I am in difficulty in addressing myself to this Bill in that it shows signs of competent draftsmanship and careful consideration of the necessity to protect investors in unit trusts. It is, however, fatally flawed by the parallel between the position of insurance companies who are free to discharge the obligations involved in a gentleman's agreement with the Minister as to the proportion of their assets that they will invest or their premium income that they will invest in Ireland and the position of the manager of the unit trust. It is fatally flawed because an essential feature of the unit trust, which is recognised in other parts of this Bill— which is an enlightened Bill so far as enlightenment is possible while this flaw casts a shadow over their preparation of the document—a recognition of the best modern thought on the kind of protection that depositors require.
I would criticise it myself under one or two headings for the lack of that degree of specification which the Minister referred to when he spoke of the determination of the proportion of the funds which were to be invested in Irish securities. Perhaps it is worth while to point out to this House that while this Bill, if enacted, will protect investors in unit trusts, the implications of a blurb which appeared in some newspaper some months ago to the effect that we were to have legislation permitting unit trusts in Ireland, is already contradicted by what the Minister himself has said. As we know, we already have unit trusts in Ireland— well managed unit trusts. The managers and trustees are persons of probity who are the kind of persons from whom investors do not need protection. But the Government are right in thinking that there could come here people who would seek to take advantage of the absence of legislation. It should be noted that those people have not come here and perhaps I shall be pointing them out in the course of what I have to say.
In this Second Reading speech— perhaps it would be far more appropriate to say this at Committee Stage —there are certain inherent difficulties arising from our arrangements with the United Kingdom why unit trust schemes have not been established here.
At this point I should make it clear why there are these difficulties. The unit trust is essentially the same as any trust. However, it is a trust whereby the trustees are given powers of managing funds, shifting and transferring them, realising profits on them and distributing the resulting profits among the beneficiaries. For a long time it was considered that unit trusts were rendered illegal by what is described by lawyers as a strange decision in 1880. One unit trust survived—the Submarine Cable Trust— because a judge was upheld by the court of appeal to the effect that the persons in this unit trust were not in association with each other and that the matter of managing investments was not a business and therefore that they did not require registration under the Companies Act.
Let us suppose you have an ordinary trust, let us take a simple trust here where the funds are partially invested in Ireland, partially in the United Kingdom. To make it easy, say there are five beneficiaries under that trust. The trustee distributes the income he receives. If that income is income which has been received from an investment in Britain, it is received after deduction of UK tax. The trustee has no power to recover that tax. The beneficiary who receives his share of the income is the only person who will be recognised by the British Revenue as entitled to repayment. You have a unit trust of which the legal nature is essentially the same as a trust with five persons, but it may have 10,000 persons.
Now you have got the situation where unit trusts cannot be repaid without special arrangements being made by the British Revenue, which presents very real difficulties. One of them is that Revenue has got to be satisfied that the trustees will police the administration of the UK code here so as to ensure that a UK investor does not get his part of his income from a UK investment through an investment in an Irish trust because there is no machinery under the UK income tax code whereby if he does, he can be taxed on it. There are real difficulties here and these are the difficulties which have prevented the establishment of unit trusts in any extensive way. There are unit trusts in existence on a particular basis; there are special cases affecting these particular trusts. There may be investors therein so substantial that they can easily look after the matter of reclaiming their refunds, but where the small investors in such trusts may not be aware that in fact they are losing the UK tax, they are not claiming by way of refund.
These are the difficulties which I had hoped, although the administration of it is not a matter within the jurisdiction of the Minister, he might have referred to.
These are some of the difficulties which have prevented the establishment of the unit trusts here to date, even though there were no inhibitions, no requests to register, no obligations of the kind that are going to be imposed on them here, obligations which are proper to impose if the difficulties which are to be eradicated are to be overcome.
You have the situation, therefore, in which we have a primary difficulty to be overcome, and if it is not overcome the loser is the Irish investor to the extent that there is an investment in the United Kingdom.
