The international investment funds industry, which employs approximately 6,500 people, is quite valuable to this country. A further 1,750 people are directly employed in professional advisory firms and many more indirect jobs have been created in information technology firms and other service providers. I acknowledge that the financial services sector as a whole is making an enormous contribution to employment in this country. Some 50,000 people are involved in the financial services sector in some way, for example by providing services to customers or managing funds. An important company, State Street International, employs 210 people in managing funds and administering hedge funds in County Kilkenny. It is obvious that this Bill will have a significant impact on the expansion and development of the firm, which also has a strong administration and funds management facility in the Irish Financial Services Centre.
It is forecast that employment levels in the financial services industry will grow significantly in the coming years. Ireland has developed a strong reputation as a niche market in the management and administration of specialised funds. Not only will many jobs will be created in the financial services area in 2005, but there will also be a substantial increase in the level of employment in professional advisory firms. I refer to legal and accountancy companies which are involved in the financial services sector.
Over 1,000 people are employed in financial services in places outside Dublin, including my constituency. I recently visited the operation I mentioned in County Kilkenny, which provides valuable high-skilled employment for over 200 people in this complicated sector. I hope the proportion of financial services employment located outside Dublin will increase as the industry develops. There is no need for all of the companies involved in this sector to be based in the IFSC. I hope to see regional variation in investment in this type of specialised business, which relies on technology rather than location for its success.
As the single largest creator of employment in this country's international financial services industry, the investment funds sector contributes significantly to our economy. All investment funds established in Ireland must be authorised by the Irish Financial Services Regulatory Authority. The investment managers of funds must be approved by the authority. The other people who service funds, such as the fund administrator and the custodian or trustee, must be based in Ireland and must be approved by IFSRA to act in that manner. They are subject to ongoing supervision by IFSRA. Fund regulation in Ireland is of a much higher standard than in other fund jurisdictions. We need to protect our reputation in this regard. While it is important to maintain the high standards which exist in our regulatory regime, we also need to develop the flexibility that is needed to allow the growth in this sector to continue.
This country's funds industry was developed on foot of the establishment of a legal and regulatory framework that facilitates the international investment funds industry. The innovation and responsiveness that served the funds industry well is still very much required. In an increasingly competitive marketplace, product development is more important than ever. Our reputation is a critical part of ensuring that we continue to expand in this important area of international financial services employment activity.
It is essential that we process this legislation as quickly as possible. We must deliver on our obligations to ensure that the regulatory regime has the flexibility to allow companies to deal with new fund opportunities. This is a new and complex area of business. We want companies that wish to invest here and to allow Irish people to work in a high-skill business with a good reputation to know that they will get the opportunity to do so in this jurisdiction. It is global business based in Ireland, a fact of which we should be proud.
While it is disappointing that it has taken longer than is usual for the Bill to come to the House, now that it is before the House it must be processed as quickly as possible. The industry told us some years ago that the Bill was necessary.
Part 2 will provide the legislative framework for an Irish authorised and regulated investment funds structure which will allow for the pooling of assets by institutional investors. Similar pooling structures are available in other jurisdictions and, as such, it is imperative that we continue to update our legislation so we can compete in this very competitive marketplace. Approximately two thirds of Irish funds are established as investment companies.
Investment funds constituted as companies have very distinct forms of company organisation and objectives as compared with those of ordinary companies. The company law review group report noted that owing to the unique nature of investment companies it is often inappropriate to treat them in the same way as the generality of companies. Recognising the unique nature of investment companies, Part 3 of the Bill includes two welcome and necessary provisions for the introduction of segregated liability and the facilitation of cross-investment. The introduction of Part 3 will allow the Irish fund product to be structured to include all the necessary investor protections and efficiencies to allow the industry to continue to compete in the international marketplace.
In the case of segregated liability, an investor who invests in a particular sub-fund should ideally be in the same position as if that sub-fund was itself a limited liability company. However, the investor should be subject only to investment risks and liabilities incurred in the pursuance of the investment strategy attributable to that sub-fund in which it has chosen to invest and should not be exposed to potential liability as a result of activities in other sub-funds. Failure to implement segregated liability sub-funds would severely impact on our nation's competitive position in the financial services sector. France and Luxembourg have two of the largest fund markets in the EU. They have already introduced amendments to their legislation to provide for segregated liability for sub-funds. The changes made there will be achieved in Ireland through the amendment of Part XIII of the Companies Act 1990, as the Minister of State has outlined.
