Central Bank and Financial Services Authority of Ireland Bill 2003: Report Stage (Resumed) and Final Stage.

Debate resumed on amendment No. 58:
In page 51, line 27, to delete "High" and substitute "District".
—(Deputy Ó Caoláin).

I have already responded to Deputy Ó Caoláin on the reasons the right of appeal from a decision of the ombudsman should lie to the High rather than the District Court as his amendment proposed. He questioned how this would relate to the existing rights of recourse to the District Court which are contained in Part 8 of the Credit Union Act 1997, as amended by the 2003 legislation.

Section 125(2) of the Credit Union Act provides that a dispute between a credit union and one of its members is to be dealt with in accordance with the credit union rules. Subsection (3) provides for referral of the dispute, with the consent of the parties to the financial regulator, unless this is expressly forbidden by the credit union rules. In either case subsection (4) provides that the decision is not subject to review by a court but that application for enforcement of a decision may be made to the District Court. Subsection (5) provides that where the rules of a credit union do not deal with the resolution of disputes or where a dispute has not been determined under a credit union's rules within 50 days, the dispute may be referred to the District Court. Section 126 of the Act makes provision for the resolution of disputes by arbitration where this is provided for in the credit union rules.

The amendments to the Credit Union Act contained in page 191 of the Bill provide that, notwithstanding the provisions of the legislation I have outlined, the ombudsman can deal with a complaint against a credit union provided it is within the jurisdiction of the ombudsman. The amendments also delete section 127 of the Act which gave the Minister the power to require a credit union to join a scheme for the investigation of complaints against the credit union. This power has never been used and the new ombudsman scheme provided for in the Bill is the type of scheme envisaged by section 121. What this will mean in practice is that a member of a credit union who has a dispute with the credit union about the provision of a financial service can either use the mechanism set out in the Credit Union Act which may involve referral to the District Court or can use the alternative mechanism of referring the case to the ombudsman, having given the credit union a reasonable opportunity to deal with the complaint. I hope that with this explanation Deputy Ó Caoláin will reconsider his amendment.

Amendment, by leave, withdrawn.
Amendments Nos. 59 to 65, inclusive, not moved.

I move amendment No. 66:

In page 53, between lines 25 and 26, to insert the following:

"(1A) The Financial Services Ombudsman shall, whenever asked to do so by the Regulatory Authority, provide that Authority with records or copies of records, or information, dealing with specified matters, or matters of a specified kind, relevant to the performance of that Authority's functions."

Amendment agreed to.

We now come to amendment No. 66a.

On a point of order, I received a letter from the Ceann Comhairle stating that amendment No. 66a is being ruled out of order because it is relevant to a part of the Bill already disposed of. That is accurate. I suggest, however, that we could consider this issue by recommitting the Bill to Committee Stage in respect of this amendment on the grounds that events have unfolded since which have brought the issue into sharper relief. For example, where the regulatory authority decides that an investigation will not occur in respect of wrongdoing, should that decision be qualified in some way? My proposal is that it should be qualified. If the regulatory authority decides there will be no investigation it should be obliged to certify why it is making that decision and publish its reasons for taking the view that an investigation should not takeplace.

The background to this is that the Minister argued persuasively that it was not necessarily required to send in the tanks for every misdemeanour. There could be circumstances where through an oversight or whatever, a regulation has been breached, the breach is admitted and the regulator decides not to have an investigation and instead simply acknowledges that it took place and decides what penalty to impose, if any. There are cases for that approach. The objective of IFSRA is to rule on the basis of principle, in other words, to try to instil an ethical culture in organisations.

However, the public could be forgiven for thinking there is a danger that a provision such as this might result in issues that should be investigated being swept under the carpet. The Minister needs to assure the public that where the regulator has this discretion, and I believe it should have that discretion, it will only use it where there are clear reasons that stand up to public scrutiny for doing so. I sought in the amendment which you ruled out of order, a Cheann Comhairle, to have that requirement placed on the authority.

The events of the last week have shown how important it is that justice is not only done but seen to be done. Where a regulator should decide that an offence need not be investigated any further, it has a duty to explain to the public why it takes that view and the decision must stand up to scrutiny. There has been public disquiet about this provision since the Report Stage amendment was made. People express concern about what economists describe as "regulatory capture", that is, where the regulator and the regulated become unhealthily close. The regulator might decide to sweep an issue under the carpet because the appalling vista of having it examined in public would not be in the interests of the banking sector.

Obviously, we cannot have that approach to regulation and I do not believe it will happen. However, that is the reason I hope the Government will agree to allow the Bill to be recommitted to Committee Stage so there can be a short discussion and decision on it.

The reason the amendment was ruled out of order was that it refers to section 33AR, which was inserted into the principal Act by the Minister's Report Stage amendment No. 11. It would not be possible at this stage to return to that section. We must keep moving forward on the Bill.

You will acknowledge, a Cheann Comhairle, that this Bill is like a jigsaw puzzle. Pieces are being dropped in everywhere. We are amending legislation that is years old.

There was a proposal before the House yesterday calling for the remaining sections of the Bill to be recommitted. It was defeated.

That was all sections. I am only seeking its recommittal in respect of this issue. The Minister proposes to recommit the Bill in respect of some later issues he has identified. I am simply seeking equal latitude to debate something that has come into the public domain and become a matter of public concern in the past week.

The recommittal would have had to take place before we dealt with section 33AR, as this amendment is directly related to it. A decision by the House has already been taken in regard to that. It would not be appropriate to recommit on this section.

The House took that decision on the basis of incomplete knowledge of the situation. There was short introduction by the Minister, following which questions were left unanswered. The Minister was unable to address them in the two minutes available to him, as he admitted at the time, and the House proceeded to take a decision without having had a chance to tease out these issues.

I am aware that the Chair is trapped by the approach the Government has taken. You have been dealt a hand of cards that should not have been dealt to you by the Government. In accepting your ruling, it must be said that the Government has abused and cleverly used the procedures to bypass a fair assessment of the issues before us.

The Chair does not deal in decks of cards but is obliged to implement Standing Orders, particularly Standing Order 128(1) which states:

A motion may be made to recommit a Bill either wholly or in respect of certain sections or amendments. The motion may be made in respect of the whole Bill at the commencement of its consideration on Report and in respect of certain sections or amendments before consideration of the section or amendment as the case may be has been completed on Report.

I am not a lawyer but that appears to refer to the section or amendment.

We do not want to spend the afternoon discussing it.

When the section is dealt with, it does not mean that an amendment cannot be considered. I have drafted the amendment in such a way that it would be a new section qualifying an earlier section.

It refers to the relevant part of the Bill. The relevant part in this case is section 33AR and that has already been dealt with.

The Government has put you, a Cheann Comhairle, in a position in which you ought not to be and obliged you to rule in this way on something that is a matter of serious public interest.

The Chair rules on the basis of Standing Orders.

It can still result in a ridiculous outcome to an important issue.

Amendment No. 66a not moved.

I move amendment No. 67:

In page 55, line 47, after "members" to insert ", at least 40 per cent of whom shall be male and at least 40 per cent female".

Amendment put and declared lost.

I move amendment No. 68:

In page 55, line 47, after "members." to insert "At Least one third of the members must be women.".

Amendment put and declared lost.

I move amendment No. 69:

In page 55, line 54, after "consumers" to insert the following:

"and after the advertising of the positions for application by individuals and after a process of independent short listing of applicants with suitable experience".

Amendment put and declared lost.

I move amendment No. 70:

In page 55, line 54, after "consumers." to insert the following:

"Appointments shall be made from a short-list of candidates drawn up following an open competition, publicly advertised, and interviews of short-listed candidates based on published criteria of qualification.".

Amendment put and declared lost.

Amendments Nos. 72 to 75, inclusive, are alternatives to amendment No. 71. Amendments Nos. 71 to 75, inclusive, can be discussed together.

I move amendment No. 71:

In page 56, to delete lines 1 to 5 and substitute the following:

"(3) In appointing persons as members of the Consultative Consumer Panel, the Minister shall ensure that at least 50 per cent of the members of the panel have experience in the provision of advice and information to consumers in relation to the core financial services areas under the Regulatory Authority's remit.".

This addresses the membership of the consultative consumer panel. It is to consist of not fewer than five and not more than 20 members. We have already failed in our attempt to ensure gender equality or assured representation for women on the panel.

This amendments seeks to replace lines 1 to 5 of section 57(c)(x)(iii) and to provide that the Minister will allow for 50% of the members of the consultative consumer panel to be people with “experience in the provision of advice and information to consumers in relation to the core financial services areas under the Regulatory Authority’s remit”. That is most important. The provision in the Bill as presented to us, states: “as far as possible ... those persons have knowledge or experience of, or as consumers of financial services”. I presume everyone is a consumer of financial services in some shape or form. The majority of people also have experience of financial services. However, to say that a person should have knowledge of financial services is not sufficient. The provision is imprecise and its application is too wide. Under this provision almost anyone could be appointed to the panel without consideration of his or her suitability, level of information or expertise.

I seek to ensure that the criteria laid down for appointment to the consumer panel are specific and remove the vagueness in the Minister's wording. The wording presented could allow almost any person to qualify for inclusion on the panel. While everybody should qualify, there is a need to ensure that the necessary expertise is represented. My amendment seeks to improve the wording presented. People with experience and expertise in advocacy should make up at least half the panel. That knowledge is critical to the success of the consultative panel. We need people who are familiar with dealing with financial institutions on behalf of consumers and will bring a vital expertise to the panel's deliberations. That is essential.

I ask the Minister to consider the proposition favourably. The amendment strengthens the consultative consumer panel and this is in the interest of all consumers. I do not intend to create an exclusiveness to a particular area of expertise but to guarantee that at least 50% of the panel will have that expertise and knowledge. I commend the amendment to the Minister.

My amendment, No. 72, is similar to others that are being discussed. The central point is that consumer interests are not adequately represented under the current wording of the Bill. If the recent scandals in the financial services sector have taught us anything, it is that those who are obliged to regulate and those who are ultimately given sanctioning authority over misdemeanours are often from the same group of people. People who work in the banking and financial services industry make judgments about others in the same sector.

In all this we see little or no representation of consumer interest. How that consumer interest is defined and represented is open to question. The suggested membership of the panel in the Bill does not dictate whether consumer interests are represented or by whom they are represented. Like Deputy Ó Caoláin's amendment, my amendment seeks to ensure that at least 50% of those on the panel have experience of the issues surrounding consumer protection. This does not exclude people who operate in the area of advocacy, whether voluntary or otherwise. MABS, for example, works on behalf of the State and includes many people who have experience of dealing with those whose rights as consumers and citizens are not respected by the financial institutions. We may find many people with the experience we require in this area.

There are also consumer rights and advocacy groups. I fully understand the need for the Minister to define them according to how representative they are. I do not think that will be a difficulty in this section of the Bill. However, the legislation lacks an opportunity to identify how consumers' interests are being represented and by whom. Consumer protection is mentioned but the Bill does not spell out specifically how it is to be achieved. Any one of this group of amendments, if accepted, would improve the Bill by bridging this gap. I hope the Minister is amenable to accepting such amendments, even if they include the word "consumer", which seems to be tantamount to a swear word since no other Opposition amendment containing this word has been accepted.

It is particularly unfortunate that the Government has arranged to take Report Stage of this Bill at a time when the Minister for Finance is not available. The Minister of State has been given his instructions and has no leeway. He is not a serious participant in the discussion. He is merely standing in.