We come now to the parallel between the insurance companies that have taken on an obligation to invest up to, I think, 80 per cent the Minister, said, by 1977 of UK investments. In regard to Irish investments, by the way, I ask the House to take note that the Minister a number of times in the course of his introduction of this Bill referred to "securities and other property". In fact "unit trusts scheme" is defined in the first section of this Bill as including profits or income arising from the acquisition, holding, management or disposal of securities or any other property whatsoever.
Here is a point at which the Minister and his advisers have departed from the best opinions, but it is true that there are some trusts with investment in property; it is true that there are some trusts with investments in real estate; but it is also true that the committees that have sat on this matter and considered the operation of unit trusts have recognised the manifest inconvenience to investors in unit trusts of having investments in property other than securities, and in fact in Britain— and no harm in that because much of the good features of this Bill come from the careful study of the experience of Britain which is manifestly very considerable—the recommmendation is that the definition should be changed so that the words "or any other property whatsoever" should be deleted for the obvious reason that the manager or trustee of the unit trust is obliged by the investor—he is to be obliged by statute now here—to buy back the unit if the investor in the unit trust wants his money back. He cannot go off and sell a corner of a room to get a proportion of the real estate in which the funds have been invested.
All that he can do, and all that under such trusts he does, in fact, is to distribute such proportion as he can realise, seeing that the securities that are under his control are quotable on the Stock Exchange. He cannot sell that other property, and the investor is in the position that he is being given a statutory right to sell back to the manager, a statutory right which in this Bill, if I read it correctly, does not recognise that he may be sitting there for five years before he gets the balance of his money.
The statutory right, the execution of which may give great trouble to the managers—a question, for example, that if they do not want to sell the property but to pay him off by a full realisation of his securities—a problem will arise with regard to the valuation of that property at the time of the request for repayment.
I am interested in the technical questions of the administration of unit trusts but I am much more interested in the question of the future of the economy and its safety and its improvement. I realise that anything which can be done to make available savings, to encourage savings first of all and make savings available for development of our own economy, ought to be done even if it means we have got to deny ourselves or deny certain members of the community certain other advantages that might be got.
It is clear in so far as this Bill would have the effect of preventing the outflow of funds into the UK or other based unit trusts and make these savings available to the public authorities here in relief of inflationary borrowing from foreign borrowing or inflationary borrowing from banks, that this would be a good thing, but I have the greatest doubt as to whether this effect will result. It is a debate we cannot here conduct with much sense. The Minister of Finance was reported, I think in yesterday's newspapers or the day before, as saying, very properly I thought, that there ought to be less secrecy about the administration of our affairs.
Bureaucracy ought to tell the public what it has in mind when it is proposing policy. The thinking behind legislation should be offered to the people. It should be offered particularly to the legislature so that we know what we are talking about. I have not been given, I do not know whether it is available to me, information on the outflow of funds to foreign-based unit trusts. I do not know how much money is being lost—let us use that word—to the economy in this way.
If we look at section 7, which prohibits the advertising in Ireland of foreign unit trusts, we find the provision for an exemption. I noticed the Minister saying that he will be slow to give that exemption. There will be considerable inconvenience in relation to the general administration of our affairs if, for example, the Financial Times refuses to produce special editions for Ireland, and if we cannot take them in and cannot formulate our own views about our own situation because we cannot read them because they happen to contain an advertisement for a save-and-prosper unit fund on page 11. It is all very well for the Minister to say that he will be very slow to grant that exemption. He will be in very great difficulties internationally if he does not, and the burden here, it seems to me, will be carried by the Irish newspapers who will be denied these advertisements which are to appear in UK publications that will circulate here.
Quite apart from that, I think the Minister has overlooked another matter, or his advisers have, which, indeed, if this is thought of as something that he wishes to remedy, I am not sure that I want to remedy, but I want to point out a loophole. I am sure the Minister has heard of tombstones. Well, there is a well-known financial tombstone. It is this: having had your block offer of the units in a unit scheme you are in a situation here where you cannot advertise that unit scheme in the country where you want to get investments for future offers. What you do is you report what has happened, you report that the investment has been made, the circumstances under which it was made, the prices which were given, the yields, you give all the information as a record, a historical record, of what has happened and the people in the country can take note that the next time they are around that will be an interesting one to invest in.
