance on, any securities or other property subject to the trusts of the scheme."
This amendment provides that the manager of a unit trust scheme will not be allowed to float loans on behalf of the scheme in order to acquire securities to increase the scheme's portfolio or to advance to participants the price of units. It provides also that there should be no charges of any kind on the fund. These restrictions are considered necessary to prevent a speculative investment policy by managers. A rule on these lines is included in the draft rules on investment funds which are being considered by the Council of Europe at present.
Amendment agreed to.
I move amendment No. 13:
In page 12, after line 38, to insert the following subsection:
"( ) A person who contravenes subsection (1) of this section shall be guilty of an offence."
Originally only the manager was referred to in this section. Section 19 provided that if he contravened section 12 he would be guilty of an offence. Subsequently, section 12 was expanded by amendments in the Seanad and the present amendment covers contravention by all of the persons now mentioned. Basically, it is a drafting amendment arising from others.
Amendment agreed to.
Section 12, as amended, agreed to.
Sections 13 and 14 agreed to.
SECTION 15.
Amendment No. 14 not moved.
Section agreed to.
SECTION 16.
Acting Chairman
Amendments Nos. 15 and 17 are related and may be discussed together.
I move amendment No. 15:
In subsection (2), page 15, line 23, after "168" to insert "(other than subsection (3) ".
This amendment is consequential on the amendment arising from the ruling of the Supreme Court that section 3 (4) of the Committee of Public Accounts Act, in Dáil Éireann is unconstitutional.
Amendment agreed to.
I move amendment No. 16:
In subsection (2) (b), page 15, line 35, after "scheme", to insert: "and to any other body corporate which is or has at any relevant time been the manager's or trustee's subsidiary or holding company or a subsidiary of the holding company of either of them or a holding company of the subsidiary of either of them".
This is a drafting amendment which is considered necessary to ensure that the powers of investigation adapted from section 167 of the Companies Act, 1963, extend to subsidiaries or holding companies of the managers or trustees.
Amendment agreed to.
Amendment No. 17 not moved.
Section 16, as amended, agreed to.
Sections 17 and 18 agreed to.
SECTION 19.
I move amendment No. 18:
In page 17, lines 8 to 12, to delete subsections (1) and (2) and to substitute the following subsections:
"(1) Where, in relation to a unit trust scheme, there is a contravention of section * of this Act, the manager under the scheme shall be guilty of an offence.
(2) Where, in relation to a unit trust scheme, there is a contravention of section 9 or 10 of this Act, the manager and (except where the contravention consists of sending a copy of a document of the kind referred to in the said section 10 to the registrar without its having been signed by a director or the secretary of the trustee or sending a copy of such a document to a person specified in the said section 10 without having obtained the approval of the trustee for the document) the trustee under the scheme shall be guilty of an offence.
(3) Where the manager under a unit trust scheme contravenes section 11 or 15 of this Act, he shall be guilty of an offence."
(This is the section proposed to be inserted by amendment No. 8.)
The first subsection is new and is necessary because of the insertion of the new section before section 8. The second subsection incorporates an amendment that was suggested in the Seanad but not accepted at the time. It absolves a trustee from liability for an offence under section 10 in a case where a manager issues a document without the trustees' knowledge or approval. The third subsection is an amendment of the existing subsection (2) which removes a reference to section 12. Offences under that section are covered now by a new subsection of that section.
At the asterisk here it says "where in relation to a unit trust scheme there is a contravention of section ....". Then there is an asterisk. Does that mean that the numbers of the sections have been changed by the deletion of one section and that, therefore, there must be different numbers?
It is the section inserted on amendment No. 8 and it could not be included there.
And it now can be included?
Yes.
Amendment agreed to.
Section 19, as amended, put and agreed to.
Sections 20 to 23, inclusive, agreed to.
Title agreed to.
Bill reported with amendments.
Acting Chairman
Next Stage?
I have an amendment down for Report Stage but, under the Rules of Order, it has not been down for two days so I cannot move it now. I am accepting the Minister's assurances that he will look into the matter.
There is no amendment in?
Acting Chairman
No. Next Stage?
This day three weeks.
Report Stage ordered for Wednesday, 14th June, 1972.
The Dáil adjourned at 8.25 p.m. until 10.30 a.m. on Thursday, 25th May, 1972.