I speak for the Government.

The point is that there has been a major scandal involving the largest Irish bank and a serious——

I would prefer if the Deputy dealt with the amendments before us.

I am speaking on the amendment. Does the Ceann Comhairle intend to allow the Labour Party to speak? He threw out our leader earlier.

When the Chair makes a ruling it will not be challenged by any member of any party.

The Labour Party has put much work into this amendment. It is unfortunate that Report Stage is being taken by the Government when the Minister for Finance is not available to engage in a serious discussion on the amendments. We are witnessing the creation by the Government of a regulatory structure which is essentially a creature of the Department of Finance and the Central Bank. IFSRA was born tied to the apron strings of the Central Bank. It was supposed to act independently and operate under a specific brief on behalf of consumers. Instead we find that as usual, Fianna Fáil has left some leeway for the 20 public appointments to be stuffed with the usual party hacks, cronies and yes-men of the financial services industry. These people are responsible for past tax scandals as well as the currently unfolding scandals in the largest commercial bank in the country.

The Minister of State can listen to this and not even blush because as far as Fianna Fáil is concerned, it does not matter that 40,000 Irish people work in this area and the pension funds of Irish workers are tied up under the tender loving care of the kind of people who gave us Faldor.

When the Deputy's party was in government it made a sweetheart deal with AIB. She should not give me any lectures.

This is supposed to be a regulatory model which will offer genuine independent oversight and scrutiny of the activities of banks. The Minister of State is refusing the Sinn Féin, Green Party and Labour Party's reasoned amendments and stuffing it with the usual suspects of his party hacks, party cronies and the usual suspects from the financial services industry. The Labour Party amendment specifically proposes that those lucky enough to be appointed to the panel by Fianna Fáil and the PDs — I almost forgot the PDs; it is difficult to remember them these days because it does not appear as if they exist anymore — should be people involved in consumer protection. I will reiterate for the Minister of State why this is important.

In recent weeks, there have been reports by very fine financial journalists of mis-selling of products. Thank God we have such journalists here, because if we did not have them, I do not know to what level of financial and tax scandal we would have sunk. There have been reports of people in their nineties being sold ten-year investment products. This has not been denied by our august financial institutions. People have been switched and switched again from one product to a fresh product for which further services apply. A number of building societies charge such extreme penalties if one falls behind on one's mortgage repayments that the costs incurred as a consequence of not meeting the building society's penalty clauses are such that ordinary families are driven into debt and, in some instances, lose ownership and possession of the family home. These are some of the scandals over and beyond what has been disclosed in the past two weeks to which the financial services industry is an active party. While everyone in the financial services industry is not involved in such activities, a significant number of people are involved. The purpose of this amendment is to give the financial services ombudsman a panel which will include people of power, advocacy and with independence of mind and action who will be in a position to right some of the wrongs regularly done to people who buy and use financial services. The Minister, Deputy Harney, and the PDs lost the battle to control this regulatory framework. Instead the Minister for Finance won the battle. The determination of the Department of Finance appears to be to protect the financial institutions at all costs. It does not matter what sharp practices some people engage in. It does not matter what happens to some elderly people who are mis-sold policies. It does not matter that some families are made to utilise credit way beyond their capacity to pay and are thereafter plunged into years of horrendous debt because of mis-selling of financial products by the financial services industry. The proposals put forward in the Labour Party's amendment, and the similar proposals of the other two parties, are reasonable and reasoned. In the context of the scandals that have unfolded over the past three weeks, they vindicate our assertion that the approach in the Bill is wrong and the comments being put forward by the Opposition in the form of Report Stage amendments are correct.

I say this with no animus towards the Minister of State who is just doing a job dumped on him by the Government after everyone else has left to go out canvassing or wherever. It is a pity, in attempting to clean up the financial services industry that, when it comes to the important part of the discussion, the Minister for Finance and the Minister of State, the two Ministers with governmental responsibility in these areas, are not here. I accept the junior Minister and the officials will pass on our comments to the Minister for Finance. However, we are involved in a completely useless exercise, except to enter caveats so that later on, when more scandals occur, we will probably be in the rather unfortunate position of saying "I told you so".

My amendments are in a similar vein, even though it does not appear others see them in that light.

This is one of the important dimensions of the new Bill. There are significant changes in the Bill which must be welcomed. One relates to what we agreed previously, that is, communication between Revenue, the corporate enforcement body and the regulatory authority. We are seeing some of the merits of this in that these agencies are becoming involved. I hope they will attempt to get to grips with the malpractice which has been rampant in the financial services industry. Members of the public are dismayed at what has been happening.

The other new dimension is that for the first time we will have a consumer council. It will represent consumer interests and comment on the performance of the regulatory authority. It will propose initiatives the regulatory authority should take. It will comment on the performance of the financial services industry and it will view the policies and codes of practice the regulatory authority introduces. This is where consumers will get the first chance to get up close and personal with the financial institutions and how they are regulated. It is absolutely essential in selecting people to be members of the authority to look for the very best people with experience in this area. We should try to get as many people as possible of high standing on to this panel.

My amendment No. 69 and Deputy Ó Caoláin's amendment No. 70 propose advertising the positions. We must recognise that this is breaking new ground and bringing a coherent voice for consumers into financial regulation, something which has never existed. The Central Bank totally ignored consumer interests. It was not interested in consumer interests when the Bill was being introduced. The operation of the consumer panel will be to some extent the most significant element of the regulatory authority, which can really make a change. If a consumer panel was up and running now, it would be interesting to hear what it would say to the regulatory authority. I think it would haul in the regulatory authorities and examine what codes of practice it would enunciate for mis-selling and over-charging. How come they were caught sleeping on the job in respect of over-charging? How come no system picked up what was happening? How come they did not pick up the establishment of these offshore companies which were used for illicit activities such as tax evasion? How come when the regulatory authorities were reviewing the impact of Allfirst, Rusnak and so on the Minister did not ensure a system was in place whereby such issues were escalated to the very top of the financial institutions so that we would know senior executives and boards were receiving the reports of compliant structures that were effective and rooting out these issues? It appears these structures were not in place. If the panel consisted of the right people, it would play a significant part in the current investigation. It would represent ordinary members of the public who must carry the can.

I am sure the Minister of State will not accept these amendments because the Minister on Committee Stage did not. I suspect that he will not change that view no matter how persuasive we are, but hope springs eternal. We should make a genuine effort to make sure that it is not a member of the dáilcheantar that emerges on to this. We should get the best people around, put them on to this panel and set them in a position that they can ride shotgun on the regulatory authority on behalf of consumers. After all, there is a widespread belief that consumer protection should not have been put under the remit of IFSRA. The Government has articulated an alternative view and there are many who share it and many who do not. The issue of whether the Government or the Opposition was right has passed, but we should make sure that the element the Government is giving to consumers, namely this consumer panel, is of the very highest calibre of people that we can find to represent those interests.

That is what motivates my amendment No. 74, that at least two members of the panel would have knowledge and experience of systems for the protection of consumers. It is also behind my other amendment No. 75, that those representing consumers should not have ties with the providers of financial services. As Deputy Ó Caoláin pointed out, the description of someone who should be deemed eligible does not seem to rule out past ties with the provision of financial services. There is no point appointing people to represent the consumer who have spent their lifetime representing the other interest. These amendments are important and I hope the Minister will accept them. If he does not, he should publish some clear protocol on how these people will be selected so that we have absolute assurance that they will not be consumers with a broad interest and with political experience, but will be people with expertise. These regulatory authorities are very complex organisations and we need people on these panels with forensic skills to carry out the task on behalf of consumers.

I am sorry to disappoint the Deputies, but the Minister indicated his position on Committee Stage. It is essential that members of the consumer panel have broad knowledge of consumer issues regarding financial services. That is obvious given the wide remit of the financial regulator, particularly in this important area of consumer education. The Minister tabled an amendment on Committee Stage to make it clear that the key criteria for appointments are knowledge or experience as consumers of financial services. The Minister does not think it wise to narrow down the criteria further, and I agree with him.

There is a very similar qualification for Seanad Éireann, where a person has to have knowledge or practical experience of the relevant vocation on the panel to which the candidate is submitted. That is a hallowed phrase in the making of appointments. The insertion of that phrase in the Constitution on Seanad Éireann has always resulted in a very strict application where a person has to produce qualifications. We are already inserting in the statute provision that a candidate must have knowledge or experience as consumers of financial services. That is a distinct statutory requirement. An appointment by the Government in breach of that requirement would be invalid, ultra vires, and unlawful.

In directing his mind to who should be appointed to this body, the Minister must have regard to this prerequisite of knowledge or experience as consumers of financial services. That is a requirement. I know that Deputies opposite me argue that the mere holding of a bank account should not amount to knowledge or experience as consumers of financial services. There is an understandable concern that persons considered for membership of this board should have as deep a knowledge as possible of the banking sector in the interests of consumers which would make them eligible for the appointment. The Minister is required by section 57CX(2) to consult the Minister for Enterprise, Trade and Employment and organisations representing consumers before appointing members of the panel. An additional procedural safeguard is, therefore, inserted there.

I have no doubt that consumer organisations will support the appointment of persons with direct experience of consumer protection. However, to be of most use to the authority as a sounding board for consumer interests, it is important that others with a contribution to make in this area, such as persons involved in consumer education and advocacy, including those who write on the subject, must also be considered for this panel.

I do not think it would be helpful, as suggested in amendment No. 75 by Deputy Bruton, to exclude entirely from consideration persons with ties to providers of financial services. There is an old saying that the poacher makes a good gamekeeper. A consumer organisation might wish to propose the appointment of an independent financial adviser on the grounds that his or her knowledge of financial services might make that person a suitable member of the consumer panel. It is the Minister's intention that the authority can benefit from a wide range of expertise among the members of the panel, including expertise in consumer protection. It would not be wise to be too prescriptive, especially given the consultative role given to consumer organisations on panel membership.

I wish to comment on appointments and the whole area of the political character of such appointments, as has been raised by the Deputies. The Government is accountable to this House for decisions it makes. If it appoints unsuitable persons, the Opposition is perfectly free to raise that issue. Many considerations enter the question of how Government makes appointments to particular offices. This has happened under successive Governments. As a class of elected representatives, we do no service to ourselves by constantly making these allegations because a Government is accountable to this House. If we write into legislation very narrow criteria for appointment to public offices and boards, we narrow the responsibility of the Government and we narrow the choice available to any Minister. This results in the Government being deprived of discretion in the appointment.

A Government has to strive for the best. It is open to fair criticism in this House. There is a clear safeguard put into this legislation on consultation of consumer organisations. There is also a clear safeguard on a basic prerequisite for qualification. After that it is a matter for the Minister to make a decision. I appreciate the spirit in which these amendments have been put down. To introduce the rigid percentage requirement such as those that appeared in amendments made by Deputies Ó Caoláin and Boyle or to define consumer protection in a very restrictive sense, for which Deputies Burton and Bruton are canvassing, does not add to the Bill. Ultimately, the Minister for Finance will be accountable to this House for appointments he makes under this measure.

I call Deputy Bruton.

We are dealing with my amendment.

I call the Members in the order in which they propose their amendments. There is no rule that states they have to be called first for the reply. I would normally call the larger party.

I have noted that. I have no objection to Deputy Bruton speaking first, but I have a concern with the way you, Sir, call the Deputies.

