Seanad Éireann debate -
Thursday, 18 Feb 1971

Vol. 69 No. 9

Unit Trusts Bill, 1970: Committee Stage (Resumed).

Question proposed: "That section 4 stand part of the Bill."

Mr. Alexis FitzGerald

I have not too much to say about this. First of all, I think the Minister must consult with the Central Bank, under section 3 (1) (a), before becoming satisfied with the application to register. On that section, suggested he should also consult the Minister for Finance. The Minister should indicate that paragraph (a) of section 3 (1) is not to his satisfaction without consultation not only with the Central Bank but also with the Minister for Finance. The words "after consultation with the Central Bank of Ireland and after consideration with that bank of the relevant information" amended to include the Minister for Finance—that office holder may take a different view from the view of the Central Bank on the same information—should he directs the cancellation of the registration of the unit trustee in this way. This is merely a matter of language and it is perhaps right to get the tense right and so on. We had a discussion on section 3 relative to the depositing of a deed with the registrar. A ground on which the Minister may direct the cancellation of a scheme is if the condition specified in paragraph (f) is no longer fulfilled. As paragraph (f) is at present expressed, I do not see how this could ever happen once the deed has been deposited unless we have the amendment that was under consideration here last evening that there should be the further obligation to register supplemental deeds or amendments to the deeds. Only where there was a failure to register a supplemental deed or a variation of the deed could the Minister be satisfied that paragraph (f) was no longer fulfilled. Paragraph (f) would have been fulfilled when the original deed was deposited. I think that is a matter of language.

With regard to section 4 (1) (c), one has to refer back again to paragraph (g) of subsection (1) of section 3. I do not think it desirable that the Minister, having decided that the name of the scheme is not undesirable, should be free to change his opinion and that, having registered the scheme under one name, he could use subsection (1) (c) (g) to cancel a scheme registered under a name which he had once thought desirable. What he really means to say, I think, is that if the name of the scheme is changed, and he does not approve of the changed name, then he is in a position to cancel the scheme. I think this is language, merely. I imagine this is what is intended by the proposed paragraph.

With regard to subsection (2), I have this to say. It is a very fair scheme. The general proposals here fair to the trust manager. He must notify the manager and the trustee of his proposals and the reasons. The trustee is given ample time to make representations. The Minister must then consider these representations. If he decides to give the direction, he must give it within a specified period. Under this subsection, I think the Minister should be required, when he gives the direction, to specify the date on which it is intended to take effect because consequences follow from this direction with regard to advertising, and so on.

Subsection (3) provides:

The Minister shall not give a direction under this section in relation to a unit trust scheme unless he is satisfied that it is necessary to do so in the public interest and in the interests of holders of units created under the scheme.

The Minister should be free to give this direction if it is either in the public interest or in the interest of unit holders. There could be a situation in which it might be contrary to the public interest and a unit trust got into the control of a small number of people and it would not be in their interest to withdraw registration by cancellation of this scheme but it would be in the public interest to do so.

In relation to the direction in section 4 (3), I would suggest to the Minister that as he does in other sections propose to give reasons, he should be required to give reasons for the cancellation of the scheme also. Then, there is something to argue about in the High Court. If he does not give reasons, what can be said? This is recognised in relation to the appointment of a new manager: he must give his reasons for what he is proposing to do. I think he should give his reasons here also.

In relation to subsection (5) (a) (i), there is a curious provision here. It says "he may, at the same time—this is when he gives a notification of his intention to cancel—or (i) in case he subsequently decides to refrain from giving the direction". I do not find in this any power in the Minister to refrain from giving a direction after he has given it. I think he must take express power to change his mind.

Under subsection (5) (a) the Minister may require the manager to refrain from selling units or publishing or procuring the publication of advertisements in relation to the scheme. That, it seems to me, could operate very unfairly where the advertisement was in fact an advertisement to buy them and a reminder to the unit holders that the manager was standing ready to buy in the units. I am not sure how good a point this is. I should like the Minister to consider, in relation to it, whether it is not necessary to give, in such circumstances, liberty. There does not seem to be liberty under the statute for them to advertise at all. There might be a general wish to draw the whole thing to a conclusion. At that point, I think they should be allowed to advertise their offer price, whatever that might be, and their readiness to buy back the units and realise the assets.

Minister for Industry and Commerce (Mr. Lalor)

The Senator has covered quite a number of matters in his observations on section 4. I find it a little bit difficult to follow through on the various points. I shall start at the end with regard to the Senator's observations. In relation to section 4 (5), on the question of the provisions preventing the manager from selling units, he mentioned it was necessary that the manager be in a position to buy back units. There is nothing in this section which prevents him from so doing. If the unit-holder wants to sell back his unit to the manager he may do so under this section but the manager cannot sell further units to a new proposed subscriber. I had reservations in this section, in the event of registration being cancelled or the operation held up during the course of an inquiry, as to whether in addition to preventing the manager from selling units, I should take the power, as Minister, to prevent the manager from buying units, as well. However, this would appear to inflict a hardship on the subscriber who would want to realise whatever little asset he would have. This subsection does not prevent from happening what the Senator is anxious should be allowed to happen, namely that the unit-holder could take back his unit and sell it back to the manager and that the manager could buy the unit back from him. That is not debarred in this section. What is debarred is the manager selling, if you like, new units and in general advertising the scheme.

Earlier on, the Senator made reference to the fact that the Minister has not to give reasons. In section 4 (2) (a), in relation to cancellation, it is provided:

...he shall notify the manager and the trustee under the scheme of his proposal and of the reasons therefor...

That is covered. The Senator raised quite an interesting point in relation to subsection (1) (c) whereunder, if the Minister is no longer satisfied in respect of the matters specified in paragraphs (a), (d), (e) and (g) of the said section 3 (1), the Minister may direct the registrar to cancel the registration of the scheme. The Senator found it very difficult to know how the Minister could, on the one hand, authorise the naming of a unit trust scheme under section 3 and then decide, at some later stage, that he did not like the name of it and withdraw it under section 4. This is a valid point. Certainly, between this and the Report Stage, I can look into the necessity for having paragraph (g) covered in this particular subsection.

With regard to further drafting arising out of any amendments I may find it necessary to introduce as a result of our discussion last night on the necessity for certain changes in section 3, this would automatically follow. In referring to subsection (1) (b) of section 4, the Senator drew attention to the inclusion of paragraph (f) of section 3 (1). If paragraph (f) of section 3 (1) has to be amended to take into account the subject matter of what we discussed last night—the question of the lodging of a changed deed—there would have to be a consequential amendment here. Possibly not. I would hope that whatever amendment would be introduced in this respect would be covered and would be included under section 3 (1) (f). There would still be the need for the reference to conditions specified in paragraph (f) as outlined here in section 4 (1) (b).

Mr. Alexis FitzGerald

I thank the Minister for what he said. I could not conceive circumstances in which it would be desirable to prevent investors in a unit trust from being in a position to require the managers to buy them back, provided the provisions of the unit trust deed, which the Minister would have approved, contained an appropriate formula for determining the bid price. I thought the language used in subsection (5) (a) seemed to contemplate that all advertisements might be stopped. The word the Minister used is "may", I now note: he "may" give such a direction; he need not. It is desirable that it be clear that what is in mind here is that what they are prevented from doing is advertising the sale of units —not advertising their readiness to buy them back, of which unit-holders may possibly require reminder in relation to their affairs.