I see the greatest difficulty in designing legislation which will make that illegal and in fact these tombstones are now published in the UK by, for example, Channel Island-based unit trusts which are not registered or managed, whose managers and trustees are not registered or incorporated in or managed or have a place of business in the UK and therefore do not comply with the Prevention of Frauds and Investments Act, 1958, which is the current governing legislation. They make the British investor aware of the advantages of their particular unit trust schemes by telling them what they have done and reporting on their performance.
To come back to the important point, that is this matter of the trustee standing ready to give cash to the man who has made his investment and who may want cash. He is generally likely to want cash, He is generally likely to want cash, incidentally, when the stock market is low. In respect of 1969 I should like the Department to have a look at the experience of mutual funds in South Africa when the market leaders were standing up all right but there was a general tendency for the South African stock market to collapse. The confidence of the investors of the unit trusts went and they looked for their money because the stock market was dropping. They forced the managers of the mutual funds in fact to sell even good counters and depress further the markets in question.
The Johannesburg stock market is, of course, vastly rich. There is no comparison whatever with the size of the Dublin stock market and the stock market in Johannesburg. If the Johannesburg market can take a knock because of the lack of confidence in mutual funds such as developed there, imagine what the situation would be in the Dublin market. A primary consideration is to try hard at saving for the benefit of the economy. At certain times in my life I thought anything that would encourage Irish companies to go to the stock market and expand the number of marketable securities available was a good thing. I have some regrets when I see companies disappearing from the stock market, even though there may be improvements in the management of the particular unit resulting from that.
Let us look at the position of the stock market. Take a not particularly conservative approach to what might be regarded as a security fit for what the British would call a wider range investment for the trustee to make. Take a company with an issued and paid up capital of £1 million, covered by net assets of at least the same amount, with a cover for the dividend of, before tax, 1½ times. I think there are not more than 25 companies in the stock market, if you exclude the two banks, which would, in fact, qualify. I am not going to develop anything about the banks, but say there had been a unit trust scheme established 12 months ago, what would have happened to the investments that would have been made by the unit trust managers in the banks as regards the course of prices of their stocks in the period—to take the two, I suppose, strongest units that there are in the stock market?
The turnover of the stock market here is extraordinarily low. Sometimes weeks will pass after an intending investor places an order for security before he can get it. Sometimes months will pass, and these are good securities. One of the features of an Irish investor—something which may indeed come in aid of the manager of the unit trust—which has a disturbing effect on the stock market is that the Irish investor intends when he buys to hold. He tends on the whole—surprisingly enough this is the opinion of the stock market—not to play round too much in the market, unlike the ordinary British investor who has in mind some capital depreciation and shifts a good deal. This has the effect of reducing the amount of stuff that is there in the market for buying and selling.
There is another point. I have figures taken about 13 or 14 months ago, excluding the banks again. The market valuation of say 50 or 60 of the reasonable securities, over £500,000 I think was the figure, was £160 million and a lot of that was held by people who have no intention of selling it because they are that kind of investors. A lot of it was also held by people who could not sell it because they would lose control of their companies if they did. These are very small sums when you think in terms of limiting the investment by a unit trust holder in, and this would be a cautious figure, a company to 5 per cent. The insurance company is not in any position which anybody can require them to go off and sell their securities at any time it is inopportune for them to sell. Take the investment trust holding company. If the Minister had specified a figure in section 8—I think it is, a proportion— and had even reserved himself the right to vary that proportion, we would have here a much more relevant debate. If the proportion is a modest proportion and is not a proportion determined in the darkness caused by the shadow of the gentlemen's agreement with the insurance companies, if it were a moderate proportion such as was contemplated by the Government of which the Minister is a member and which introduced the Finance Act, 1968, which provides for relief against corporation tax payable in respect of an investment made by an Irish investment trust holding company where certain conditions are complied by that investment trust holding company, one of the conditions—the only one that is relevant to the point I am now concerned to make—is that at least 15 per cent throughout the accounting period the following conditions are satisfied. The value of the Irish securities held by the investment trust company was not less than 15 per cent of the value of the securities held by the investment trust company.