I accept the Minister may have good intentions on this. However, the philosophy of this panel will be important. The Minister has not always inspired the confidence of consumers that his approach to consumer protection is a high priority for him. For a body such as this, it is important that the Legislature make a call on the sort of person it wants. We want people who will be vigorous and tough in their defence of consumers. We do not want people who take a soft approach and who are more interested in the prudential, profitability and risk assessment side of banking, important as those are.

The Government should have more discretion if it is willing to come in before a committee and stand over its selections. It is unfair of the House to criticise people after they have been selected because we are then undermining a body which is acting in good faith. Ministers should be willing to put forward their recommendations and let the committee consider them. We would then have a more open and accountable system.

Perhaps the Minister of State is inexperienced in the way boards are appointed and the scope for holding people to account. I have seen some diabolical appointments made by his side of the House — I am sure he would say the same about some appointments made by my party when in Government — and the House has been powerless to hold Ministers to account without damaging the institution involved. We need a system that allows that to happen within the House, such as by a committee. If the Minister signed up to that I would take his view more seriously.

Before continuing, a Cheann Comhairle, I wish to point out to you that we are dealing with my amendment.

The Chair has ruled. The four amendments are now properly before the House to be discussed together.

The Chair has ruled but, with respect to you, it appears to be at its whim. The practice heretofore has been that you call for the second contribution and indeed for a third.

The Chair does not intend to get into a discussion with the Deputy. I have ruled on the matter.

No, because the Chair has not ruled in accordance with practice.

The Deputy has two minutes remaining and if he wants to address the amendment, so be it.

That is a fact. There is clearly an inequality in the approach and I protest against it.

Regarding the Minister of State's response vis-à-vis amendment No. 71, it is not a case, as the Minister said, of seeking to narrow the criteria any further; far from it. As the amendment clearly states, it is about ensuring that at least 50% of those appointed to the consultative consumer panel have an expertise, knowledge and experience of advocacy on the part and in the interest of consumers. That is critically important and I reject the Minister of State’s view of what the amendment seeks to do.

The reality is that what is now contained in subsection (3) amounts to a situation where anyone operating a supermarket pre-Christmas saving stamps scheme would qualify on the basis of knowledge of matters such as this. That is nonsense. The Minister of State must be more specific and he must ensure there is protection of the consumer interest. The only way that can be done is with the required expertise.

The Minister of State is happy to respond to Deputy Bruton on the point vis-à-vis those who may have an expertise in financial and services provision but he is not as enthusiastic in the response he has given to ensure that those who have been the champions of the interest of the consumer are adequately——

On a point of order, what exactly is the Deputy referring to? Is he suggesting I have an amendment on financial——

No. The Deputy has misunderstood what I said.

Perhaps I have.

In response to Deputy Bruton's contribution the Minister of State rejected a notion that there would not be participation by people who were directly involved in the financial services sector. I am saying he is keen to ensure an argument is presented that would accommodate their participation but he is not as keen to ensure there is an accommodation of those who have the expertise in advocacy in the interest of the consumer. They are the counterbalance to the very interest the Minister of State sought to protect by his response to Deputy Bruton.

I thought I said a poacher would be a good gamekeeper——

——a point not lost on the Deputy, I am sure.

That is exactly how the Minister phrased it but I assure him that a good advocate will always be a good advocate because he or she will have a proven record of performance. I have no doubt that experience and expertise will be of great value in such an engagement.

Amendment No. 71 does not seek to exclude people from the smallest and least experienced financial services provision, be it from a post office savings bank account or whatever. It is open to everyone but in seeking to build in a protection in terms of more than 50% having that expertise, we are ensuring that the interests of consumers are adequately protected and guaranteed.

With all due respect, I thought it was a little trite of the Minister of State to say the Government will be accountable to the House in its appointments. The Government's record of appointing is not only not accountable to the House but it is not accountable to the electorate or the populace. That has been demonstrated not only in appointments to boards but in appointments to the Cabinet itself.

The Minister of State is blessed in his unquestioning belief in the value of the current system of appointing people to State boards, bodies and committees. Even he must realise the correlation between such people who are appointed and whatever political preferences they have expressed publicly, regardless of the Government in power at the time of their appointment. That system continues to bedevil our——

Does the Deputy want anyone left in party politics?

I will give the Minister of State one example where that has not been the case. The Green Party, which has not yet been in Government, has not availed of that particular system but I was appointed by the Taoiseach to the National Economic and Social Council, not because of any party political affiliation but because I represented a body in the partnership process, the National Youth Council of Ireland, which was descriptively listed in legislation as being a direct nominating body for participation in the National Economic and Social Council. It appears that where legislation specifies directly where nominations can be made by accepted bodies with experience in the areas for which the State was establishing a grouping, the people are not chosen on the basis of party political patronage.

The other system that can be adopted is a direct public appointments commission where anyone and everyone can submit nominations for whatever positions are being sought by a Government at any particular time. That, too, has merit.

As for the Minister of State saying that the Government is accountable to this House in the appointments it makes, we have nothing like the system that operates in the United States Congress, the Senate or House of Representatives, whereby people who are nominated for significant bodies come before committees of that legislature to justify the reason they are being appointed, outline their experience and the commitment they can bring to the position on offer. To say that what exists here is anything like a sufficient system or a system in which we can have public confidence is laughable.

All these amendments seek to put in place a degree of public confidence that does not exist in general or because of recent events surrounding confidence in financial services. If the Minister and the Government cannot see that, and if they insist on the usual practice in terms of political appointments and patronage, we are only storing the seeds for future scandals to be uncovered and improper practices to take place because we did not put in place the proper infrastructure for ensuring it did not occur in the first instance.

Since the Minister is obliged to consult consumer representatives in regard to the appointments it is likely that the panel will be broadly representative of consumers of financial services. The requirement to consult the Minister for Enterprise, Trade and Employment should also contribute to this outcome. I agree that persons with experience of consumer protection will definitely be on the panel but it is important that other types of experience, for example, consumer education, including journalism, and consumer advocacy should be reflected in the panel membership. Amendment No. 75, for example, tabled by Deputy Bruton, would preclude from consideration the current Consumers' Association spokesperson on finance, who is an independent financial adviser.

Deputy Boyle drew a comparison with the constitutional system that obtains in the United States. There is no comparison with this country because, in the first instance, the United States has an elected executive Head of State and Congress operates under a completely different set of ground rules from the system that operates in Dáil Éireann and in the Seanad.

The Deputy keeps repeating the word "patronage" but listening to his comments I have come to the view that he subscribes to the current public view, and I agree that it is a common view, that if someone is a member of a political party he or she should be disqualified from being appointed. There is a case, and I say this on a cross-party basis, for appointing people who are prepared to commit themselves to the political process and not to delegate the responsibility for making political appointments to a body which is expressly divorced from that process. That would not promote confidence among the Executive, state boards and this House. I do not propose to refer to the record of various political parties in this area but my own party has quite a good record. We have a strong record of appointing people from other political backgrounds to posts. Sometimes it is the parties which are less frequently in office and are somewhat ravenous for appointment which misbehave themselves when they are in office. However, I will not go into that issue this afternoon.

The Minister of State would be better not to do so because it is not true. That is an outrageous statement.

In that case I withdraw it.

I thank the Minister of State.

Nevertheless, there is an important issue here which we can overlook. Membership of a political party should not disqualify a person from appointment.

No one said it should.

The Minister of State has made a serious accusation of misbehaviour. He should explain that remark.

I did not make an accusation of misbehaviour on anyone's part.

The Minister of State said so. He should explain it.

Deputy Ó Caoláin, you have the right to reply.

Thank you. The implication that people appointed to boards from other political parties have misbehaved——

I did not say that.

That was my understanding of it. That is what other Deputies and I heard.

I cannot let that pass.

I did not suggest that appointees from other parties misbehaved. I said that when other parties were in office they were sometimes more extravagant in their appointments.

I see. I welcome that clarification. It is up to others who have been in power to address that matter.

This is an important series of amendments. The disposition of the Minister and the Minister of State to reject in a barefaced manner every reasonable amendment presented by Opposition Members shows a prior disposition to railroad their own text of the Bill aside from the concerns expressed. I find that objectionable. Sound arguments have been presented by Opposition Members, not least with regard to the critical focus of consumer protection. This is not in evidence in much of what the Minister and the Minister of State have argued on Committee and Report Stages. There are real deficiencies in the Bill which give rise to concern that the supposedly fundamental and underlying foundation of the Bill, with regard to consumer protection, is not being met. Nowhere is this more in evidence than in the measures relating to the consultative consumer panel, which is a very important body which can only function to its real and full potential if it is made up, primarily, of people who have the expertise for which other Deputies and I have argued. They should be advocates on behalf of consumer interests.

Therefore, I will be pressing this amendment. It is fundamental to the legislation before us, which is indicative of the disposition of the Minister and the Minister of State to reject the sound and reasonable arguments presented. The mask has slipped on a number of occasions and their interest in ensuring that other interests and expertise within the financial services sector are accommodated and guaranteed active participation has been revealed. I want to see a guarantee of the active participation of those who have the knowledge and experience of advocacy in the interest of consumers protected, guaranteed and insured within the make-up of the consultative consumer panel. Therefore, I will press my amendment.

Question put: "That the words proposed to be deleted stand."
The Dáil divided: Tá, 53; Níl, 34.

  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, Barry.
  • Ardagh, Seán.
  • Brady, Johnny.
  • Brady, Martin.
  • Brennan, Seamus.
  • Callanan, Joe.
  • Carty, John.
  • Coughlan, Mary.
  • Cregan, John.
  • Curran, John.
  • Davern, Noel.
  • Dempsey, Tony.
  • Dennehy, John.
  • Ellis, John.
  • Finneran, Michael.
  • Fitzpatrick, Dermot.
  • Glennon, Jim.
  • Grealish, Noel.
  • Hanafin, Mary.
  • Haughey, Seán.
  • Hoctor, Máire.
  • Jacob, Joe.
  • Keaveney, Cecilia.
  • Kelleher, Billy.
  • Kelly, Peter.
  • Killeen, Tony.
  • Lenihan, Brian.
  • Lenihan, Conor.
  • McDowell, Michael.
  • Moynihan, Michael.
  • Mulcahy, Michael.
  • Nolan, M. J.
  • Ó Cuív, Éamon.
  • Ó Fearghaíl, Seán.
  • O’Dea, Willie.
  • O’Donnell, Liz.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Malley, Tim.
  • Power, Peter.
  • Power, Seán.
  • Roche, Dick.
  • Sexton, Mae.
  • Smith, Brendan.
  • Treacy, Noel.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Wilkinson, Ollie.
  • Woods, Michael.
  • Wright, G. V.

Níl

  • Boyle, Dan.
  • Breen, Pat.
  • Bruton, Richard.
  • Connolly, Paudge.
  • Cowley, Jerry.
  • Crawford, Seymour.
  • Cuffe, Ciarán.
  • Durkan, Bernard J.
  • English, Damien.
  • Enright, Olwyn.
  • Ferris, Martin.
  • Gilmore, Eamon.
  • Gormley, John.
  • Hayes, Tom.
  • Higgins, Michael D.
  • Kehoe, Paul.
  • Lynch, Kathleen.
  • McGinley, Dinny.
  • McGrath, Paul.
  • McManus, Liz.
  • Mitchell, Olivia.
  • Morgan, Arthur.
  • Neville, Dan.
  • Ó Caoláin, Caoimhghín.
  • Ó Snodaigh, Aengus.
  • O’Keeffe, Jim.
  • O’Shea, Brian.
  • O’Sullivan, Jan.
  • Penrose, Willie.
  • Quinn, Ruairi.
  • Ring, Michael.
  • Ryan, Eamon.
  • Sherlock, Joe.
  • Timmins, Billy.
Tellers: Tá, Deputies Hanafin and Kelleher; Níl, Deputies Ó Snodaigh and Durkan.
Question declared carried.
Amendment declared lost.
Amendments Nos. 72 to 80, inclusive, not moved.