I do not expect the Minister to consider this, obviously, in relation to the same point made about the previous section but I think cancellation of a scheme is going to have such profound consequences on the status and reputation of the manager and trustee that really it should not be done save after consultation with his colleague, the Minister for Finance—and the Central Bank—who will know all about this: he will have a particular kind of expertise on this affair. I should like to see that insertion there. In this section, there is a recognition of the importance of time in relation to a unit trust. It is very difficult to see how the Minister is going to oblige himself to register a scheme within a particular time. Some sort of language should have crept into the earlier section to the effect "as speedily as possible" or something of that kind. An investment man will have his own idea as to when is the good time to go into a market. He should not be sitting there for 12 months wondering if the Minister is going to approve of his scheme at all. Now may be the time, or he may guess it to be the right time, to go into whatever the market may be. There should be a sense, on the Minister's side, of the importance of time in relation to this. He recognises it in this section and in the subsequent section: he should recognise it in the preceding section, too. I recognise the great difficulties of specifying a time. He may have to go backwards and forwards to the manager and trustee for information, and so on. However, there should be some recognition, in some language, so that the officers in his Department, who will be concerned with this, will be made aware, by virtue of the very section, of the importance of the matter. It is not like many other matters that would be administered by a Department.

Mr. Nash

Would the Minister be prepared to consider a possible slight amendment in section 4 (3) to which Senator FitzGerald also referred—the alteration of the word "and" to the word "or". That would give a wider discretion. It may be necessary to cancel the scheme either in the interests of the public or in the interests of the shareholders. The word "and" is there now. He could not do it now as that subsection stands unless he is satisfied that it is both in the public interest and in the interest of the shareholders. The Minister should have a wider discretion in that for the protection of either the holders of unit trusts or the general public.

Mr. Lalor

Senator Nash's point was also raised by Senator FitzGerald. This is a matter on which I am wide open to expressions of view. This tying-in of the necessity for me to be satisfied—both ways—caused me to ask myself if it was necessary that I should write into the legislation that the Minister shall refrain from giving a direction unless he is satisfied under both headings. It could be argued that anything that could be inferred as being against the interests of the holders could be inferred to be in the interests of the general public. From that point of view, the playing around with the "or" or "and", as I saw it, did not seem to be that terribly important. The general view, on legal advice, is that the overall powers under section 4 were so wide that they might be questioned on constitutional grounds unless hedged in by adequate safeguards. This is why the "and" goes in here. Let me be frank and say—Senator FitzGerald mentioned this—in general the cancellation of registration is a very big step.

This touches on another point Senator FitzGerald mentioned. It is very unlikely and hardly necessary that it should be written into the legislation that the Minister, before he makes this very serious decision, must have consultations with the Central Bank and with his colleague, the Minister for Finance. It goes without saying that, of necessity, there would have to be quite a study in depth. It is a very important and serious decision. Built into the legislation is the power of the management of a registered unit trust scheme to appeal to the courts. If the Minister makes a decision on a flimsy whim—suppose he did not like the way the thing was going and withdrew registration on that basis—he will look very foolish if the management or trustees take him to court on the matter. He will not make a decision to tell the registrar to withdraw registration without being fully satisfied that he is doing something which is fully justified. I must be satisfied that it is necessary to withdraw registration in the public interest and in the interest of the holders of the unit trust. My advice on this is that it is necessary, in view of the wide powers I have, that I should feel myself restrained in moving without being satisfied that it is in the interests of both.

Senator FitzGerald also spoke about the time factor and the desirability of not holding it up indefinitely. In subsection (2) (c), I am spelling out that there is a time limit. I do not know whether the time limit of 30 days— whereby the Minister must make his decision, if you like—meets the Senator's requirements. I think it does.

Mr. Alexis FitzGerald

The Minister shows understanding of my attitude to the various points I have been making and the motivation in regard to them. I should like him to leave himself open to the idea that it might be desirable that he, or any successor in office, should be obliged to consult the Central Bank and the Minister for Finance if for no other reason other than this. It is possible that the cancellation of a scheme, mistakenly, by the Minister for Industry and Commerce might have an effect on the outflow of savings from the country. The Central Bank might have a special point of view to express on that, with regard to the cancellation, as it would have, originally, on the question of the possible registration. I agree there is proper provision in section 4 for the time. There is no reference or relationship to time in section 3.

Question put and agreed to.

SECTION 5.

Question proposed: "That section 5 stand part of the Bill."

Mr. Alexis FitzGerald

I should like to repeat my points with regard to the Central Bank and the Minister for Finance; whether the Minister has the power, subsequently, to decide to refrain from making an appointment and the point with regard to advertising offers to buy. Having said that, there is no reason why I should dwell any more on these points.

I have one other small point. Section (1) (b) (i) deals with the Minister's power of appointment of a manager. The question of section 3 (1) (a), (b), (c) and (d)—if (d) is to be retained— is important here. With regard to paragraphs (e), (f) and (g), I think this power ought not to exist.

The only really important point I want to make on section 5 is this. The normal trust deed with regard to the establishment of a unit trust recognises the particular duties of the trustee. Perhaps the most important duty of the trustee is the power to remove the manager. The trustee is a substantial, reputable institution whose reputation will be affected if it continues to tolerate a manager who is not doing things properly. The Minister should not exercise his power of appointment here without first giving the trustee an opportunity of removing him. He should give notice to the trustee of his intention to exercise the power under this section so that the trustee may anticipate him, and maintain his own reputation, if the situation is that it is only the manager that is under criticism. The whole thought behind the legislation is that the trustee would have certain duties. His prime duty is to watch the manager; to get the assets the manager buys into his name; to see that they are protected and preserved and to get all the certificates in respect of them, and so on. He is always given power and should have power to do this. The Minister should not be in a position to appoint a new manager, under section 5, unless he has first given the trustee, in a case where he is not satisfied with the trustee, power to remove the manager.

Mr. Nash

Would the trustee per se not have a right to remove the manager? That right would not have to be given expressly here. If the trustee does not do his job and does not remove an inefficient or a dishonest manager then I do not think there should be any obligation on the Minister, in other circumstances, to have to go to the trustee and say "Look, you should remove him. If you do not, I shall". Normally, the Minister might be prepared to do that. I do not think there should be an obligation on him to do so, if the trustee is not doing his job.

Mr. Lalor

I think that sums it up.

Mr. Alexis FitzGerald

I am not satisfied with that. There should be a clear obligation on the Minister to tell the trustee. The Minister may have reasons for believing the manager is not doing his job properly that the trustee may not have.

Mr. Lalor

If the Minister has reasons for believing the trustee is not doing his job, and is satisfied that this is so, then it almost automatically means that the trustee is not, in turn, doing his stuff. Therefore, the question of consultations with a trustee in such circumstances is not called for. If the trustee is not aware of it, and the Minister becomes aware of it, it is a reflection on the trustee before it goes any further.

Mr. Alexis FitzGerald

I shall not press the point.

Question put and agreed to.

SECTION 6

Government amendment No. 3:

In page 8, subsection (4), line 7, after "effect," to insert "solely or mainly,".

Mr. Lalor

Amendment No. 3 provides that arrangements for participation in income arising from securities or other property will only come within the scope of the Bill. This amendment allows an escape for any arrangement where participation in profits from securities is only incidental to some other purpose. The example in mind here is the assurance with profits policy where investment is secondary to assurance.

Arrangements where investment in a unit trust or property is the main purpose, but where there is also an element of assurance, still remain within the scope of the Bill.

Mr. Alexis FitzGerald

I welcome this amendment as an improvement to the section and also the substitution of "public". Or is that a separate amendment?

Mr. Lalor

That is amendment No. 4. We have already taken that with amendment No. 2.

Amendment agreed to.

Government amendment No. 4:

In page 8, subsection (4), line 7, to delete "persons" and to substitute "the public".

Amendment agreed to.