I am quite sure that entrepreneurs who have it in mind to establish unit trust schemes here with advantages to the country, would do so if one particular suggestion that I am going to make to the Minister were adopted, and this would have advantages that would benefit the revenue of his colleague. If the proportion were established at 15 per cent I am quite sure this would not be found to be an impediment, but figures much higher than 15 per cent have been hinted round the city and a parallel has been sought to be drawn by a similar percentage which was fixed in Italy. I am not too sure that it is the best model for us, and in any case the range of securities is very much greater than would be available here. If the figure was 15 per cent this would not put people off.
Take the position of an investment trust company and this legislation. There is no question here of the investment trust company being in breach of something. If the investment trust company do not invest more than 15 per cent they are not in breach of anything. They get a reward if they comply with it. They save tax if they invest 15 per cent. Look at the position of an investment trust company and compare it to a unit trust. If you put your money into an investment trust company there are certain advantages. For example the investment trust company can go off and get what the financiers call "geary", that is they can persuade some insurance company to lend them some significant enough proportion of the capital that is subscribed and is under the administration of the directors of that company. The investors in the investment trust company get the parallel advantage to the advantage of the investor in the unit trust scheme in the spread of securities. They also get an advantage over the unit trust investors in that the cost of administering an investment trust company is very much less than the cost of administering a unit trust.
There is one thing which, in particular, distinguishes the investment trust company from the unit trust. To the managers of an investment trust company and the board of directors, while their vanity may not be encouraged if they see their securities slipping in the market, there is no skin off their nose —it is a little red perhaps but there is no skin off it. However, there is no loss to the investment trust company. They are not in the slightest degree embarrassed. They have got to do nothing about it. When people lose confidence in the investment trust company all that happens is that the security issued by the investment trust company falls in value. But if there is a loss of confidence in the unit trust administered by the same people—these are the sort of people who probably will be administering the unit trust scheme—there is a lot of skin off their noses. They will have to realise, at a time which might not be good for realisation, they have got to stand ready to deliver cash.
In the one case the legislation encourages an investment in Irish securities, gives a reward if the investment is made in Irish securities to a proportion that is reasonable, recognises the realities of the Irish stock market and, in the other case, there is no question of a reward. There is a breach of statutory duty. If section 8 is enacted in the form in which it is proposed to this House I do not mind going on record —I do not think it is the sort of matter that I will be taunted on—as saying that there will be no respectable body of persons prepared to establish a unit trust scheme in Ireland under this Bill. Why? Because they have to comply with the requirements of the Minister's order under subsection (4) and provide that not less than the proportion specified in the order of any property for the time being subject to any trust created under a registered unit trust scheme shall be Irish securities or other property in the State. If they fail to comply with that look at what happens to them under subsection 5, where, in relation to a unit trust scheme, there is a contravention of or failure to comply with a provisional order under this section and then there is a proviso in certain subsections or certain paragraphs of subsection (2) which do not affect this matter.
The manager and the trustee under the scheme, and where the contravention or failure relates to the publishing of any document, the person who publishes the document, and any person who procures such publishing, shall each be guilty of an offence. Section 19, subsection (3), says:
(3) A person guilty of an offence under this Act (other than section 14 (6)) shall be liable—
(a) on summary conviction, to a fine not exceeding one hundred pounds, or
(b) on conviction on indictment, to a fine not exceeding five thousand pounds,
and if the contravention or failure in respect of which he is convicted is continued after the conviction, he shall be guilty of a further offence and shall be liable on conviction on indictment to a fine not exceeding two hundred and fifty pounds for each day on which the contravention is so continued.