I move amendment No. 81:

In page 57, line 30, after "members." to insert "At least one third of the members must be women.".

Amendment put and declared lost.

I move amendment No. 82:

In page 57, line 37, after "providers." to insert the following:

"Appointments shall be made from a short list of candidates drawn up following an open competition, publicly advertised, and interviews of short listed candidates based on published criteria of qualification.".

Amendment put and declared lost.

I move amendment No. 83:

In page 63, to delete lines 26 to 48, in page 64, to delete lines 1 to 49 and in page 65, to delete lines 1 to 27.

Amendment agreed to.

Amendments Nos. 87 to 92, inclusive, are related to amendment No. 84 and they may be discussed together, by agreement.

I move amendment No. 84:

In page 75, lines 11 and 12, to delete "guidelines, notices and other documents" and substitute "guidelines and notices".

The series of technical amendments tabled by the Minister to section 23 addresses concerns raised by Deputy Richard Bruton on Committee Stage. They also address concerns of accountancy bodies. The general effect of the amendments is to tighten up terminology and align it in so far as possible with the terminology in the Companies (Auditing and Accounting) Act 2003. As I am sure Deputies are aware, the Act implemented the main recommendations of the review group on auditing. Amendment No. 91 also provides that the authority can rely on a compliance statement provided by a financial institution under that Act if it is satisfied that it meets its requirements.

Amendment No. 87, in the name of Deputy Richard Bruton, may be based on a misunderstanding. The regulatory authority is structured as a constituent part of the bank and the consumer director is a member of the regulatory authority. Section 33C of the Central Bank Act 1942, as inserted by last year's Act, makes it clear that the regulatory authority has the function of ensuring compliance by financial institutions with their obligations under financial services legislation. It would therefore be the regulatory authority, and not the Central Bank, that would exercise the powers conferred by this provision regarding compliance statements. There is nothing to prevent the authority from giving the consumer directorate the authority to act in its name under this Part.

On amendment No. 88, in the name of Deputy Richard Bruton, section 27A already empowers the authority not only to issue guidelines on compliance statements but to issue more general guidelines on the governance of financial institutions. All such guidelines must be notified in Iris Oifigiúil and published. It is likely the authority will wish to develop and publish such guidelines to supplement the guidance on corporate governance that it has already issued using its existing powers. However, it would not be helpful to be too prescriptive about the content of such guidelines, especially because the compliance statement requirement is discretionary. It is important that any such guidelines take account of the particular features of financial institutions. The type of corporate governance and compliance regime that would be desirable for a large bank, for example, might be quite inappropriate for a small credit union or intermediary, and therefore we should not tie the hands of the authority in this area. As I believe the Minister’s amendments address the main concerns raised by Deputy Richard Bruton, I hope the Deputy will agree to withdraw his amendments.

Of all the sections that remain to be dealt with, this one gives rise to the greatest public concern, especially in the wake of the extraordinary series of events in AIB. It seems that at the time of the Rusnak debacle, the Central Bank instructed that there be an audit of the compliance procedures of all the banks in the system. We are led to believe this was in compliance with some sort of policy document or expectation that was well-known and understood by banks. We would have expected, therefore, that the compliance request from the Central Bank, which was the then regulator, would have triggered the discovery of all the instances of non-compliance that were not discovered for a very considerable period thereafter. Some instances were discovered as a result of a whistleblower and some, admittedly, were discovered internally.

I suppose there is considerable unease over the extent to which we are reliant, in regulating financial institutions, on internal compliance procedures that are not up to the job. In this regard, consider serious non-compliance such as the failure to make charges in accord with what is legally permissible, which is certainly serious from the perspective of the consumer. When this form of non-compliance was discovered in the AIB, the discovery was not escalated beyond the head of the division. Apparently the head of the division did not understand that it mattered, nor did he take any steps to do anything about it. This all happened after the Central Bank had instructed that the internal compliance systems in the bank were to be audited and brought up to best practice. That is why I am reluctant to take the leap of faith the Minister of State is asking of me in this instance.

We need pretty strong and clear policy statements on what compliance means. We must ask what sort of internal procedures exist to enforce compliance, what sort of work programmes are undertaken by the compliance officers, what sort of independence they have within the structure and to whom they are accountable, who has a duty of care to take action when non-compliance is discovered and who has a duty to report non-compliance to the responsible authority. I know the Minister will say the new regime is entirely different and that there is a new attitude. The evidence from recent weeks has suggested there is not really a new culture and that the same old culture exists although it may have a few new things tacked on to it. I am not an expert in this field, nor do I pretend to be. I suppose none of us is and therefore we have been seeking the recommittal to committee to allow a more free-ranging debate and to allow us take stock and hear independent expert opinion on what ought to be done.

I will accept the Minister of State's word on amendment No. 87. It surprised me that the Central Bank was going to decide whether there were add-on compliance requirements over and above the compliance requirements that apply to every company. He tells me we can read the Central Bank, the regulatory authority and the consumer director interchangeably. However, the governor of the Central Bank, whom we heard yesterday, is concerned with financial meltdown. He will have a very different attitude to the sort of compliance statements that are required. He will be worried about risk management, bad debts and systems that might leave undetected huge trades that might be uncovered subsequently. They will not be the concerns of the consumer director, who will be concerned about overcharging, mis-selling, bad dealing practices and dishonest dealing practices. The Minister is asking us to believe these are all the same. In previous Stages of this Bill we stated these are not the same.

The consumer director depends for her budget on the Central Bank and the regulatory authority. She has no independence from those bodies, is part of that structure and depends for her existence on that structure. I am not reassured by the Minister of State's sleight of hand, which suggests that for "bank" we should read "anyone who has a concern". These are the real internal politics of the organisation as to whose view will prevail. Will it be the Governor of the Central Bank, who rightly sees his job as protecting the currency and protecting the stability of the financial system, which represent a completely different set of requirements and interests to Mary O'Dea, the consumer director?

How will those issues be resolved internally? We have no code of practice or policy statement that nails down what the Oireachtas should expect about compliance statements. We are leaving it to the internal politics of the regulatory authority to decide what will represent best practice in compliance and what we should demand in terms of compliance. While we can make that act of faith, the evidence is to the contrary. The evidence of how financial regulation has developed here and the evidence of the misdemeanours that continue to occur in the financial sector do not allow us to make those acts of faith.

We need a clear code with input from the consumer panel we just mentioned, which I hope will contain strong advocates and defenders of consumer rights. They will ride shotgun on this sort of decision. As currently structured, it appears that the bank may, whenever it sees appropriate, serve on the regulatory authority a notice regarding these various matters. We need to pin down our expectation that they will consider consumer protection as one of the key compliance issues and that should be stitched in somewhere.

The Minister of State does not seem willing to accept a policy document, which was the lowest level I could propose, as it did not require a statutory provision detailing X, Y and Z, because inevitably things change based on the latest wheeze. It is said that regulators always arrive late and breathless. As we will always have to try to catch up with the financial wizards who move fast and ahead of the regulator, I accept it cannot be set in stone. However, we need some sort of public expression as to what sorts of compliance requirements will be expected. This is the last chance the Oireachtas will have to do this.

Of course we can subsequently call in the regulators and hope we ask the right questions. However, we will depend on future members of an Oireachtas committee being able to home in on such detailed issues. I am sure the Minister will agree that these two Bills are the most tortuous to navigate. They are not even referenced or indexed for those of us who are debating them here. They are virtually impossible to handle.

The experience of the past few weeks brings into very sharp relief that we ought to go down the route of principle-based regulation, as suggested by IFSRA and others, and to try to bring ethics to the boards of directors as opposed to regulating by rolling in the tanks every other day, sitting on the shoulders of bank managers and executives, and second-guessing and monitoring everything that is done. We know we do not have the resources, the regulatory regime or any of the forensic skills to do that. We will rely on a system that will be based on trying to get people thinking not only of shareholder value but understanding that good ethics form part and parcel of what they bring to the workplace. They should run their businesses according to a standard that should bear scrutiny by anyone and the regulatory authority is trying to reach that point. That represents an ideal and of course we do not live in a perfect world. However, that is the model we are trying to introduce as opposed to a model requiring daily monitoring, checking and oversight.

It behoves us to carefully consider these sections on compliance as they appear to be the only vehicle to define the ethic, how it will exist in organisations and how can we verify that it rolls down to the bottom. A bank manager should not be solely driven and obsessed by how he or she can drive up the commission on his or her products, sell more products, get more front-loaded commissions so that he or she gets a good bang in the short term and how he or she can churn products so that even if it is not in the interest of the consumer, the commission increases.

We must get to a point where such a person has values and understands that in addition to being profitable and getting commission, this must be done within standards which define that only products that are in people's interest will be sold to them, that they will only be charged according to the law for items for which they rightly paid, that they are not advised to invest in products that are not in their interests and that money will not be veered from one product line or fund to another because it is possible to do so without being caught.

The Minister of State has been too quick to accept the brief handed to him stating that everything is fully thought through and everything in the garden is rosy. Contrary to what the Minister of State has said, it would be much better if the Oireachtas signed off on this legislation and made it explicit that either the bank, the regulatory authority or the consumer director could take the initiative to have compliance requirements imposed on a particular institution. I would have much greater confidence if the consumer director had the power to make these compliance requirements. While I know the Governor is an excellent person, he spends most of his hours ensuring that the system does not melt down. The Minister of State should make that explicit and not accept the brief he has been given.

We need a policy document on compliance. We urgently need to have some kind of statement in the case of AIB. We need to be able to verify that no tax evasion is going on anywhere in the organisation, that no such practice would be tolerated in any case, that people would be sacked if discovered, that those in management have responsibility for ensuring it does not happen, that no mis-selling or dishonest practices take place and that no deals or reward arrangements exist for senior executives built on the sorts of foundations we have recently seen. We need a policy statement from IFSRA stating that those are the standards that must be in place. It should be in a position to ask an organisation to see the work programme to ensure the standards are being applied and to be shown what happens whenever a deviation from best practice is uncovered.

My amendments go to the heart of the scandals we are trying to address. We need to ensure that the Bill is not passed just because we are at the end of a long and exhausting process and we all want to see something implemented. That is not a sufficiently good reason. We need to ensure we are doing the right thing and putting the powers in the right place. We are moving to a new ethic that has been sadly lacking in the financial sector.

Given what the Government is trying to achieve, clock watching and trying to pass the legislation before the summer recess whether or not the Minister is in the House is not the right approach. I hope the Minister of State will reconsider and accept my amendments. If they do not quite meet the case, I hope the Minister will produce his own amendments in the Seanad to give the public confidence that everything has changed in terms of the standards we expect financial institutions to observe.

The public must be assured that we are determined to drive consistently for this sort of ethic to apply and will do whatever it takes to get it done. We are not overburdening financial institutions with regulations, we are asking them to internalise proper ethics within their organisational structures. That must be our objective and it behoves us to take the time to see that we achieve it.