Question proposed: "That section 6, as amended, stand part of the Bill."

Mr. Alexis FitzGerald

There is just one point on subsection (2). The manager or trustee under a unit trust scheme that is not a registered unit trust scheme, or any other person concerned with the managing or supervision of the scheme, shall not purchase or sell units of the scheme. This prohibition, it is said in subsection (2), shall not apply to the purchase from a holder thereof of units of a unit trust scheme the registration of which under this Bill stands cancelled.

What is the position with regard to the purchase of units during the period when a direction has been given, under section 4, and a similar direction under section 5? In such a case, is it clear and is it intended to be clear, that the prohibition does not extend to the unit trust scheme in respect of which these directions are given? I think it is but I should like to know if attention has been given to it.

Mr. Lalor

This subsection and reference to subsection (1)—the Sena. tor is talking about subsection (2) now—is a necessary safeguard for people who invest in a unit trust whose registration is subsequently cancelled. In the absence of this provision, the prohibition under subsection (1) would prevent unit holders from selling back their units to the manager of the scheme. The previous section does not prevent the manager from buying back the units from the unit holder. Both of these are interconnected.

Mr. Alexis FitzGerald

I thought the provision was as the Minister described it but I wanted to be clear that, because cancellation terms are registered in a trust scheme, it is necessary to preserve the rights of unit holders to get them, but during that period prior to cancellation or the appointment of the manager, there is no need for the preservation, because the prohibition of subsection (1) does not apply.

Question put and agreed to.

SECTION 7.

Government amendment No. 5:

In page 8, to delete subsection (1), lines 12 to 20, and to substitute the following subsection:

"(1) There shall not be published advertisements in relation to or referring to a unit trust scheme that is not a registered unit trust scheme."

Mr. Lalor

This is in substitution of "There shall not be published advertisements in relation to or referring to a unit trust scheme that is not a registered unit trust scheme." This arises because section 7 (1) (b) becomes superfluous. Section 6 (4) extends the definition of unit trust schemes for the purposes of sections 6 and 7 to include a foreign company which buys back its shares from shareholders. This is a tidying up amendment because (1) (b) of section 7 in the original draft, now becomes superfluous.

Mr. Alexis FitzGerald

I may be failing to understand the point here but, as I understand the amendment, it now means that a body corporate incorporated outside the State who purchases back from its members shares of the body corporate, offered to it by the members, may advertise; whereas the unregistered unit trust scheme may not. Why is the one freed from a burden cast on the other? Am I off target here? It seems that the effect of this is to allow bodies that were prohibited under paragraph (b) from advertising in the same way as unregistered unit trust schemes, that were trust schemes, could not advertise. I could say more on the section than on the amendment. I cannot see why one is prohibited and the other not. I cannot think that the amendment would have been put down if this was intended.

Mr. Lalor

The amendment is altering subsection (1) of this section. It is a tidying up operation where, instead of having paragraphs (a) and (b) which formerly were included, we have this straightforward subsection (1) where it is said "There shall not be published advertisements in relation to or referring to a unit trust scheme that is not a registered unit trust scheme". This is a far more straightforward way of putting it than was originally envisaged. Bodies formerly prohibited under paragraph (b), when (b) is deleted, are still prohibited from being brought in under (a) by the definition in section 6 (4). Therefore, the question of having 1 (b) here at all is not necessary, especially in relation to subsection (4).

Mr. Alexis FitzGerald

I have been slow in grasping it.

Amendment agreed to.

Government amendment No. 6:

In page 8, to delete subsection (3), lines 47 to 52, and to substitute the following subsection:—

"( ) Where an advertisement is published in contravention of subsection (1) of this section, the manager under the unit trust scheme to which the advertisement relates, the person who publishes the advertisement and any person who procures such publishing shall each be guilty of an offence."

Mr. Lalor

This amendment will be seen as being consequential on the amendment removing subsection (1) (b). It is a consequential amendment.

Mr. Alexis FitzGerald

I do not see how this is a consequence of the amendment at subsection (1).

Mr. Lalor

Consequential on removing section 1 (b).

Mr. Nash

And prohibiting the publication of advertisements.

Mr. Alexis FitzGerald

I do not know if this is a point to be made on the amendment or to be made on the section. I do not think the manager, if this section is thought to be wise and is enacted, should be responsible, be guilty of an offence. If someone publishes an advertisement and he is not responsible for the publication, it would seem here that the manager and any person who procures the publication will all be liable. You could conceive the situation in which the manager was not responsible for publishing it. It is only if each one is guilty of the offence in question that each one should be responsible for the liabilities. Would the Minister look at that and see if there is any validity in my point?

Mr. Lalor

I shall certainly look at that. As I have already indicated, so many points have been raised on the various sections on Committee Stage that I shall be asking the House for time to have a look at the whole piece of legislation with a view to introducing amendments for Report Stage. One always, I suppose, must try to visualise certain situations, but I find it difficult to imagine that anybody who publishes advertisements, or any agent, would endeavour to advertise on behalf of a non-registered unit trust without the inspiration or the co-operation of the management.

Mr. Nash

The necessity I see of leaving in the word "manager" there is that, where an offence is committed, such an advertisement is published and sometimes it is very very hard to find out who the guilty party is. How do you find out who sent in the advertisment? The newspaper may not tell you. How can you find out who procures it? One obvious target for prosecution is the manager. If he is innocent, and has had nothing whatever to do with the publication, he can turn up in court and prove it. He can say: "I did not publish that advertisement but a director of the company did, or a chairman of the company did, or someone else did." Thereby, the proper defendant can be got and the person who offended can be prosecuted. Unless you have a reasonable sanction to insist that the law be obeyed, the law can too easily and too readily be broken with impunity. I am inclined to disagree with Senator FitzGerald in that regard. If the manager is innocent, he can turn up to court and prove his innocence, then he will get a dismissal of any prosecution against him.

Mr. Alexis FitzGerald

He will have been prosecuted. This in itself is a blemish to carry. Judge Adams said: "You have been released from this court with no other guilt attaching to you than if you had been released by a Limerick jury." The point is that to be prosecuted itself may be a damaging thing. I have had personal experience of people repudiating responsibility for advertisements that were put in without their authorisation and knowledge. For example, managers may have agents who will act in excess of their authority and in whose interest it may be to put in this advertisement so that they will get the resulting commission from whatever is sold. This may be completely contrary to the rules and directions they are getting from the manager. They may not be an authorised agent of the manager, although conceivably they might be able to burden the manager for liability, civilly, for the debt incurred. The manager in such a situation should not be guilty of an offence. If you put in: "A manager who authorises the insertion of an advertisement," it would meet the point.

Mr. Lalor

I appreciate the Senator's concern for the management being caught out in a situation such as this. But one can open too many escape hatches. Let us talk about an agent putting in some sort of an advertisement that is out of order. Normally, it takes the State a couple of days to take action if an illegal advertisement appears. Normally, there would be sufficient time for the management, if they did not agree with the advertisement or if they objected to the advertisement appearing, to say: "We have nothing to do with this." Before any question of prosecution arose an opportunity would have been given. Senator FitzGerald said in some cases the management could be prosecuted. However, I feel that to write into this section some type of an escape clause for the manager not being responsible would take all the meat out of the subsection altogether. I shall certainly look at this, but I should like to indicate to the Senator my thinking on it at this stage.

Mr. Alexis FitzGerald

Just one further point. I am not certain that I agree with Senator Nash with regard to the manager, that if he were able to come to court and say he did not know anything about it he would be found innocent. This is a statutory offence and there is no question of whether he authorised it or did not authorise it under this subsection. It appeared and under this subsection he would be guilty of an offence. Imagine the situation of a highly reputable manager who discovered his firm had scoundrels acting for them in other countries, who found himself rendered liable to prosecution. There is not even a saving here of "it shall be a defence to such proceedings if the manager should prove this, that or the other thing". I think that the weapon used here is too strong for the purposes of the section. However, the Minister has said he will consider it.