Section 20 says:
Where an offence under this Act is committed by a body corporate and is proved to have been so committed with the consent or approval of, or to have been facilitated by any neglect on the part of any person being a director, manager, secretary, member of any committee of management or other controlling authority of such body or official of such body, that person shall also be guilty of the offence.
Who will take a directorship, a managership or a trusteeship where the offence may arise overnight because there is a collapse in the value of the investments in the Irish securities reducing the proportion to below what the Minister has determined by order? Perhaps the Minister may, by appropriate amendment, provide against it, but this Bill does not provide against it. I cannot make Committee Stage observations at this Stage obviously. The Minister must be invited to give serious consideration to spelling out more than he has done, and telling us what proportion he has in mind. Let us have a debate about it when it arises on the Committee Stage of section 8. Information can be provided by those with knowledge in the city about this affair to the Members of this House and I am quite sure Members of this House on the basis of the information available will be able to make their own estimation of it.
I have said that the draftsmen and the Minister's advisers have had to prepare this under the shadow of this gentlemen's agreement—the insurance companies. I imagine there is some embarrassment arising out of this. This embarrassment should be faced, rather than that we should be circulating for the world to see a document which anyone who knows about the management of unit trusts will recognise in the Irish situation is inappropriate. The proportion should be spelt out here with some marginal power to the Minister to adjust it. The question of an offence should not arise. He has got the right anyhow under another section to cancel the scheme and the managers and trustees will take good care I imagine to cover. If, for example, a figure such as 50 per cent were mentioned that would mean that any wise manager would have to take 60 to 70 per cent to cover himself against the risk of a fall in value. The Minister should, I suggest very strongly, consider between now and Committee Stage telling us more about the proportion he has in mind to impose as a requirement on the managers and trustees of unit trusts. He should also consider the section under which the Minister may order the kind of information which is to be contained in the circular, or prospectus, to be issued by the unit trust managers. We have the parallel of the British legislation when the President of the Board of Trade was obliged, in approving of the trust deed, which was his task, provided certain statutory conditions were satisfied as regards the independence, for example, a manager and trustee, the place of incorporation and place of business of the manager and trustee and so on, to have regard to certain matters that were set out in the Schedule. It was held in a decision of 1956 that he was not restricted by being obliged to have regard to these matters; he was free to have regard to others. That has been criticised. It is thought that with all the experience that is now being gathered in Britain, which is available I am sure to the Minister anyhow, that the exact statutory obligation should be spelt out or be set out in instruments which might have to vary from time to time. The Minister should then be obliged— and I think he has taken it on himself to be fair here—if certain conditions are complied with, subject to his being satisfied as to the probity of the manager and trustee, to register the unit trust scheme here. That is good. He ought to consider to what extent he can tell us more about a matter which I think is very important and that is what the document should contain, and for the benefit of the House, knowing perfectly well that the Minister's advisers will have this information before them anyhow.
The Committee which considered this matter most recently, the Jenkins Committee, said that the prospectus should contain the names of the manager, the trustee and the auditor. If the company are a subsidiary of another company they should be required to state the name of the holding company, details of the maximum charges permitted by the trust deed, divided between initial and annual charges; details of investments held as at a date not earlier than that of the last half-yearly accounts to have been filed; an explanation of the investment policy followed, including any provision of the trust deed as to the minimum number of different investments to be held as a trust at any one time; the maximum percentage trust funds to be invested in any one security; the maximum percentage of the total in issue of any one security to be held by the trust, any prohibition or restriction or holdings of unquoted securities, particulars of distributions made to unit holders over the last three years and where the trust deed can be inspected. Some of that is provided for in other parts of the Bill, but it is provided for in the sense that they are the rights of the unit holders. I am thinking of the person who is not a member and who is considering making an investment.