While the Deputy makes a very fair case, there is an answer to it. There are a number of reasons compliance statements and their content are being left to the discretion of the regulator. While compliance statements as a matter of practice will be an integral part of the scheme envisaged by the legislation, there are reasons the requirement to provide such statements is being left to the discretion of the regulator. Deputy Richard Bruton is trying to move a step further by making the preparation of a compliance statement mandatory in all cases but we must recognise that most of the larger financial institutions are obliged to provide a compliance statement under the terms of companies legislation enacted last year. This compliance statement covers compliance with company law, revenue law and any other enactments which provide a legal framework within which the company operates and which may materially affect its financial statements. For financial services companies, financial services legislation overseen by IFSRA is an important part of the legal framework within which they operate. In general, it is material to their financial positions. It is therefore possible for IFSRA to rely on compliance statements of this sort in many cases. As a matter of good regulatory practice, the financial regulator should not unnecessarily burden such institutions with the obligation to produce a compliance statement covering substantially the same ground.

As was recognised by the review group on auditing, many of the institutions regulated by IFSRA fall into the small business category. To quote from the report, there are a number of small financial entities including retail investment intermediaries, insurance intermediaries and small credit unions which fall into the small business category. The report recommended that the degree to which the recommendations should apply to smaller financial entities should be examined further. For small businesses it is especially important that the existing regulatory burden should not be worsened by the unnecessary imposition of an additional regulatory burden. Instead, we have provided a power for the regulator to require a compliance statement where it considers the circumstances to merit it.

The regulator could, for example, require a particular institution or category of institution to provide such a statement on particular legislation such as the Consumer Credit Act 1995. This would have the effect of focusing the attention of directors and senior managers on the adequacy or otherwise of controls and procedures in place to ensure such compliance. The regulator will use his discretionary power in this area wisely and in accordance with the principles of better regulation. For those reasons, the Government provision represents a better approach than the more prescriptive one advocated by Deputy Richard Bruton. It is fully in line with the recommendations of the review group on auditing.

The Minister of State has not addressed my points at all. I acknowledge that he has read from a prepared script. I am asking why we are not being allowed to provide the Director of Consumer Affairs who represents an entity in herself and is a member of the board with the discretion to require compliance statements. She should not have to mediate the demand through the entire structure. This is the net point of the change I seek and it was not addressed in the Minister of State's reply. I am aware that the Companies Act requires a compliance statement, a provision which quite manifestly failed in the case of AIB which did not demonstrate compliance in respect of consumer law.

I am not trying to be prescriptive, I am saying that we need a policy document from IFSRA. The authority should set out the policy it expects to be followed within compliance which does not imply requiring every credit union to sign off on 120 different actions requiring hours upon hours of box ticking for six months. I am saying there has to be a policy. It can include proportionality whereby certain compliance requirements are made of institutions of varying sizes and different compliance expectations are made of institutions trading in certain types of derivative products or products the complexity of which consumers might not immediately understand.

A policy is required whereby it is clear to everyone what IFSRA expects. We must ask IFSRA to articulate such a policy to ensure that where something happens in AIB, for example, we have a document which proves its chairman knew what it was. We can ask why certain actions were not taken and why any incidents were not reported to senior management. If it says on page 6 that an issue of a certain nature should be escalated to the board of directors to allow it to make appropriate decisions, we should be in a position to ask what happened. We need a document to be able to hold people to account. I hope we will see boards of directors and executives saying we have got it right and agreeing that the most successful businesses are the ones which are ethical as well as profitable. The Minister of State did not address any of those issues. Sadly, as it is Report Stage I will be told that I am out of time and this is the last word I can have on the subject.

The Minister of State has two minutes.

It is farcical.

You will have a right of reply.

I do not think I will but I hope so.

I addressed the Deputy's amendment. The net point is very clear. The Director of Consumer Affairs is a member of IFSRA — as the Deputy is well aware — and IFSRA can prescribe compliance statements.

That is not what I asked for. That is not what I seek to make provision for. The Minister of State is answering a different question.

The Minister of State is refusing to allow the Director of Consumer Affairs to have her own discretion to order compliance statements. The Government is insisting that she must go through IFSRA.

I am looking for a separate arrangement. The Minister of State has not addressed why the Government is refusing to provide the Director of Consumer Affairs with that discretion.

The issuing of compliance statements must occur in the context of financial regulation generally. It is not exclusively a consumer interest.

We are in the business of providing consumer protection here.

That is not at issue.

We are trying to create circumstances in which one will not have banks ripping off consumers and which provide for action to be taken against mis-selling. The Government says the issue must be mediated through IFSRA, but that body may decide this is not its priority.

I should have said the Minister of State has the right of reply as the mover of the amendment.

The Director of Consumer Affairs is a member of IFSRA which takes consumer protection into account. A balanced view must be taken of compliance statements. The authority has full power to insist upon them under this legislation.

Amendment agreed to.

Amendment No. 86 is an alternative to amendment No. 85. The amendments may be discussed together, by agreement.

I move amendment No. 85:

In page 75, to delete lines 27 to 30 and substitute the following:

"(i) any other firm that, at any time during the financial year, was under the same ownership and control as the auditor,".

Will the Minister of State explain the proposal?

Has this not been discussed?

Is the Minister of State offering an explanation of his proposition?

Amendments Nos. 85 and 86 are being discussed together.

Amendments Nos. 84 and 87 to 92 must be taken together in the first instance.

We decided on amendment No. 84.

Amendment No. 85 is a technical amendment to align the definition of "affiliate of an auditor" with the definition contained in section 82 of the Companies Act 1990 as inserted by the Companies (Auditing and Accounting) Act 2003. The effect of the amendment's provisions are the same as those of Deputy Richard Bruton's amendment No. 86.

Amendment agreed to.

Amendment No. 86 may not be moved now that amendment No. 85 has been agreed.

Amendment No. 86 not moved.

Amendment No. 87 has already been discussed.

I move amendment No. 87:

In page 76, line 33, after "Bank" to insert "the Regulatory Authority or the Consumer Director".

Amendment put and declared lost.

Amendment No. 88 has already been discussed with amendment No. 84.

I move amendment No. 88:

In page 76, line 36, after "section" to insert the following:

"without prejudice to the power outlined in subsection (1) the Bank shall develop a policy document on compliance requirements under this subsection".

Amendment put.
The Dáil divided: Tá, 32; Níl, 53.

  • Boyle, Dan.
  • Breen, Pat.
  • Broughan, Thomas P.
  • Bruton, Richard.
  • Connolly, Paudge.
  • Cowley, Jerry.
  • Crawford, Seymour.
  • Durkan, Bernard J..
  • English, Damien.
  • Enright, Olwyn.
  • Ferris, Martin.
  • Hayes, Tom.
  • Higgins, Michael D.
  • Lynch, Kathleen.
  • McGinley, Dinny.
  • McGrath, Paul.
  • McManus, Liz.
  • Morgan, Arthur.
  • Moynihan-Cronin, Breeda.
  • Neville, Dan.
  • Ó Caoláin, Caoimhghín.
  • Ó Snodaigh, Aengus.
  • O’Keeffe, Jim.
  • O’Shea, Brian.
  • O’Sullivan, Jan.
  • Pattison, Seamus.
  • Penrose, Willie.
  • Ring, Michael.
  • Sherlock, Joe.
  • Stanton, David.
  • Timmins, Billy.
  • Upton, Mary.

Níl

  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, Barry.
  • Ardagh, Seán.
  • Brady, Johnny.
  • Brady, Martin.
  • Brennan, Seamus.
  • Callanan, Joe.
  • Carey, Pat.
  • Coughlan, Mary.
  • Cregan, John.
  • Curran, John.
  • Davern, Noel.
  • Dempsey, Tony.
  • Dennehy, John.
  • Ellis, John.
  • Finneran, Michael.
  • Fitzpatrick, Dermot.
  • Glennon, Jim.
  • Grealish, Noel.
  • Hanafin, Mary.
  • Haughey, Seán.
  • Hoctor, Máire.
  • Jacob, Joe.
  • Keaveney, Cecilia.
  • Kelleher, Billy.
  • Kelly, Peter.
  • Killeen, Tony.
  • Lenihan, Brian.
  • Lenihan, Conor.
  • McDowell, Michael.
  • Moynihan, Michael.
  • Mulcahy, Michael.
  • Nolan, M. J.
  • Ó Cuív, Éamon.
  • Ó Fearghaíl, Seán.
  • O’Dea, Willie.
  • O’Donnell, Liz.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Malley, Tim.
  • Power, Peter.
  • Power, Seán.
  • Roche, Dick.
  • Sexton, Mae.
  • Smith, Brendan.
  • Treacy, Noel.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Wilkinson, Ollie.
  • Woods, Michael.
  • Wright, G. V.
Tellers: Tá, Deputies Durkan and Broughan; Níl, Deputies Hanafin and Kelleher.
Amendment declared lost.

I move amendment No. 89:

In page 77, line 8, after "must" to insert ", in accordance with any relevant guideline,".

Amendment agreed to.

I move amendment No. 90:

In page 77, line 12, to delete "statutory".

Amendment agreed to.

I move amendment No. 91:

In page 77, between lines 16 and 17, to insert the following:

"(7A) In the case of a regulated financial service provider that is a company to which section 205E of the Companies Act 1990 applies, the Bank may, instead of serving on the financial service provider a notice under this section, rely on a compliance statement prepared under that section if it is satisfied that the statement contains the information that would be required to be included in a compliance statement under this section.".

Amendment agreed to.

I move amendment No. 92:

In page 77, line 41, to delete "obtainable" and substitute "obtained".

Amendment agreed to.

Amendment No. 93 arises from committee proceedings. Amendments Nos. 94 to 98, inclusive, are related and amendments Nos. 93 to 98, inclusive, may be taken together, by agreement. Is that agreed? Agreed.

I move amendment No. 93:

In page 80, lines 17 to 19, to delete all words from and including "3" in line 17, down to and including "provider" in line 19 and substitute the following:

"1 month after the date of the auditor's report on the financial service provider's accounts".

This amendment and amendments Nos. 96 and 97 are largely technical in character. Amendment No. 93 recognises that not all financial service providers have their accounts ready for audit within three months of the end of the financial year. It therefore changes the obligation on the auditor to provide the required statement to the regulator within one month of completing the audit of the accounts. Amendments Nos. 94 and 95 tighten up terminology. This series of amendments to section 23 addresses the main concerns expressed by accounting bodies about the section. I hope Deputy Richard Bruton accepts that it meets the case he has made in amendments Nos. 96 to 98, inclusive.

I do know what the Minister of State has done to build that hope. My understanding was that there was a compliance requirement on auditors requiring them to state whether circumstances had arisen that require a report of the matter to the bank. They felt it was too onerous for them to have to issue a report on every occasion and that they should do so only in the case of non-compliance. They agreed that non-compliance should be reported but not that they should be obliged to create a report if there was not non-compliance. This was the essence of the point made in amendment No. 94. Has the Minister taken this on board in respect of this amendment?

With regard to amendment No. 93, the Minister seeks to delete the words "3 months after the end of each financial year of a regulated financial service provider,". This is understandable and quite straightforward as the three-month period is the issue. However, the Minister's substitution is more convoluted. While it suggests a period of one month, this is not one month after the end of each financial year but one month after the date of the auditor's report on the financial service providers' accounts. Is it specified when the auditor's report and the financial service provider's account should be presented? I am concerned and would like the Minister of State to elaborate because while the first reading might suggest there is a best performance in terms of time diligence, I wonder if that is really the case given the convoluted presentation the Minister of State now offers in substitution. Perhaps the Minister of State will clarify this because I am concerned about the effect of amendment No. 93 compared with the wording in the text of the Bill.