With regard to cross-investment, the 1990 Act will also be amended to provide for cross-investment by investment companies, and the UCITS regulations will be amended to provide for cross-investment by investment companies established as UCITS. These amendments would facilitate investment by one sub-fund of an umbrella fund into another sub-fund of the same umbrella fund. This is currently permitted in investment funds which are structured as unit trusts but is not possible in investment companies because the legislation provides that shares which are purchased by an investment company must be cancelled. This means that an investment company cannot purchase shares in itself and hold these for the benefit of the investors in a particular sub-fund. The proposed amendments as set out by the Minister of State are aimed at removing this prohibition.
The foundation on which the funds industry was built was the establishment of a legal and regulatory framework to facilitate the international investment funds industry. That innovation and responsiveness has served the industry well. We must continue to monitor legislative change and fund management change in other jurisdictions so Ireland is able to keep up to date with the competition elsewhere in Europe and throughout the world.
The Bill will provide the legislative framework for an Irish authorised and regulated investment funds structure which will allow the pooling of assets by institutional investors. Similar pooling structures are available in other jurisdictions and we must be up there with the best of them to ensure that we continue to have a high reputation but also a high level of engagement in investment in this important industry.
With regard to the miscellaneous provisions, the Minister of State has made a number of changes to consumer policy. I welcome the belated acceptance by the Government that we have encountered many difficulties in regard to the cost of living in recent years, during which many indirect taxes and charges were imposed. These taxes and charges are catching up with us as a country, making us less competitive in the small business sector, costing more of consumers' disposable income and feeding into job losses in the manufacturing sector. Unfortunately, companies are voting with their feet by relocating to other jurisdictions, particularly in eastern Europe and the far east.
We must be continually mindful of the cost base of the industrial sector. All Members acknowledge that if there is not a strong manufacturing base, there will not be the necessary spin-off employment in the services sector to sustain many communities. Ireland can only have so many manufacturing bases. If any major manufacturing base were to close, it would have major ramifications not just for that business but in indirect knock-on effects for the services sector.
Consumers have sought an opportunity to put in place an independent system through which they can seek the right of redress and make complaints about excessive overcharging in the economy. I was admonished in recent years for highlighting this matter by Ministers who seem out of touch, particularly the Ministers for Arts, Sport and Tourism and Enterprise, Trade and Employment. I am glad there has been a conversion on the part of the Government which recognises the necessity of an overhaul of the office of the Director of Consumer Affairs.
One agency, not two, is needed to overhaul the definition of responsibilities that have not been updated since the Sale of Goods and Supply of Services Act 1980. Moreover, penalties must be increased in line with what we would expect to be an appropriate sanction almost 30 years after that Act was passed. This would mean that retailers or any stakeholders in the economy which excessively charge consumers are brought to book and that appropriate penalties exist. In this day and age, a fine of €127 for non-display of prices is out of line with what would frighten any retailer who is of a disposition to rip off consumers.
I welcome the Minister of State's announcement today that he will implement many of the recommendations of the consumer strategy group. It has taken a long time for the Government to realise this point, but it is welcome nevertheless. The Minister of State's review of the groceries order is also important. However, I am sure he will be mindful of other opportunities that arose, particularly during the term of office of his predecessor, the Tánaiste, Deputy Harney, who reviewed this order and came to certain conclusions at the end of 2001, after a long consultation.
While some commentators believe that the litmus test of consumer policy is the ministerial attitude to the groceries order, I do not subscribe to that view. Many other facets of life which have a major impact on household budgets must also be considered, including the impact of the legal, pharmacy, banking and other professions. Such issues have as great an impact as the implementation of the groceries order on the grocery sector. It will be interesting to examine the submissions that will be made and the outcome of the deliberation.
The regulatory environment has been a subject of much recent discussion. I take the view that we are over-regulated; we are taking a sledgehammer to crack a nut. I welcome the Minister of State's decision to review some of the regulations and refer them to the company law review group. I hope there will be an early investigation of these matters and an early report from the review group to the Oireachtas on how the Minister of State is progressing in reviewing these matters.
There were many complaints from individuals, in particular those with small businesses, about the way many of the impositions affect people, whether unwittingly or otherwise. The Minister of State was well warned about the directors' compliance statement in the context of the implementation of the Companies (Auditing and Accounting) Act 2003. I am glad representations made to the Minister of State are being fed to the top man in Government who has a particular interest in the matter in recent times. Once the Taoiseach takes a view on the issue he will not ignore it. I am glad it is not being ignored with regard to the review being carried out.
Complaints received were referred to and the company law review group with regard to the insurance and banking sectors should perhaps take these into account. The manner of implementation of a proper regulatory environment by IFSRA does not come under the remit of this legislation. However, in the context of the review of our regulatory regime we must have proper regulatory systems in place. We have seen many examples around the world and do not want a similar situation in Ireland.