Mr. Lalor

I will consider it. It is also written into the Bill that the person who publishes is also guilty of an offence. That being so, a publisher is unlikely, with his knowledge of the situation in this regard, to go ahead and publish something without checking with the management to know if this is in order. I am hoping that publishers, managers and agencies will all be very conscious of the fact that this is an offence.

Amendment agreed to.

Question proposed: "That section 7, as amended, stand part of the Bill."

Mr. Alexis FitzGerald

I think this is the appropriate section for me to refer to something that I think should be in the Bill, something which is recommended in the Jenkins Report, and, I think elsewhere, meets with approval. It is something that has long been prohibited with regard to companies, that is, door-to-door canvassing for the sale of units. That should be prohibited. The question of television advertisements should also receive the Minister's consideration. Perhaps I should make one other point. If the section is to stand, as amended, there should be another amendment in subsection 2 (d) that the publication should not be limited to that exciting volume, Iris Oifigiúil, which appears twice weekly. If some English company is to get the benefit of an exemption under the section it should be published in the Irish national newspapers and everybody should know that certain specified papers have been exempt.

People do not get up early in the morning to buy Iris Oifigiúil—at least not too many. Perhaps you might say that the editors of the national newspapers will have to go and do that but I do not think that is quite adequate really. Publication in Iris Oifigiúil is intended for other reasons— proofs of one kind or another to see that things are done in an orderly way and that the State Departments are informed of what other State Departments are doing. There are many different reasons for publications in Iris Oifigiúil. But the general public do not buy the magazine.

This whole scheme will prove completely unworkable and unfair to Irish newspapers. It may be that Sunday newspapers, because they have to print early, may produce special editions for circulation in Ireland, but you will find that the greater part of the Sunday papers, if examined, would be found to be the same as the equivalents circulating in England. The Minister should cause a real examination, before he proceeds with this section, as to whether even where there are now special Irish editions there are ever special Irish editions which exclude advertisements of any kind. I do not think there are; I do not think it is practicable. You get your advertisement from your customer, if you are running a newspaper, on the basis of a given circulation. You cannot quote a circulation in relation to publication in one part of the world which will be different from circulation in another part of the world.

I think, as a matter of fact, the Minister will find that he will be forced to exempt UK papers—to name just UK papers—although there are others. May I say, too, the British have this difficulty themselves. There is a prohibition with regard to the circulation of offers for sale of non-UK securities in the UK; and the British have found this prohibition simply unworkable. The idea is to bring under control foreign companies as well as UK companies and make them give the kind of information that UK companies have got to give about themselves. In practice they cannot refuse, and they do not refuse, advertisements from American companies, and they do not refuse advertisements from Irish companies. One can have, in relation to the type of circulation of Irish newspapers, special arrangements to blank sheets where you have a circulation in Britain of something that is to be floated on the stock market; but even this is fraught with great difficulty and the newspapers do not like it. The Minister will then be put in the invidious position of having to allow in certain UK papers that he simply cannot stop without besmirching the reputation of the country. If this is so, the lot must then come in. You cannot exempt some and not exempt others.

I know the object of this section is quite clearly designed to try and stop the outflow of savings, but I think this is not the way to do it. It will not be practical to do it in this fashion. It will not work. The Minister will have to exempt the UK newspapers. The sole effect of that will be that, under this section, Irish newspapers will be denied the revenue to be got from taking these advertisements which will be available to their competitors in Britain. There is an increasing degree of competition between British newspapers here and Irish newspapers, and I think it is unfair to the Irish papers generally to have to carry this burden. This is not the way to do it. The way to do it is to create conditions for the successful operation of Irish unit trusts. There is a degree of patriotism with regard to Irish investments. Investments in unit trusts that are managed by reputable Irish institutions will tend to get the small saving money which is going out of the country, if the conditions under which they are allowed operate make it possible for them to return a performance which is comparable to the performance of the UK unit truts. The object of this Bill should be to make Irish unit trusts successful and not the negative approach which is proposed in this section and which I think is doomed to failure. I will leave the Minister to think about what I have said on that.

Mr. Nash

The object of the Bill, as I understand it, is to protect the holders of unit trusts by seeing that they are adequately protected to inspire confidence. The primary object of the Bill is not to create unit trusts. That is a matter for entrepreneurs. It is to ensure that people will have confidence in a unit trust that is registered here. Regarding the prohibition against the publication in newspapers, in so far as I am aware, there is similar legislation relating to unit trusts in practically every country where they exist. I consider the legislation here was rather slow in developing, having regard to the growth of unit trusts. Today, unit trusts have been growing very rapidly proportionately. They are a relatively modern thing, even though they started in the thirties. There was no growth whatsoever in unit trusts until within the last ten years. Even today, on the English stock exchange, unit trusts are only 2 per cent of the total investments. In other countries, where unit trusts do not comply with the regulations, they are prohibited from advertising in the local national newspapers. That is as far as the Minister of any country can go. I cannot see that the Minister can go further in this case.

Unit trusts can be a most desirable form of saving. It is the type of thing in which a person could set aside a certain amount of his savings each month or each two months for investment purposes. In England there are groups of people in very large factories who have joined together and have set up their own little committees among themselves. They meet every month and invest part of their overtime savings in unit trusts. If the people have confidence in unit trusts then I am sure they will grow; but I feel, first, that the people here must have confidence in the type of unit trust organisations which are registered here.

Ruairí Brugha

Taking up Senator FitzGerald's point, I can see what he is getting at, but have we got a unit trust in Ireland?

Mr. Nash

Yes, we have.

Ruairí Brugha

It seems to me that the first thing is that we should be in a position to make an effort to slow down the outflow of capital from here. Another thing is that incoming newspapers publish special editions for various reasons not to do with this aspect of things, whereas the Irish newspapers going abroad could not be that significant that any prohibition of this kind might be applied to them. It all boils down to the net point that Senator FitzGerald made: that Irish newspapers may be deprived of advertising. There is a point here but it is outweighed by the need to discourage the outflow of capital from the country. Perhaps the Minister, when later on he exercises his functions, might keep this in mind.

Professor Dooge

I should like to support Senator FitzGerald on this point. Senator Brugha has just given the antithesis here—that he feels that a possible effect of allowing such advertising would be to cause such a flow of funds out of the country that this would far outweigh any loss of revenue or loss of competitive power to our Irish newspapers. I question this. I question the effectiveness of what the Minister proposes to do here. As Senator FitzGerald has said, any attempt to control the newspapers coming in here from abroad will almost certainly in practice be largely defeated. I do not think this prohibition will be an effective one. It will not do anything in regard to stopping the outflow of capital. If a person wishes to invest in a unit trust he does not invest in it as the result of an advertisement which he sees, like the sort of advertisement one sees before the January sales. This is not the effect of advertising for unit trusts. As Senator Nash has said, small groups come together to make a unit trust. The individual who considers he will invest in a unit trust is not, as it were, an impulse buyer and does not respond to advertisements in that particular way. Such a person looking for a unit trust will not merely look at what is advertised in the Irish newspapers but will have information concerning unit trusts in Britain. Such information will be available to him and the additional prohibitions which are here in this section will not affect his decision about where he invests his money. If we take the balance which Senator Brugha has mentioned it lies in the direction which Senator FitzGerald has indicated.