The text of the Bill being amended reads, "Within 3 months after the end of each financial year of a regulated financial service provider, or within such extended period as the Bank allows, the auditor of the service provider shall deliver a written report". As I have outlined already, this amendment is intended to take account of the fact that not all financial service providers must submit their accounts within three months of the end of the financial year. Limits are set out in legislation but they are not always within three months and the effect of this section will be that the issuance of a set of audited accounts by the auditor will trigger a one-month deadline for meeting obligations under this section. This amendment arises in Part 4 of the Bill which implements the recommendations of the review group on auditing for financial service providers. I hope that clarifies matters.

I thank the Minister of State for trying to throw light on the matter but I understood that they do not all present reports within a specified period of three months, as indicated in section 27B(2) of Chapter 3. What mechanism is being employed for the alternative presented here to ensure that we receive the annual report of the auditor on the annual report of the specified institution? What will ensure that we have it within a specified, or even a reasonable, time following the conclusion of the financial year, given that the calendar year and the financial year are now contemporaneous?

Despite what the Minister of State has said, I am still concerned about the timeframe being one month after the date of the auditor's report on the financial service provider's account because there is no specification of when the auditor must report. The situation appears even worse to me after the amendment so I would like the Minister of State, who moved it, to help me through this.

The time limits are set out in the different legislation that covers companies and financial services. There are different time limits prescribed in different Acts and this section is drafted to accommodate the differing legislation. It is expressed as within three months after the end of each financial year or within such extended period as the bank allows, but there is always a time limit and that is clear in the legislation.

That I understood but the amendment causes uncertainty.

The amendment creates a strict deadline of one month after the date of the auditor's report on the financial service provider's account. It introduces an absolute deadline into the legislation. It is a double lock that provides a further, absolute guarantee of a one-month limit. The effect of the amendment will be that when a set of audited accounts are issued, a one-month deadline will be triggered to meet the obligations under this section. I accept that it is very technical.

I accept the Minister of State's assurances but the wording is very confusing.

Deputy Richard Bruton raised issues concerning the relationship between his amendments and those tabled by the Minister for Finance.

On amendment No. 96, section 27B implements a recommendation of the review group on auditing that the external auditors of financial institutions should provide an annual positive statement to the Central Bank on whether anything has come to their attention that gives rise to a legislative duty to report to the Central Bank. Subsection 2(a), as amended by amendment No. 93, provides that within one month of the auditor’s report on a financial service provider’s account, the auditor must provide a written report to the bank stating if circumstances have arisen that required him or her to report a matter to the bank under prescribed enactments and what those circumstances are. Deputy Richard Bruton’s amendment would not implement the recommendation of the review group that requires a positive statement from the auditor that no statutory duty to report to the regulator arose during the financial year. The amendment would weaken the legislation.

On amendment No. 95, section 27B implements the recommendation of the review group on auditing on the external auditing of a financial institution that there must be this annual positive statement to the Central Bank on whether anything has come to the attention of the auditor. Subsection (4) lists the financial services legislation under which an auditor has a duty to report to the bank in circumstances specified in the legislation. The Bill lists section 33 of the Investment Intermediaries Act 1995, which deals with auditors and their duties related to investment business firms which are not incorporated bodies, such as brokers. The Deputy wants to limit the application of this provision to subsection (3) only, which deals with the duty of an auditor to report to the regulator in certain circumstances. However, it is suggested that the duty to report should extend to the entire section, for example, subsection (7) which imposes a duty on the auditor to report to the supervisory authority, and not just to the subsection sought by the Deputy. Again, a wider obligation is imposed in the Government proposal.

On amendment No. 98, Deputy Richard Bruton wanted to include "and that is reasonably required by the Bank for a specific purpose". Again, section 27F implements a recommendation of the review group on auditing that audit paper should be available on request to the Central Bank and, under the provisions of section 27F, the bank may require an auditor or affiliate of the auditor to provide it with a copy of any record relating to work carried out for the service provider that is in the possession of the auditor or affiliate. The Minister is satisfied that the thrust of this part and the provisions of it make clear that the regulator will only use the powers being provided when there is an express need to do so. Adding the qualifier "and that is reasonably required by the Bank for a specific purpose" unnecessarily provides the potential for obstructive behaviour by auditors.

Amendment, by leave, withdrawn.
Amendments Nos. 94 and 95 not moved.

I move amendment No. 96:

In page 81, lines 33 and 34, to delete "carrying out work for the service provider" and substitute the following:

"auditing the accounts of the financial service provider or carrying out any other work for the financial service provider of a kind specified by the Bank".

Amendment agreed to.

I move amendment No. 97:

In page 83, lines 13 and 14, to delete "relating to work carried out by the auditor or affiliate for the service provider" and substitute the following:

"or information provided or obtained by the auditor or affiliate in connection with an audit of the financial service provider's accounts".

Amendment agreed to.
Amendment No. 98 not moved.

I move amendment No. 98a:

In page 85, between lines 34 and 35, to insert the following:

Notwithstanding any other penalty provisions in the foregoing, if the financial service provider is a body corporate or an unincorporated body, the maximum penalty shall be either——

(a) €5,000,000, or

(b) a sum equal to the amount involved in the financial impropriety,

whichever is the greater.".

We were dealing with penalties and whether they are commensurate with the size of the financial institution's operation. I suggested that we consider having not only a maximum penalty of €5 million but a penalty which would equal the amount involved in the financial impropriety. Very substantial sums were involved in the recent case of overcharging and in that case there are no penalties. Penalties should be commensurate with the size of the organisation involved and with the scale of the impropriety. For some very large institutions penalties of this nature might not be particularly relevant, but for other small institutions a maximum penalty of €5 million would be a major penalty. In competition law the maximum penalty is related to the turnover of the company and the penalty can be up to 10% of the company's turnover. I seek a reconsideration of the issue of maximum penalties and of the possibility of introducing a structure of penalties that is more proportionate to the offence or to the size of the organisation. It would be a more effective deterrent if the penalty were more directly related to the offence committed.

I welcome Deputy Bruton raising this matter again. I await the Minister's reply with interest. However, I take a slightly different view to Deputy Bruton on the amendment. I wonder whether we should prescribe the maximum penalty when our recent experience indicates that a minimum penalty might be more applicable. As for a sum equal to the amount involved in the impropriety, that is hardly a disincentive when the institution has had the use of moneys from which it has benefited over a period of time. Is there any allowance, for example, regarding AIB's overcharging from 1994 for the interest that accrued to the bank from the use of money belonging to its customers?

I saw it as a 100% penalty.

That is a penalty of 100% on top of the reimbursement. I accept Deputy Bruton's point on that.

While it will not be accommodated in this exchange, I want to highlight again, as I did yesterday, that I strongly believe that if penalties are applied only to the institution the culture that is more and more being exposed will be perpetuated — and I speak as somebody who worked in a financial institution for many years — not at the counter in terms of provincial banking, which was the extent of my experience, but at the level of those who devise and order and oversee the implementation of policy. We saw in today's national newspapers the exposure by a former member of the bank who retained the missive that had been sent to staff in which additional decimal points were added to the publicised rate that was to apply. That would have led to a significantly greater charge, particularly in regard to major transactions. Over a period of time significant additional profit would have accrued to the bank over and above what should have accrued on the basis of the publicised rate.

That example underlines where we need to focus penalties. The financial institutions will ultimately pass penalties on to the customer base by one means or another. The only people who will bear the brunt of penalising the institutions will be ordinary members of society who constitute the customer base of the financial institutions. The only way we can stamp out such practice is to make it absolutely unattractive and unacceptable within the institutions. That means ultimately that the penalties must apply to those who are at the helm at the different levels of administration and management and it must include prosecutions. Otherwise the abuse will be perpetuated. I add those comments at this stage because that is the only fail-safe way of putting an end to the series of abuses that are being exposed on a daily basis whereby we see the full extent of the way the banking institutions, and particularly AIB which is the financial institution most in the public spotlight at this time, have been operating. I do not doubt for one moment that many of these abuses will yet be shown to have been replicated in the practice of other financial institutions.

I take a different view of what penalties should be about. Their purpose should be two-fold, to punish the person or the institution for having done wrong, and to act as a mechanism for ensuring that that wrong does not recur. I am not certain that a financial penalty can ever penalise a financial institution because its stock-in-trade is to do more business, earn more money, and to replace the money lost in penalties. I do not believe they can be penalised financially.

I agree with the last speaker that this is probably only one of many cases that have yet to come to light. We have seen it in different institutions of the State and we are only starting to see the banking institutions begin to tumble, I hope not to the detriment of the country or the individual. In terms of penalties, the Regulator should have the power to put someone into an institution as soon as something like this is unearthed to report back over six to 12 months, and it should be done at the expense of the institution. Simply imposing a financial penalty might suit the financial institutions. It is a blinkered way of thinking and it is probably how the financial institutions want us to think. This is not just about penalising someone but about restoring confidence in the institutions and for people to see that there is someone in the institutions who is on their side and keeping a very close eye on matters over a period of time. Although I am not certain it will ever be possible, perhaps that person might be able to instil ethics into the financial world. This should be about accountability as well as restoring confidence. I ask the Minister to take that on board.

The amendment overlooks the fact that the regulator has power, under section 33AQ, not only to impose a fine of up to €5 million but to issue a direction to the institution to refund an amount of money charged to a customer. The fine of €5 million is punitive in scope and there is always the power to direct a refund of money charged to a customer.

I take that for granted.

Yes, but it is a valuable power. It means the customer does not have to institute civil proceedings, be faced with the Statute of Limitations or go through the obstacle race of court proceedings. Let us suppose that a financial institution overcharges its customers. The first priority of the regulator will be to ensure that these customers are fully recompensed. As recent events have shown, the cost to the institution of such recompense could far exceed the maximum financial penalty of €5 million, and rightly so. These events show that the regulator, even without the new powers in this Bill, has been able to use moral suasion to achieve this outcome.

In addition, the Minister has power by regulation to increase the maximum financial penalty should that appear desirable in the future. That flexibility is provided for in the legislation and, to that extent, the substance of the amendment is covered by the Bill. The Minister can increase the figure.

I accept the Minister's comments, by and large. My amendment is not robust and I really put it down to facilitate a debate on this. The Minister should look at the power he has reserved to himself to see what are the appropriate penalties in this instance. The objective of my proposal was that, in the case of impropriety, the institution would not only pay back X million euro but a further penalty of Y million euro would be exacted by the regulator. In the tax system, for example, 100% penalties are quite common in respect of certain types of non-compliance with tax law.

A different view is taken in the Competition Act. In that Act, penalties can be related to turnover, so there is a high threat involved to the institution if it is in breach of the Act. Perhaps the Minister feels we are not yet in a position to provide for penalties of that scale in the system. If that is the case, the Minister should indicate that he will institute a review of what would constitute appropriate penalties, particularly in light of current ongoing experiences, and decide whether there is cause to reconsider the maximum penalty provided for in this Bill.

The figure of €5 million is the limit for the direct punishment. It is a punitive figure and is very high. However, there are many different types of financial institution. It would be difficult to envisage circumstances where a fine of this level would be reasonably imposed on a small financial institution, such as an intermediary or a credit union. A balance must be struck. That we have provided for a maximum fine and for an element of ministerial discretion in the future meets the need at this stage.