I should think, having lived through the unit trust boom that we all associated with, the stock market boom, which ended about two years ago, that what would be impermissible if you are issuing a prospectus under the Companies Act, ought to be impermissible in the case of issuing an advertisement under a unit trust code. It should not be allowed to take an arbitrary date when if you put in £100 it would now be worth about £290. Whereas if they put in another date, the £100 would probably, under the conditions then existing, be worth a very different figure indeed. There ought to be an obligation on people advertising for money to be under their control and managed in this way. To save £100, if initially invested, be now what? That would be a very useful guide. Perhaps we would be entitled to go and compare that with experiences of people who invested in market trends and so on just to show if they had meat in the market.
The Minister is taking power to control the position of managers. The language of section 12 which is relevant to the manager making a profit out of unit trust schemes, may not be adequate to deal with the actual situation of managers. It may be dangerous in its implications and may not realise the realities. I should like to give a quotation here from a book dealing with unit trusts. It is entitled Pennington's Company Law—Second Edition—page 768. He gives an account of the remuneration of the manager. The view seems to be that the remuneration ought not to be controlled but that it should be disclosed and published in any documents relative to the unit trust and clearly demonstrated in the audit which is circulated with the distribution. The cost of administering a unit trust, where the investment unit is a fiver, will be very different to the cost of administering a unit trust, where the minimum sum taken is £5,000. Accordingly, what would be adequate remuneration in the one would be wholly inadequate remuneration in the other. It is a matter for the trustee to provide for what the remuneration ought to be. It is a matter for informed financial scribes to criticise and say if the remuneration in any given case is too much. I see great difficulty in the Minister making an order which would cover all the different types of cases which may arise. In relation to financial developments which are constantly changing they ought not to be over-controlled. Protection of investors ought to be of primary importance. An investor is protected by full disclosure and this is the best type of protection. He should also obtain advice from his broker, his bank manager and the financial pages of the newspapers.
I should like to quote from the Pennington book on unit trusts:
The manager is always remunerated by an initial service charge which forms part of the price at which units are issued, and by an additional annual or semi-annual service charge equal to a percentage of the current value of the trust fund which is sometimes payable only out of the income of the fund, but is often charged on its capital as well.
That does not seem to conflict with the section in this Bill. But listen to this:
Additionally, the manager is sometimes empowered to retain the adjustment of the issue price of units, that is the amount added to round off the price to the nearest threepence——
I interpose here and do not quote, 1 per cent of the total value of the fund is the usual formula, whichever is the less—and continue quoting
——and also to retain holding profits made by vesting securities in the trustee at their current value when the manager has purchased them earlier at a lower price, or by re-purchasing units and re-issuing them at a higher price than was paid on the re-purchase, or by realising securities on the cancellation of re-purchased units for a greater sum than was paid on the re-purchase.
We are not talking about the performance of any little men in back streets. We are talking about a common practice of large institutions of high integrity who manage large sums, have the full confidence of their investors and are not subject to criticism by financial scribes. I think section 12 would cut right against that, even if the essential change required in this Bill to make it workable is that the Minister should tell us the proportion and the proportion should be a realistic one. Granted adjustments and margins, the Minister should be empowered to vary that percentage. Allow one bit of development to take place here all sorts of companies will get floated for one reason or another. I should like to see that proportion increased but I say this: if that happens you will not need to increase the proportion. The investors and the managers will be after these securities because they will be good investments in their judgment.
Let us do without unit trusts, let us freeze them away, let us have no legislation. Let us not go through the nonsense of introducing legislation that will prevent them from being established here. The benefit is that savings will be retained in the country for the good of the country. I do not see that benefit coming. I simply see a piece of legislation which has a great deal of good in it. It seems a pity to have it spoiled by having regard to a consideration which is irrelevant.
The consideration the Minister ought to be regarding as relevant is what is Government policy with regard to investment in investment trust companies. In fact the situation is that it is very much easier for investment trust companies to make an investment in a much higher proportion than it is for unit trust holders because they are not standing in the position of having to deliver the proceeds of securities which they may have to sell at a sacrifice price.