Mr. Nash

I regret I must differ with Senator Dooge on the impulse buying of unit trusts. I am quoting here from the most modern book on the subject that I know of, which is by Louis Ginnsburg. He has been the investment consultant to such bodies as the Public Trustee and the Court of Protection in England, and a director of Trade Union Trust Managers Ltd. On pages 215 and 216 of his book, The Meaning of Investment in an Age of Plenty he deals with unit trusts and says:

Although units are continuously on offer, and may be purchased by direct application or through a stockbroker or a number of banks, it is an accepted fact freely acknowledged by managers that subscribers can be attracted in sufficient numbers only by an advertised offer of units at a fixed price in a block of several hundred thousands or even a million or two. The advertising to be successful has to be forceful, and it is sometimes given a topical connotation which may or may not have acceptable investment implications.

You can assume, if you like, that some people will be foolish with their money and that they will invest in all sorts of bucket-shop investments. The Minister or anybody else cannot help those people. However, the Minister must create a confidence in the unit trust companies that are started and registered in Ireland so that the Irish people, in particular small investors, may feel that they can invest in these companies with reasonable safety, that they can put aside their weekly or monthly savings for investment in unit trusts with confidence. By inspiring that confidence a great fillip can be given to Irish unit trusts.

Mr. Lalor

I want to say, first of all, that I am fully aware of the inadequacies of the extent of the control I am endeavouring to exercise here over advertising. Senator Nash mentioned that this piece of legislation was being provided to protect the investors in unit trusts. I said in my introductory speech on Second Stage that the objects of the Bill were twofold. First, protection of investors and secondly, the promotion of the investment in this country of funds raised by unit trusts. It is in relation to this question of the investment within the country that I am taking what powers I can here to prevent an outflow of money as a result of advertisements from outside by non-registered unit trust schemes to attract investments from the small investor or any type of investor in this country.

Senator Nash has just outlined that there is this type of impulse buying of unit trust units. Senator Dooge questioned the effectiveness of what we are trying to do. I am not taking any power in this Bill to prevent any person here from buying foreign trust units. What I am endeavouring to do is to discourage the outflow of funds as a result of advertisements appearing here. I am fully conscious of the difficulties there will be in this regard. Of course, there is an exemption clause: where I am satisfied a newspaper or a printed magazine from outside the State might find it difficult or impossible to comply with this measure, I have power to grant exemption. I said on Second Reading that I do not propose to grant such exemptions lightly, and I want to repeat that now. Reference has been made to the fact that this is an imposition on Irish newspapers. I do not accept this. I fully appreciate that, by making the regulation, I am preventing Irish newspapers from getting revenue from outside sources. On the other hand, if we do have the development of registered unit trusts here, these registered unit trusts will be encouraged to advertise in the Irish papers.

Senator Alexis FitzGerald said that some outside papers have special Sunday editions for Ireland and he felt that those Irish editions do not differ too much from the UK editions. I accept this and I accept the fact that the person putting in advertisements expects those advertisements to appear in all editions. I think it would be quite practicable to insist that the special Irish editions of foreign papers should not carry advertisements of non-registered unit trusts. This type of regulation is in force in reverse in that at the present time Irish papers when sold in the UK cannot carry certain advertisements. Take the example of the Irish Hospital Sweepstakes. Our newspapers cannot carry advertisements for lotteries over there, whereas they are allowed over here. I understand that even one of our provincial newspapers was held up at the Customs recently due to regulations of this nature. Therefore, I do not feel I am doing anything unfair or repressive at all. I am taking what steps I can to try to prevent the outflow of Irish capital. It is like a lot of pipes drawing off a central tank: I am trying to block off two or three of them. I am fully conscious of the fact that there still can be an outflow of money here into investments abroad, but under this section I am endeavouring to block off a couple of those outflow channels and I will do my utmost to try to prevent advertisements here soliciting for non-registered trusts outside this country.

I think I have the power under this section to prevent the publication of advertisements for non-registered unit trusts on television, but if I have not I certainly will be looking at it between now and the Report Stage to ensure that I will have that power in addition. However, I do not think there is any doubt that, when I make regulations preventing the advertisements or the publication of any matter, it covers television advertisements. If door-to-door canvassing includes the handing out of any literature I am satisfied that this section covers this also. Senator FitzGerald felt that the publication in Iris Oifigiúil of the names of magazines or newspapers that were permitted was not sufficient. Anything I have ever seen in Iris Oifigiúil that appeals to newspapers appears in them. I have found that by having something published in Iris Oifigiúil is not a way of hiding it. The surest way of getting publicity as to what is indecent literature is to have it appear in Iris Oifigiúil and then it usually gets fair prominence in the newspapers.

Mr. Alexis FitzGerald

I have never set myself the problem as to the surest way of selling something.

Mr. Lalor

Iris Oifigiúil is the official publication from this point of view. I have no doubt at all that, once the Minister makes an order saying that such-and-such a publication is exempted, I will hear more about it and perhaps every effort will be made to change my mind in this regard. There is nothing to prevent me, having exempted a periodical or a newspaper, from withdrawing that permission if, at any stage, I felt that the permission given to The Economist, The Financial Times or any of those newspapers was being abused.

Mr. Alexis FitzGerald

The Minister in many of the sections of this Bill takes power to make orders and to amend and revoke those orders. The curious and most objectionable feature of this section is that, while he has power to exempt newspapers or magazines printed outside the State—not necessarily published in the State—once this Bill is brought into effect by order, if those of us here who have criticised the section are proven to be right, and if the Minister is proven to be wrong, it will be impracticable not to exempt all of them without damage to the reputation of the country. We have suffered damage internationally from the misapprehension of our censorship code. People have alleged that we have operated a censorship code, censored opinion, quite apart from what was intended in the Act. This was a gross misreprentation of the operators of it at all stages, no matter how deficient they were at some stages. I can see a further misrepresentation of our position resulting from any failure of the Minister to give exemption. He will then have created the position, by this Bill, that he will have exempted all the UK newspapers but will not be free to exempt the Irish newspapers because he has taken no power to do that by order.

As I understand it, section I provides that these advertisements cannot be published. He has taken power to exempt only newspapers or magazines printed outside the State. The Minister should, at least, put himself in the position of being able to adjust his policy if he finds it does not work. If I put myself in his position I have complete sympathy with the object of preventing the outflow of savings from the country. Anyone who knows anything about our affairs knows that, in so far as we can persuade ourselves, be they small or large, to invest here, it is good for the economy, even if the return to the individual investor might be better elsewhere.

Perhaps I did not make myself as clear as I should have with regard to door-to-door canvassing or television or cinema advertising. What I had in mind here—even in relation to registered trusts—was that there should be a prohibition of door-to-door canvassing. There is no control over what the door-to-door canvasser is saying when he is selling his units. I think it should be an offence for unit trust schemes, whether they are registered or unregistered in Ireland, to engage in door-to-door canvassing. This has long been part of the law relating to companies, because one cannot apply effectively the provisions as to what should be in a prospectus to the words uttered by people moving from door to door.

It may be more appropriate to say this on the next section. The form of the advertisement, whether it be on television, sound broadcasting, in the cinema, or in the newspapers, is a matter of great importance. These rules, it seems to me, could very properly be applied to registered and unregistered schemes. I should like the Minister to note in regard to door-to-door canvassing, in particular, that I was not thinking of unregistered schemes only; I was thinking of registered schemes also. It has been long seen as undesirable that shares should be hawked around in this kind of way, and normally this is prevented. That is just in clarification of one point that I made.

Mr. Crinion

I should like to know what Senator FitzGerald is thinking of. Is it the property bonds some insurance companies are selling at the present time? I know of one insurance company with which I deal, who are selling those bonds. Their agents have been going around from door to door selling bonds. Is it something in that nature the Senator envisages?

