The firm referred to in the article is under criminal investigation by the Garda Síochána. I am, therefore, unable to comment specifically on the case.
On a more general note, firms authorised under the Stock Exchange Act, 1995, operate under obligations imposed by the Act, and requirements-regulations imposed by the Central Bank of Ireland and the Irish Stock Exchange which cover, inter alia, capital, financial and conduct of business issues.
The capital requirement for stockbrokers is calculated as provided for in the capital adequacy directive and determined by the nature of investment business activities undertaken by the firm. Under the Stock Exchange Act, 1995, responsibility for the enforcement of conduct of business rules rests with the Irish Stock Exchange. The conduct of business rules are subject to agreement with the bank.
The Central Bank has imposed general supervisory and advertising requirements on stockbrokers, and these include reporting requirements. All stockbrokers are required to submit to the bank monthly management accounts and a capital adequacy return within 20 days of the month's end. In addition, stockbrokers submit a weekly report to the bank, which includes details of the firm's cash liability to clients compared to client bank account balances, the funding contributed by the firm in order to settle client transactions, and background information on the level of client debtors. All stockbrokers are required to submit annual audited accounts to the bank within six months of the financial year's end. This requirement applies irrespective of whether the firm is a limited company or a partnership.
Moreover, section 52 of the Act places certain obligations on firms, including requirements with respect to clients' money and investment instruments. Section 70 provides that failure to comply with these requirements constitutes an offence. All stockbrokers have been required under section 52(3)(d) of the Act to commission an annual audit of the firm's compliance with the Central Bank's requirements in relation to client money and investment instruments, including whether the firm has maintained adequate systems and controls for safe custody throughout the year. Section 34(3) of the Act also provides that an auditor of a stockbroker shall report to the bank in writing without delay where the auditor has certain concerns regarding the firm.
As regards the adequacy of the Central Bank's procedures for regulating this sector, my Department wrote to the bank on 25 May 2001, seeking its views on what the implications of this case might be for the regulatory regime in this sector and, particularly, whether any modifications to the relevant legislation might be required. The bank replied on 29 May 2001 that it was much too early in the investigation to give a definitive opinion as to whether legislative or regulatory modifications might be required. It will, however, conduct a review of its procedures as part of its examination of the facts surrounding the collapse of this firm and then let me have its definitive response. If any legislative or regulatory shortcomings are identified, I will ensure these will be tackled as a matter of urgency.