How stands the amendment?

My amendment is not sufficiently robust. If it were, I would press it. I accept that this might be an appropriate penalty structure for the financial impropriety we have seen but there are many other types of impropriety for which it would not be appropriate. However, the Minister should assure the House now that he will review the penalties in light of recent experience and if it is appropriate to have penalties related to turnover, he will take that option. That would demonstrate that we are serious about these issues. Does the Minister not feel able to make such a commitment?

We will have to rely on IFSRA to suggest it to the Minister. He might do it then.

I cannot make a commitment as to how the Minister will exercise statutory powers conferred under this Bill, such as the discretion to increase the amount.

I am simply asking him to put in place the review that will be necessary for him to exercise those statutory powers. I am not asking him to exercise them now.

If it is necessary, the Minister will do that. However, he does not consider it necessary at present.

Amendment, by leave, withdrawn.

I move amendment No. 99:

In page 92, lines 44 and 45, to delete "Unless the Appeals Tribunal otherwise orders, revocation" and substitute "Revocation".

Amendment agreed to.

I move amendment No. 100:

In page 93, lines 18 and 19, to delete "Unless the Appeals Tribunal otherwise orders, a" and substitute "A".

Amendment agreed to.

Amendment No. 102 is consequential on amendment No. 101 and amendments Nos. 103 and 104 are related. Is it agreed that amendments Nos. 101 to 104, inclusive, be discussed together? Agreed.

I move amendment No. 101:

In page 121, in the third column, lines 20 and 21, to delete "(3) and (4)" and substitute "(4) and (5)".

Amendments Nos. 101 and 102 are technical amendments to correct a subsection reference.

What is the Minister's response to amendments Nos. 103 and 104 which arose from technical concerns within the profession?

These amendments might be based on a misunderstanding. They would substitute the new procedure for appeals, to go in the first instance to the appeals tribunal, with the old system involving direct applications to the court. The amendments might have been put forward in view of an omission in the Bill as published which meant that the right of appeal with regard to the revocation of an intermediary's authorisation was inadvertently eliminated. That omission has been corrected through amendment No. 105.

Amendment agreed to.

I move amendment No. 102:

In page 121, in the third column, line 22, to delete "(3)" and substitute "(4)".

Amendment agreed to.
Amendments Nos. 103 and 104 not moved.

I move amendment No. 105:

In page 126, in the third column, between lines 38 and 39, to insert the following:

"(12A) A decision of the supervisory authority to revoke an authorisation under this section is an appealable decision for the purposes of Part VIIA of the Central Bank Act 1942.".

Amendment agreed to.

I move amendment No. 106:

In page 135, in the third column, line 31, to delete "a licence" and substitute "an authorisation".

This is a technical amendment. The term used in section 116 of the Act is "authorisation" not licence, hence the substitution in the amendment.

Amendment agreed to.
Amendment No. 107 not moved.

Amendments Nos. 108, 109 and 110 are cognate, amendments Nos. 111, 113 and 118 to 124, inclusive, are related and amendments Nos. 112 and 114 to 117, inclusive, are a related cognate group. Is it agreed that amendments Nos. 108 to 124, inclusive, be discussed together? Agreed.

I move amendment No. 108:

In page 177, in the third column, line 35, to delete "(2)" and substitute "(1)".

These amendments, which relate to the Investment Intermediaries Act, arise mainly from concerns expressed by Deputy Richard Bruton on Committee Stage. They are mainly technical in nature. The only substantive amendment relates to section 28 of the Act. Amendment No. 120 narrows the obligation on a product producer, such as a bank or an insurance company, to monitor the activities of an intermediary appointed by it. The obligation will now only apply if the regulatory authority issues a specific direction to the product producer to monitor the activities of specific intermediary.

Amendment No. 123 would remove the requirement for an annual audit from certain categories of intermediaries. Such an audit is an important independent assurance of an intermediary's financial soundness and compliance with regulatory requirements. Amendment No. 124 would weaken the current requirement that where an insurance agency held by a broker is discontinued for any reason, such a fact should be publicised. This amendment seeks to create a potential exclusion from this provision. This would be undesirable from a consumer protection perspective. I hope, in the circumstances, the Deputy will not press the amendments.

Amendment agreed to.

I move amendment No. 109:

In page 178, in the third column, line 13, to delete "(2)" and substitute "(1)".

Amendment agreed to.

I move amendment No. 110:

In page 178, in the third column, line 18, to delete "(2)" and substitute "(1)".

Amendment agreed to.

I move amendment No. 111:

In page 178, in the third column, between lines 35 and 36, to insert the following:

"(d) In subsection (1), substitute the following definition for the definition of ’product producer’:

‘"Product producer" means a firm, institution, collective undertaking, investment company or insurance undertaking of a kind referred to in section 26(1A);'.".

Amendment agreed to.

I move amendment No. 112:

In page 179, in the third column, line 8, to delete "A person" and substitute "An investment product intermediary".

Amendment agreed to.

I move amendment No. 113:

In page 179, in the third column, to delete lines 10 to 12 and substitute the following:

"(a) the only investment business service that the intermediary provides, or in relation to which the intermediary provides investment advice, is one or more of -”.

Amendment agreed to.

I move amendment No. 114:

In page 179, in the third column, line 26, to delete "person" and substitute "intermediary".

Amendment agreed to.

I move amendment No. 115:

In page 179, in the third column, line 31, to delete "person" and substitute "intermediary".

Amendment agreed to.

I move amendment No. 116:

In page 179, in the third column, line 43, after "intermediaries" to insert "or certified persons".

Amendment agreed to.

I move amendment No. 117:

In page 180, in the third column, line 12, to delete "A person" and substitute "An intermediary".

Amendment agreed to.

I move amendment No. 118:

In page 180, in the third column, line 14, to delete "person" and substitute "intermediary".

Amendment agreed to.

I move amendment No. 119:

In page 180, in the third column, between lines 30 and 31, to insert the following:

"(1C) Nothing in this section affects the obligation of a restricted activity investment product intermediary to comply with regulations in force under section 43D of the Insurance Act 1989 in so far as they relate to the matters referred to in section 43E(1)(a)(iii) and (iv) of that Act.”.

Amendment agreed to.

I move amendment No. 120:

In page 181, in the third column, to delete lines 41 to 57 and substitute the following:

"(4) Subsection (5) applies to and in respect of—

(a) product producers who appoint investment product intermediaries to act on their behalf for any purpose specified in subsection (1), and

(b) investment product intermediaries who are so appointed.

(5) On being requested to do so by notice in writing given by the supervisory authority, a product producer who has appointed an investment product intermediary shall, for so long as is specified in the notice, monitor the activities of the intermediary in order to be satisfied that the intermediary complies with the requirements imposed by or under this Act on investment product intermediaries. If requested to do so by that notice or by a further notice in writing given by the supervisory authority, the product producer shall also provide that authority with evidence in writing that that producer has not contravened subsection (7). The supervisory authority may provide a product producer with such information as appears to the supervisory authority necessary to enable the producer to comply with this subsection.".

Amendment agreed to.

I move amendment No. 121:

In page 182, in the third column, line 34, to delete "reward" and substitute "any other form of remuneration".

Amendment agreed to.

I move amendment No. 122:

In page 182, in the third column, line 36, after "investment" to insert "product".

Amendment agreed to.
Amendments Nos. 123 and 124 not moved.

Amendments Nos. 125 to 128, inclusive, are related. Amendment No. 134 is consequential on amendment No. 128. Amendments No. 125 to 128, inclusive, will be discussed together by agreement.

Bill recommitted in respect of amendments Nos. 125 to 128 inclusive.

I move amendment No. 125:

In page 185, in the third column, to delete lines 19 to 45 and substitute the following:

""‘housing loan' means—

(a) an agreement for the provision of credit to a person on the security of a

mortgage of a freehold or leasehold estate or interest in land—

(i) for the purpose of enabling the person to have a house constructed on the land as the principal residence of that person or that person's dependants, or

(ii) for the purpose of enabling the person to improve a house that is already used as the principal residence of that person or that person's dependants, or

(iii) for the purpose of enabling the person to buy a house that is already constructed on the land for use as the principal residence of that person or that person's dependants,

or

(b) an agreement for refinancing credit provided to a person for a purpose specified in paragraph (a)(i), (ii) or (iii), or

(c) an agreement for the provision of credit to a person on the security of a mortgage of a freehold or leasehold estate or interest in land on which a house is constructed where the house is to be used, or to continue to be used, as the principal residence of the person or the person’s dependants, or

(d) an agreement for the provision of credit to a person on the security of a mortgage of a freehold or leasehold estate or interest in land on which a house is, or is to be, constructed where the person to whom the credit is provided is a consumer;“;”.

This is a technical amendment. It inserts a paragraph which was omitted in error when the new definition of housing loan was inserted on Committee Stage.

The policy objective in inserting the new definition was to provide that all loans secured on the family home, including those made for commercial purposes, should come within the scope of Part 9 of the Consumer Credit Act. Without this amendment loans for commercial purposes secured on the family home would not be covered.

Amendment No. 128 amends sections 12, 149 and 149A in order to bring contraventions of the Consumer Credit Act provisions relating to the notification and approval of bank charges within the scope of the offence provisions of that Act. This would remedy a deficiency in the Act which has existed since it came into force in 1996. The deficiency has been highlighted by recent events in the banking sector of which Deputies are fully aware.

Following the amendment, a financial institution that charges its customers in excess of the rates notified to the financial regulator will be subject to the penalties provided for in the Consumer Credit Act. In addition, with this amendment, it will be easier for the regulator to use its new powers under section 10 to impose significant penalties directly on such an institution and to order a refund of fees incorrectly charged to customers.

Section 120 also amends section 116 of the Act. This amendment responds to a concern raised by Deputy Bruton on Committee Stage relating to the requirement that mortgage intermediaries secure a new authorisation each year. Intermediaries authorised under the Investment Intermediaries Act, including insurance intermediaries, do not require annual authorisation. The amendment gives the regulatory authorities the discretion to issue authorisations to mortgage intermediaries for longer than a year, subject to compliance with additional conditions laid down by the authority. The amendment addresses the point raised by Deputy Bruton in amendment No. 127. Amendment No. 134 is a saving provision.

The effect of Deputy Bruton's amendment No. 126 would be to exclude a major category of mortgage introducers from the new definition of mortgage intermediary in page 185 of the Bill. If the regulation of mortgage introducers is being introduced in the Bill on the recommendation of the Director of Consumer Affairs, the Minister is not disposed to creating such an exclusion.

I welcome amendment No. 128, which introduces a penalty for overcharging in excess of the provisions laid down. This power was inherited from the Central Bank Acts. It is extraordinary that over all these twists and turns, and in the course of a four-year review of best practice in regard to regulation and dozens of years of practice in applying these powers, no one twigged the fact that they had no power to enforce all the requirements they were making on the financial institutions. If indicates that the complexity of the legislation appears to have caught out those who drafted it in that they created an obligation but created no sanction for failing to honour the obligation. However, it is better late than never.