Dr. Belton

I am not going to waste the time of the House in repeating what Senator FitzGerald has said except to say that I thoroughly endorse it. I would not like one statement of the Minister to be placed on the record of the House without correction. To support his argument on this amendment he quoted the fact that Irish lotteries are not allowed to be published in any newspapers. Surely no lotteries at all are allowed to be published in newspapers? Surely English lotteries are not allowed to be published in English newspapers. It is not in any sense a discriminating act on the part of English newspapers to prevent Irish lotteries being published. That correction should be made because, according to English law, it is the limitation on the prizes in lotteries that prevents publication in their newspapers. From the Minister's statement, it might appear the English Press were discriminating against us.

Ruairí Brugha

I find myself agreeing with the point made by Senator FitzGerald on this section. The Minister should not be deprived of the use of discretion in relation to advertising. I mentioned this earlier. The Minister should have the right to decide what is best in the interests of the community and our other interests. The situation would be curious if the Minister could waive or give permission for an overseas publication and not be able to do so for a home-produced publication.

Mr. Lalor

I want to clear up some misconception arising from Senator Belton's remarks. I wish to say positively that at present advertisements for Irish unit trusts are not allowed in the UK. If any Irish newspaper carried advertisements of Irish unit trusts they would not be allowed to enter Britain. It is the same on the Continent. There is a strong case for outright prohibition. People will make the case that this will be used as a convenient way of keeping some foreign papers from coming in. I do not want to go to that extent.

Mr. McDonald

It would be in the interests of the Irish investor that they should see what our neighbours are offering. This would have the effect of having the maximum value offered to would-be Irish shareholders.

Mr. Lalor

I have been endeavouring to explain that I am trying to protect the interests of the Irish nation by trying to keep as much money as possible at home. This Bill is for that purpose and also to protect the investor in registered Irish unit trusts. It is not intended to protect the Irish investor in a foreign trust. It is intended to try to discourage people from investing in a foreign trust. It does not want to blindfold in any way.

Mr. Alexis FitzGerald

Might I make a comment on what the Minister has just said? He is absolutely correct in what he says with regard to the advertisement of Irish unit trusts in British newspapers. That is because they are not a licensed dealer under the Prevention of Fraud Act, which is a somewhat different matter. I am not informed in regard to the practice of our Irish unit trusts as to circumventing that legislation. I can tell the Minister—and I think I made this point on the Second Reading—that that legislation, in fact, can be effectively circumvented and is effectively circumvented in the case of Channel Islands unit trusts, not by trying to deal but by telling the British public, by appropriate advertisements in appropriate newspapers, about their performance, the results of their last block offers and so on. They are not in breach of the Prevention of Fraud Act by doing this, but they are enabled to bring their wares to the notice of the British public, which they do effectively.

I do not know what the policy of Irish unit trusts is at present. I know the existence of two—there may be a third—which would have been caught by the original draft definition of the unit trust scheme but which, I think, are now exempt from it. One of these is a recent creation. I do not know how long the other is in existence. I do not know whether they have thought it worthwhile trying to circumvent the Prevention of Fraud Act. I suspect there are other reasons why they do not. They may be connected with the gentlemen's agreement to which the Minister referred in his Second Reading speech.

Question put and agreed to.

SECTION 8.

Government amendment No. 7:

In page 9, to delete subsection (3), lines 60 and 61.

An Cathaoirleach

It is proposed to discuss amendments Nos. 7 and 10 together.

Mr. Lalor

This is a straightforward case of transferring this section from where it is at present to a position after subsection (4), in order to make it more embracing. The Minister may, by order, amend or revoke an order under this section. The transfer of this section to the end of subsection (4) is in order to include the power of the Minister to amend or revoke an order made under the present subsection (4). Amendment No. 10 is the arrangement for its replacement at the end of the present subsection (4).

Mr. Alexis FitzGerald

I welcome anything that removes disorder and improves order.

Amendment agreed to.

Government amendment No. 8:

In page 10, subsection (4), to delete paragraph (a) lines 1 to 5, and to substitute the following paragraph:

"(a) The Minister may by order provide in relation to all registered unit trust schemes or a specified class or specified classes thereof (denoted by reference to such matters as the Minister considers appropriate) or in relation to all such schemes other than a specified class or specified classes thereof denoted as aforesaid) that not less than a proportion specified in the order of any property for the time being subject to any trust created under a scheme to which the order applies shall be Irish securities or other property in the State."

Mr. Lalor

This amendment is necessary because the existing wording may not give me power, as was intended, to prescribe different proportions for investment in the State for different types of unit trust schemes. The purpose of this amendment is to give me, in the fixing of the amounts that have to be invested here, a certain degree of stability.

Mr. Alexis FitzGerald

I welcome this amendment in so far as it makes the administration of this section more flexible. Would the Minister be able to tell the House what kind of unit trusts would be receiving benefit of an order providing for a smaller proportion to be invested in the State where other unit trust managers would be burdened with the obligation to invest a higher proportion? I do not wish to press the Minister to tell the House anything that might be based on confidential information or private representations of one kind or another. Is the thought here that there are certain institutions which are subject to certain burdens with regard to investment here, which are not statutory burdens but burdens arising from their operations here? Is it thought that, in relation to such, if the manager registered the unit trust scheme, a higher proportion would have to be invested here, so that the unit trust scheme could not be used if a lower proportion were being specified for other unit trusts as a device to escape from the burden of policy about which I have expressed myself as critical? I am not certain if that policy is a good one. I should like as much information as the Minister is able to give.

Mr. Lalor

What I have in mind here is in relation to investment in security or any other property whatsoever. It is the question of investment in property not quickly realisable. If some of the money was going into property, there would be a necessity for insisting that a greater degree of Irish investment should take place in that regard. Assuming that there was an arrangement whereby 60 per cent of the investment was to be in Irish securities——

Mr. Alexis FitzGerald

I am shuddering at the percentage.

Mr. Lalor

The Senator spoke yesterday about the dogs barking in the streets, so I did not want to say 20 per cent or 80 per cent.

Mr. Alexis FitzGerald

The Minister did not split the difference.

Mr. Lalor

I can hear the dogs barking, too. If 50 per cent were to be invested here, and the other 50 per cent were to be invested in securities abroad that type of arrangement would not appeal to me. This is why I am looking for this degree of flexibility.

Dr. Belton

As the Minister is aware, this amendment reflects in some way the main theme of the Second Reading. The Minister wants money to be invested in Irish securities—assets of any description. Is the Minister going to lay down here a specific percentage investment in Irish securities or property? If he is, can it ever be changed? If we have six different Irish unit trusts, each having their particular percentage of investment in Irish securities or property, whatever they may be, and the Minister decides that the percentage should be increased because of market trends and various other things, to 40 per cent, it would be very difficult to apply the increase to 40 per cent uniformly over every unit trust. They will not all be able to liquidate and transfer at any stage.

I see great difficulty in the Minister enforcing this. I agree with the Minister that it should be done. For instance, I would agree that, if it were practicable, 100 per cent investment in Irish securities should be arranged. Senator Alexis FitzGerald brought out that point earlier. If the Minister ever feels a change is necessary I do not see how he can equitably and legally enforce that change evenly over every unit trust. They may not all be able to re-invest in Irish securities. Does the Minister understand the point I am making?

Mr. Lalor

I do, yes. The Senator is talking about the question of the Minister having set a particular figure and then at some stage saying that this figure had to be increased?

Dr. Belton

Yes.