Might I mention a matter that I regard as important? It may be said to the Minister that this is an unreal problem for the reason that these gentlemen need not be taking any risks. There is the Government. They can put their money in Government securities. May I tell the House they will not. I have not got these figures with me today but when we come to the section I can bring them. The performance of the unit trust funds that were limited themselves to gilt edge is the worst of all over the period that I have seen and accordingly they will not attract investors.
Theoretically there are two kinds of unit trust. There is the rigid one where there is a set of securities spelled out and in one of these trusts they spelled out Government securities and the way these went was nobody's business. It was a serious loss all round. Therefore there is built-in prejudice, which is going to take years to overcome even with the highest interest rates and even assuming we make all the necessary adjustments here in the administration of affairs to increase confidence. The rigid one is rather gone anyhow, where you invested in these limited securities and this type of unit trusts. All that is universal now is a flexible one where they are free to move from one security to another. They may have to add to their list by the consent of the trustees and so on but the recognised thing is the skill which is used for the benefit of the unit trust investor, the skill of switching from one security at the right time to another. That means you will have a curious hybrid if you have a unit trust established here at all under this Bill. It will be a curious hybrid because you will find if people comply with the proportions they regard as wrong they will deal with it by taking a block of gilt edge and leaving it there, and that will be rigid, or some other security and they then have the difficulty of administering a proportion only of their fund to meet the demands that will be made on them from time to time.
This is not my final point but it is certainly one of them. I should like to see a section in this protecting depositors who are innocently misled by statements contained in the advertisement as a result of which they subscribe. It is thought that, contrary to what you would primarily think, they can get recision of the contract to invest even after the name is entered on the register of unit holders. It is thought that it is possible that they may. Of course that is not much of a remedy really. The real remedy is that they should get damages if they suffer loss as a result of misrepresentation which is innocent. I think there ought to be a provision equivalent—I ask for no more than this—to the sort of protection that someone would get if he invested in a company pursuant to a prospectus that contained a statement that was wrong but not fraudulently wrong.
I want to mention a problem here with regard to two points and then I will really end. Forgive me for being so long. The UK view is that the manager needs a trustee to keep him in order and the trustee's job is to see that, when investments are made in the unit trusts through the manager, there are underlying securities vested in the trustee which represent what has been subscribed. If you get a manager of probity you do not need a trustee and we have a situation here—and I would like the Department to consider this— that the number of potential trustees who will be independent of the manager or the managers and who will have the capital of, what is it, £500,000 to 50,000 paid up, ready to do this business, is small. There may be difficulty in complying with this and the question arises— passing, if you like, from the path of virtue for a moment— for me as to whether or not in Irish circumstances this will be necessary or whether the trustee might not be someone not necessarily established in this country. I would think, in relation to the provisions regarding manager and trustee, that we ought to get some money from them. I know we have a £10 registration fee and £1 for every inspection, registration or whatever it is, but why do we not require them to be managed and controlled in Ireland? Then they would have taxes here. Then it would be attractive in another way and it would be very attractive to the Revenue if we were sure. You know they can have their place of business here but they can be managed and controlled anywhere. They can be managed and controlled in the Bahamas, managed and controlled in the Channel Islands. Perhaps in these cases they would pay taxes here, but if they were managed and controlled in Britain they would not. They would pay some corporation profits tax.
Finally, with regard to the manager, and ending on a very controversial note in relation to this whole field. It is not universial, you know, the prohibition against managers dealing in the underlying securities. That is not universal. It is a feature of the UK legislations. I suggest to the Minister that it is possible that the difficulty which I see, because of the size of the Irish market, might to some extent be mitigated. The proportion which he might be able to fix might be more than, I think, would be encouraging to people to establish unit trusts here but might be closer to what he wants himself. If the managers were free to take these units themselves to buy the underlying securities where there is a pressure by unit holders for funds, perhaps this could be a proviso in the deed—that in such circumstances rather than realise the securities the managers could, if they wanted to, hold them if they had the finances available for that task. I just throw that out as a suggestion with regard to this Bill which contains so much that is interesting. I do not think I have anything more to say except to thank the House for its patience in listening to me.