On amendment No. 125 and the definition of ‘housing loan' paragraphs (i), (ii) and (iii) specify to have a house constructed on the land, to improve a house that is already used as, and for the purpose of enabling a person to buy a house that is already constructed. What about someone buying a house that has yet to be constructed, which is not catered to in paragraph (i)? The pattern today invariably is that properties are sold prior to construction and from the plans as presented. The phraseology in paragraph (iii) which states "is already constructed" suggests exclusion of the definition of housing loan as that applying to a mortgage secured to purchase a house that has yet to be constructed or is under construction, which is the case in the majority of mortgage applicants' proposals where they are buying off the plans. This is very much the pattern today. Will the Minister of State clarify if there is a deficiency in the wording and an area that applies to many proposees for mortgages?

I clarify that we have recommitted these amendments but we have not come out of committee proceedings.

As I understand it, the key point is that the family home falls within the definition of the Act, not just to a person who has bought property. If it is a family home, the type of transaction referred to by the Deputy is captured in the legislation.

Legislation is language in precision and there is no precision in this respect. The amendment seeks to define "housing loan" and it is quite specific. It refers to having a house constructed on the land, either improving a house that is already used or buying a house that is already constructed. Paragraph (i) does not cover the area I am addressing. Is there a deficiency in the wording? Does it require revisitation? I am not seeking to trip up the Minister or those who drafted the legislation, but I am trying to point out that if there is a deficiency in terms of the construction of the language, it would need to be addressed in the Seanad. A great number of people buying a house today buy from the plans while the house is not constructed. The language in the amendment appears to exclude a number of people, therefore I believe it merits revisitation.

I am advised it does not require revisitation because the wording is broad enough. "Housing loan" means an agreement for the provision of credit to a person on the securing of a mortage of a freehold or leasehold estate or interest in land, including for the purpose of enabling the person to have a house constructed on the land as the principal resident or that person's dependants.

If the Minister of State and his officials are happy the wording is broad enough I sincerely hope it is. The reason I raised the matter is that if it is not sufficiently broad, it will cause a problem for people seeking a mortgage in the situation I have described. However, if the Minister and his officials believe there is no concern, I will accept that. I hope I am not proved correct.

Amendment agreed to.
Amendments Nos. 126 and 127 not moved.

I move amendment No. 128:

In page 186, to delete lines 15 to 35 and substitute the following:

Section 12 Substitute the following subsections for subsections (1) and (2):

‘(1) A person commits a summary offence under this Act if the person—

(a) in Part IA, contravenes section 7(2) or (3), 8(2), 8D or 8F, or

(b) in Part IB, contravenes section 8K(2) or (3), 8L(2) or 8P, or

(c) in Part II, contravenes section 26 or 27, or regulations under section 28, or

(d) in Part III, contravenes section 39, or

(e) in Part IV, contravenes section 43(2), or

(f) in Part VI, contravenes section 61, 64 (1) or 69, or

(g) in Part VII, contravenes section 87 or 91, or

(h) in Part VIII, contravenes section 93(6) or (9), 94, 95, 98(4) or (5), 99, 105(3) or (4), 106(2) or (3), or (i) in Part IX, contravenes section 116(1) or (2), 117, 122(3), 123, 124, 128, 129(2), 130, 131(4) or (5), 132, 133(1) or (2), 134 or 135(3), or

(j) in Part X, contravenes section 138, 139, 142 or 143(2), or regulations made under section 137, or

(k) in Part XI, contravenes section 144(1) or (3), 145 or 148.

(2) A person commits an offence under this Act (other than a summary offence) if the person—

(a) in Part IV, contravenes section 45, 46 or 49, or

(b) in Part V, contravenes section 54, or

(c) in Part VIII, contravenes section 96, 97, 98(1) or (2), 100, 101, 102, 103 (2), 107, 110 or 111, or

(d) in Part IX, contravenes section 118 or 127, or

(e) in Part X, contravenes section 140, or

(f) in Part XI, contravenes section 146, or

(g) in Part XII, contravenes section 149(1), (12A) or 12(C), section 149A(2), (14) or (16) or a direction given under section 149(5) or (6) or section 149A(6) or (7).’.

3. Section 116(a) Substitute the following subsection for subsection (7):

‘(7) Except as provided by subsection (7A), an authorisation remains in force for 12 months from the date specified in the authorisation.

(7A) In the case of a particular applicant, or an applicant of a particular class designated by the Bank for the purposes of this subsection, the Bank may, if it so chooses, grant an authorisation for a period longer than 12 months, subject to such conditions or requirements as the Bank specifies. If the Bank grants an authorisation for a period longer than 12 months, the authorisation remains in force for that period from the date specified in the authorisation.'.

(b) Substitute the following subsection for subsection (9):

‘(9) The Bank may refuse to grant an authorisation on any of the following grounds:

(a) the applicant does not satisfy the condition specified in subsection (1)(b);

(b) the applicant or any business with which the applicant is or has been associated has, during the previous 5 years, been convicted of an offence that, if committed by a natural person, would be punishable by imprisonment;

(c) the applicant is the holder of—

(i) a bookmaker's licence issued under the Betting Act 1931, or

(ii) a licence for the sale of intoxicating liquor granted under the Licensing Acts 1833 to 1994, or

(iii) a gaming licence issued under the Gaming and Lotteries Act 1956, or

(iv) a pawnbroker's licence granted under the Pawnbroker's Act 1964, or

(v) a moneylender's licence;

(d) the applicant has failed to provide a current Revenue tax clearance certificate in respect of himself or his business;

(e) the applicant is not, in the opinion of the Bank a fit and proper person to carry on business as a mortgage intermediary.’;

(c) Substitute the following subsection for subsection (11):

‘(11) The Bank may suspend or revoke an authorisation on any of the following grounds:

(a) the holder no longer satisfies the condition specified in subsection (1)(b);

(b) the holder, or any business entity with which the holder is associated, is convicted of an offence that, if committed by a natural person would be punishable by imprisonment;

(c) the holder has become the holder of——

(i) a bookmaker's licence issued under the Betting Act 1931, or

(ii) a licence for the sale of intoxicating liquor granted under the Licensing Acts 1833 to 1994, or

(iii) a gaming licence issued under the Gaming and Lotteries Act 1956, or

(iv) a pawnbroker's licence granted under the Pawnbroker's Act 1964, or

(v) a moneylender's licence;

(d) the holder is failing, or has failed, to provide a current Revenue tax clearance certificate in respect of the holder or the holder’s business;

(e) the holder is failing, or has failed to comply, with a condition or requirement imposed on the holder under subsection (7);

(f) the applicant is contravening or has contravened a regulation in force under subsection (10);

(g) the holder is no longer, in the opinion of the Bank a fit and proper person to carry on the business of a mortgage intermediary;

(h) the Bank would, if the holder were an applicant for an authorisation be entitled to refuse to grant an authorisation to the applicant on a ground specified in subsection (9).’.

Section 149 (as substituted by item 42 of Part 21 of Schedule 1 of the Central Bank and Financial Services Authority of Ireland Act 2003.

Insert the following subsection after subsection (12);

‘(12A) A credit institution shall not impose a charge for providing a service to a customer or group of customers if—

(a) the charge has not been previously notified to the Bank or to the Director, or

(b) the charge exceeds the charge notified for the service in accordance with subsection (1), or

(c) the charge does not comply with a direction issued by the Bank under this section.

(12B) The Bank may, by notice given in writing, require a specified credit institution, or credit institutions of a specified class, to publish in such publications and within such time frames as are specified in the notice details of the amounts of charges notified to the Bank under this section.

(12C) A credit institution to which a notice has been given under subsection (12B) shall comply with the notice within the time frame specified in the notice.'.

Section 149A (as substituted by item 43 of part 21 of Schedule 1 of the Central Bank and Financial Services Authority of Ireland Act 2003)

(a) Substitute ‘regulated business’ for ‘bureau de change business’, wherever occurring;

(b) Substitute the following subsections for subsection (14):

‘(14) A holder of an authorisation shall not impose a charge for providing a service to a customer

or group of customers if—

(a) the charge has not been previously notified to the Bank or to the Director, or

(b) the charge exceeds the charge notified for the service in accordance with subsection (2), or

(c) the charge does not comply with a direction issued by the Bank under this section.

(15) The Bank may, by notice given in writing, require a specified holder of an authorisation, or holders of a specified class of authorisation, to publish in such publications, and within such time frames as are specified in the notice details of the amounts of charges notified to the Bank under this section.

(16) A holder of an authorisation to whom a notice has been given under subsection (15) shall comply with the notice within the time frame specified in the notice.

(17) In this section—

"bureau de change business" has the same meaning as in section 28 of the Central Bank Act 1997 (as substituted by section 24 of the Central Bank and Financial Services Authority of Ireland Act 2004);

"service" means any service provided by the holder of an authorisation to a customer in relation to a bureau de change business or money transmission business carried on by that holder;

"money transmission business" has the same meaning as in section 28 of the Central Bank Act 1997 (as substituted by section 24 of the Central Bank and Financial Services Authority of Ireland Act 2004).’.

Amendment agreed to.
Bill reported with amendments.

I move amendment No. 129:

In page 191, in the third column, line 7, after "complaint" to insert the following:

"(being a complaint which has been first submitted to the credit union's internal complaints procedures)".

Amendment put and declared lost.

I move amendment No. 130:

In page 191, in the third column, between lines 14 and 15, to insert the following:

"(c) provided that the complainant has exhausted all dispute resolution options available to the complainant under a credit union’s rules save the referral of the matter to arbitration or to the District Court for resolution.”.

Amendment put and declared lost.

I move amendment No. 131:

In page 191, in the third column, line 21, after "1942." to insert the following:

"This is provided that no such dispute shall be dealt with by the Ombudsman unless all dispute resolution options available to the complainant, save referral of the matter to arbitration or to the District Court for resolution, under a credit union's rules have been exhausted.".

Amendment put and declared lost.

As it is now 7.00 p.m. I have to adjourn the debate.

There is only one technical amendment left.

With the agreement of the House we might finish this.

Could the Chair accommodate the Private Members' business which follows with an additional equal number of minutes?

I agree to that. I move amendment No. 132:

In page 191, in the third column, to delete lines 33 to 40 and substitute the following:

""‘administration', in relation to a collective investment scheme, includes (but is not limited to)—

(a) performing a valuation service, and

(b) performing a fund accounting service, and

(c) acting as a transfer agent, and

(d) acting as a registration agent;”;”.

Amendment agreed to.

I move amendment No. 133:

In page 192, in the third column, to delete lines 18 to 30 and substitute the following:

"‘(5) Despite subsection (1), a firm is not an authorised investment business firm, or authorised as such, for the purposes of this Act if—

(a) the firm is not an investment firm within the meaning of the Investor Compensation Directive, and (b) the only activity that the firm is authorised to carry on under the Investment Intermediaries Act 1995 is either administering collective investment schemes or undertaking custodial responsibilities involving the safekeeping and administration of investment instruments of or relating to such schemes.’.”.

Amendment agreed to.
Bill recommitted in respect of amendment No. 134.

I move amendment No. 134:

In page 202, between lines 17 and 18, to insert the following:

"Saving for certain offences against the Consumer Credit Act 1995

12A. An offence alleged to have been committed under section 12 of the Consumer Credit Act 1995 before the commencement of item 2 of Part 12 of Schedule 3 is to be prosecuted, tried and determined under that section as in force before that commencement.”

Amendment agreed to.
Bill reported with amendment.
Bill, as amended, received for final consideration.
Question proposed: "That the Bill do now pass."

I thank the Deputies from the other parties for their co-operation in the consideration of this matter.

Question put and agreed to.