Mr. Lalor

At all stages the fact is that we must always visualise the situation. Suppose we jump from 20 per cent to 30 per cent, as the Senator has suggested, over a short period, 10 per cent of the subscribers who hold units can come back and re-sell them to the trust and get their money back. Technically, that means the management needs to sell 10 per cent of their securities. This means that the management have to realise 10 per cent of their holding. No Minister for Industry and Commerce, when making those regulations, could envisage a situation where he was going to say at any stage: "You must increase your percentage of Irish securities from 20 per cent to 30 per cent." I presume he would specify a time, but not a time which would endanger the value of a trust scheme or do damage from the point of view of protecting the investor. He should not begin making regulations which would interfere with the interests of the investor. In relation to this gentleman's agreement to which the Senator's colleague referred——

Dr. Belton

I referred to it myself.

Mr. Lalor

Yes. There is this gentleman's agreement with the insurance people whereby there was an arrangement for 66? per cent up to 80 per cent over the next seven years. This is the type of operation I would envisage. I would expect sucessive Ministers for Industry and Commerce to encourage registered unit trust schemes to invest more and more of their moneys in Irish securities or property.

Dr. Belton

I am glad to hear the Minister speaking along these lines. I am quite certain the Minister is genuine. The problem from the point of view of the Opposition here is that we always take on trust what a Minister says. We know the Minister we are dealing with at the time will honour our trust but, unfortunately, his successors may not.

The Minister understands the difficulty here. I am glad to see that he has promised some flexibility in this arrangement if he, or his successor, ever intends to increase the percentage of the investment in Irish securities. Unit trusts will not all have the same portfolio, shall I say, and they will not all invest. Therefore, some unit trusts may be hard hit if the time allocated by the Minister to increase the investment in Irish securities by 10 per cent is too short. It may hit one hard and not another. I think the Minister appreciates the point I am making here.

Mr. Lalor

Yes. The difficulty the Senator is referring to is that some other Minister for Industry and Commerce may insist upon too short a period. It is very difficult to cover everything.

Dr. Belton

I appreciate that.

Mr. Lalor

Under this legislation the Minister is to protect the unit trust board or the investor. It could not be in the interests of the investor to say, "You have to transfer from 20 per cent to 15 per cent of your Irish investment inside the next 12 months." I would not visualise even a Minister——

Dr. Belton

——of another party?

Mr. Lalor

Yes.

Mr. Alexis FitzGerald

The Minister should really consult again with the Central Bank and the Minister for Finance before he determines these proportions. They are, after all, the people concerned with finance; the Minister for Industry and Commerce has other heavy duties to perform.

On a drafting point, I have been trying to read this paragraph, as amended, and is it possible the amendment by the employment of the words "other than a specified class or specified classes thereof (denoted as aforesaid)" has the effect that in relation to those specified classes he cannot specify any proportion?

Mr. Lalor

No, I do not think it does.

Mr. Alexis FitzGerald

I think the best way to try to look at it is to underline the words "other than a specified class or specified classes thereof (denoted as aforesaid)". He has power to make the order. The proportion follows after the exception "other than the specified classes". Does that not exclude him from any ability to determine a proportion in relation to those classes of unit trusts that he has specified? It is such a point that I do not think it is fair to ask the Minister to deal with it in Committee.

An Leas-Chathaoirleach

It is a draftsman's point.

Mr. Lalor

I appreciate that and I shall have a look at it in the meantime.

Mr. Alexis FitzGerald

I shall have a great deal more to say about this but I want to ask the Chair for guidance. Can I take it we can debate the whole of subsection (4) when we are dealing with the section?

An Leas-Chathaoirleach

If the amendment is agreed to then the debate will be on the section, as amended.

Mr. Alexis FitzGerald

That does not prevent me from presenting a case with regard to the effects of these proportions?

An Leas-Chathaoirleach

No. The only thing that the Senator would be precluded from discussing on the section, as amended, would be a specific matter on which a decision had been taken. It is not possible to go back on a decision already made in Committee.

Amendment agreed to.

Government amendment No. 9:

In page 10, subsection (4), line 26, to delete "company" and to substitute "body corporate".

Mr. Lalor

This is purely a drafting amendment.

Amendment agreed to.

Government amendment No. 10:

In page 10, before subsection (5), to insert the following subsection:

"( ) The Minister may by order revoke or amend an order under this section (including an order under this subsection)."

Amendment agreed to.

Government amendment No. 11:

In page 10, to add to the section the following subsection: "() In a prosecution for an offence consisting of a contravention, in relation to a unit trust scheme, of an order under subsection (4) of this section, it shall be a defence to prove that the property subject to the trusts of the scheme was in compliance with the provisions of the order within a period of time after the date of the offence that the court in which the prosecution is brought considers reasonable in all the circumstances."

Mr. Lalor

This amendment was introduced arising out of comments made during the Second Stage debate. Some Senators raised the question that, if the management in their investment were working on the borderline of 50 per cent here and 50 per cent outside and the value of the shares here dropped, perhaps only 47 per cent of their investment would appear to be here and 53 per cent appeared on the far side. This amendment is introduced in order to provide a safeguard for a manager and trustee in a case where the level of investment in the state falls below the proportion prescribed by order under subsection (4) due to unforeseen circumstances, such as a sudden fall in the standard of Irish securities.

Mr. Alexis FitzGerald

I can see what the Minister had in mind when putting down this amendment. I am afraid I do not think it is at all adequate. I do not think it should be an offence to fail to comply with this order. The Minister has adequate powers to cancel the scheme if he is satisfied no genuine effort is being made by the manager to comply with these requirements. As for leaving the matter to the High Court for determination as to whether the time was reasonable: what do these chaps know about the operations of unit trusts and what is a reasonable time? The time should be specified here.

There should be no question of people being guilty of an offence and being left in a position where they can get away from the court with the prosecution against them having failed. Because of the very circumstances which the Minister mentioned, where the investments in the Irish market may have dropped or, what is more likely is that the successful manager, who by the management of his portfolio has led to an appreciation in the foreign investments, with the result that the unit holders have been enriched by the sucess of his efforts, will be in the position of having committed an offence. He has to rely on a subsection to prove that he has acted in timely fashion with regard to it. He will be forced to sell his UK equities, which have increased in value, before he thinks—in the interests of the unit holders—he ought to sell out.

There ought to be a statutory provision, if there is to be an order specifying proportion, so that the manager will know when he is making his investments. He may think of a particular investment as being a two or three year run. This is a short-term operation. He has got to keep himself in the position where he will know that, if there is an appreciation of one and a depreciation of another, he will have that much time to adjust. That time ought to be generous if when he establishes his trust he satisfies the Minister that his initial investment has been of the proper proportion. If his good investment policy has appreciated one section where it could not because of the circumstances have appreciated other sections, then there should be no question of his being guilty of an offence and he should have plenty of time to make his adjustment to the satisfaction of the Minister with regard to the proportion in question.

I raised a point on another section which is appropriate to this. It is the question of the necessity for the definition of "value". I asked the question as to what manner a site which is half built, if that happens to be the investment, is valued. In this section the Minister takes the power to determine the value. When does he make this determination? What competency has he got with regard to the determination of the value? On what basis does he determine it? What happens if he determines it in a particular way which is wrong, without having the special competency or without being obliged to consult with people who have it? If there is to be investment in property other than security, I would have expected to see the Commissioner of Valuation, a reputable valuer or a member of some qualified body coming in to have a look at the other resources of the unit trust in order to make a judgment as to whether the unit trust in question would be able to complete the half-built building. What is the value of a half-built building subject to contractual obligations of one kind or another? This difficulty could be got rid of if we eliminated the question of an offence and let the Minister rely on cancellation. This whole section will have to be rethought. At the moment we are dealing only with the question of the offence. It is not adequate to deal with a situation that could arise honestly and genuinely for successful managers in the operation of their trusts.

I am sure the Minister wants to have successful Irish unit trusts and I think this is the only way he will really effectively keep these savings at home. There is a great deal of reliance on our ordinary patriotism, which was shown in a recent take-over attempt when 90 per cent of the investors acted entirely contrary to their interests. It was very interesting evidence of a sort of natural patriotism which I think will rally around a manager who has the confidence of the people. I hope the Minister and his colleagues will not take offence when I say that small investors here may have more confidence in successfully operated unit trusts than they would have in relation to the fate of their money invested in gilt edge securities. For the moment I am simply arguing that this amendment does not go far enough.

Amendment agreed to.

Question proposed: "That section 8, as amended, stand part of the Bill."

Mr. Alexis FitzGerald

I find it difficult to know how to attack this very vital section in the way that I think it must be attacked. First of all, the Minister in this section takes excessive powers with regard to what he may provide in the sense that I do not think, in regard to any of the matters listed in subsection (2), that it is not desirable to have provision made for the protection of the unit holders. Instead of having these matters dealt with by order, they should be in the statute itself. I am quite sure that the Minister already has draft orders in existence, that he already has a policy with regard to these various matters. That policy should be expressed in the statute. It is right that he should have a residual power to supplement the matters, which would be spelled out in the statute, to do this by order. It would be wrong to deny him this power. I will not go into the details of this as it is to be found in paragraph 324, chapter 9, of the Jenkins Committee Report on unit trusts. The recommendations there give an example of what I have in mind. Instead of the Minister having the power by order to specify the contents of advertisements, the statute should say, just as the Companies Act says, what has to be in a prospectus. In that way one knows one's position right from the commencement of the whole operation. Do not forget that the Minister here has power to amend or revoke his order.

With regard to the contents of the prospectus, I do not think he ought to have that particular power. The Jenkins Committee suggested that the information to be included in the prospectus should include the following: the names of the manager and trustee and the auditor; if the manager is a subsidiary of another company, it should be required to state the name of its holding company and of its ultimate holding company; details of the maximum charges permitted by the trust deed, divided between initial and annual charges; details of the investments held as of a date not earlier than that of the last half-yearly accounts to have been filed with the Board of Trade; an explanation of the investment policy followed, including any provisions in the trust deed as to the minimum number of different investments to be held in the trust at any one time; the maximum percentage of the 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 on holdings of unquoted securities; particulars of distributions made to unit holders over the last three years; and where the trust deed can be inspected.

I recommend this document to the Minister for his consideration before Report Stage. It is described as The Rules of the Association of Unit Trust Managers, price to non-members, five shillings. It is a very reputable body. Very much of what the Jenkins Committee recommended is, in fact, standard practice in the deeds that are sanctioned by the Board of Trade.

My own view about this is that it would be much better if we strengthened by clarification what is to be in this section and I should like the Minister to look at paragraph (h) of subsection (2):

(h) may specify requirements in relation to the charges imposed for the services of the manager under the scheme (including, if the Minister so thinks fit, a requirement that the charges shall not exceed the amount or amounts obtained when calculated in such manner or by reference to such matters as may be specified in the order).

I presume that any order made under this section would apply equally well to one unit trust as to another. I do not know if I am understanding correctly paragraph (h) of subsection (2), but it would seem to me to mean that it would be laying down a scale of charges as might be laid down by the Auctioneers Association for its members, and, as the Minister for Justice determines, with regard to the activities of solicitors—a fact which he seems to forget from time to time incidentally. In fact, the scale to be applied to all unit trusts would be quite inappropriate, if I understand the operations of these trusts correctly, because the charges that a manager would make if he was taking units of £5 and the charges that he would make and should make if he were taking units of a £1,000, would be quite different: the expense of looking after countless certificates in relation to small sums, with a vast register of unit holders, would be very much more considerable than where the unit investment is of a higher order. It is one of the reasons why, I think, it is possible to say that the performance of certain trusts is better than that of others. The units they take in are large and this makes it a less expensive thing. But if you incur expense, it is not merely expense in the sense of outlay. The manager should be remunerated for the degree of capital that he has invested in incurring this expense and for the fact that the service he renders is more onerous. This is not a matter which should be specified in this way. It is a matter which should be left to be determined in his view as to whether the trust deed deposited with him when the scheme was being registered, or any supplemental trust deed that might thereafter come to be deposited, are fair in the circumstances of the particular trust and the policies he intends to operate. It should be, of course, a matter which should be published for the information of unit holders so that they know what the manager is, in fact, getting out of the thing.

I have great difficulty in understanding paragraph (i). It relates to section 15 which, when you look at it, relates back to section 8 (2) (i). If the Minister would do so, I would like to have a reconciliation of these and to know why this is there at all—why it is not simply in section 15. It seems to me to be more orderly to add whatever is required with regard to the form in the conclusion to section 15, which we need not go into any further.

With regard to subsection (4), which is the difficult subsection, perhaps much of what I have said already would bear repetition. There are one or two points on which the Minister has indicated having an open mind. The first proposition is that if UK unit trusts perform better than Irish unit trusts it will be very difficult to keep this a secret from the Irish investors. They will be comparing the performance of UK trusts with Irish trusts and they will tend to invest in UK trusts rather than in Irish trusts whose performance may have been impeded by an unwisely high proportion being determined as the amount that must be invested here. There are some people interested in income—my remark could be misunderstood, I mean income in terms of investment policy—and I could see perhaps a gilt-edged sort of trust coming into existence. There will be this whole question of growth. Perhaps I can summarise my position by using this kind of phrase to the Minister: "Twenty-five per cent of something is much better than 80 per cent of nothing." If you have successful unit trusts which attract Irish funds, even if that 75 per cent is invested abroad— and it need not necessarily be—the unit trust manager will take the view that he must conform with this proportion. The whole scheme is designed to control unit trusts and not to establish them. If the Irish unit trust movement gets under way and is a success, because it is as flexible as the law can allow it to be, it will be very much better because a fair amount of Irish savings will be captured. Incidentally, it would be good for the country if the Irish unit trusts are well managed because they would be flexible. Even though there would be difficulties in attracting UK investors into Irish unit trusts, this may not be true of many other types of investors. A well-managed and successful unit trust will be beneficial to the country, quite apart from investment policy. It keeps the money in the country and also brings money in, and this is good all round.

I do not like to repeat myself but I consider it very important that this question of value be looked at and receive a proper definition. It is very important that any change made by the Minister in the proportion should give the manager every opportunity to get his portfolio or general investment into the proper condition. On the question of value, how often has the proportion to be complied with? Has it to be complied with daily? Does this require the manager to make a daily evaluation of his portfolio? Does it mean that he must contact the Minister in order to estimate the value of the property concerned every morning? It would seem to me that he would be guilty of an offence if on a Tuesday he is wrong, even though he is right by Wednesday. I think this should be made on some specified basis, such as taking every half year with a report. The section, if revised so as to make it more flexible, would give auditors an opportunity to make the assessment, as regards whether the section has been complied with and that the proportion was found to be right, when that report was being made. I repeat again that I do not think there should be any question of an offence. The Minister has every power to keep people in order by cancelling the scheme if he is satisfied that they are not in order.

With regard to subsection (4) (c), the matter of what is the proportion of the business of a body corporate carried on in the State depends on the opinion of the Minister. The proportion of business varies from quarter to quarter.

Progress reported; Committee to sit again.

The Seanad adjourned at 1.5 p.m. until 3 p.m. on Wednesday, 24th February, 1971.