I move:
That Seanad Éireann approves the following Order in draft:
Trustee (Authorised Investments) Order, 1982,
a copy of which Order in Draft was laid before the House on 29 March, 1982.
Trustee (Authorised Investments) Order, 1982: Motion.
Clare): The Trustee (Authorised Investments) Act of 1958 contains a list of investments in which trustees may place trust funds unless the instrument setting up the trust forbids them to do so. The terms of a trust may provide wider powers of investment than those set out in the Act; in that case of course trustees are not limited to the investments authorised in the legislation.
Section 2 of the 1958 Act provides that the list of authorised investments may be amended by order. Before the Minister may make the order a draft must be laid before both Houses of the Oireachtas and a resolution of approval must be passed by each House.
The list of authorised investments has been reviewed frequently since the passing of the original Act. As a result, several orders have been made under this section which have considerably increased the range of outlets for trust funds. The most recent order was made in 1979. The draft order now before the House proposes to authorise trustees to place trust funds in interest-bearing deposit accounts in three non-associated banks. The Central Bank, which is the licensing authority for banks, has recommended that trustee status should be granted in these three cases. This will bring to 31 the number of licensed banks in which trust funds may be deposited: these include the four associated banks and most of the other leading banks in the State.
Before an order of this kind is laid before the Oireachtas, the following people must be consulted: a judge of the High Court nominated by the Chief Justice, the Public Trustee, the Governor of the Central Bank, the President of the Incorporated Law Society of Ireland, the Chairman of the Irish Banks' Standing Committee and the President of the Stock Exchange — Irish Unit. All the statutory requirements in this respect have been complied with.
I am satisfied that the banks named in the draft order are secure and that they are suitable for the investment of trust funds. The order will further widen the range of investment opportunities open to trustees. I therefore commend the motion for approval by the House.
There cannot be objection to this. It is desirable that there should be flexibility in regard to the investment of trust funds provided that there have been the usual guarantees. The Minister has indicated in his speech that the Central Bank has recommended that he has fulfilled the statutory consultations that arise under section 2 (3) of the original Act and accordingly this is welcome.
The Minister has indicated that orders of this type have been made repeatedly from time to time. The number of banks has now risen to 31 compared to 12 in the original Act of 1958. It might be helpful if rather than have orders like this we could have consolidation. Rather than have us in the position that we have to refer to order after order to find out how the original list is being extended, a short Bill which would make a substitution for section 1 of the 1958 Act might be in order. I notice that section 1 of the 1958 Act which we are extending here was a total substitution for section 1 of the Trustee Act, 1893. This might make it more convenient for reference.
I welcome the Minister of State to the Seanad and wish him a fruitful period of office if not, from a constitutional point of view, a long one.
I would like to give a general welcome to this order but I would like to ask the Minister a question about the general matter involved. The Minister has outlined the statutory requirements of people who must be consulted before these investments are made. I have no doubt that, having examined the credentials of these institutions and the proper people having been consulted, the Minister is satisfied that these institutions are satisfactory investments for trustee purposes.
There is a matter of general principle here to which we should direct our attention. In an issue of this kind the Government, the State and ourselves are giving a certificate to a particular institution and informing the world at large, and investors in particular, that the institutions named in these orders are satisfactory and secure. We are talking here about trustee investments. Consequently, they must be investments which can offer security to the type of investment which is involved in a trust of this nature. We are dealing with substantial investors in many cases but we are also dealing with relatively small investors. We are dealing with trusts from which people would otherwise have no income or access to an income upon which they are dependent. Consequently, the responsibility of the State and the Seanad is very considerable because we are giving a certificate, in effect, to these institutions and to these investments.
It is relevant to raise this issue in view of the general economic climate of the country, but also in view of certain events in the financial area which have attracted considerable public attention. It would be invidious for me to mention names or to give specific instances, but I think what I am talking about will be clear when I proceed. I will give an instance in which very substantial moneys in the property field have been manipulated, and I do not necessarily mean manipulated in a morally pejorative term. I am talking about the role of financial institutions, the role of investment bodies, some of which may involve trustee investment.
We are talking about 31 banks. I am referring to the role of these banks as the trustees and custodians of money and in many cases small investors' money, where that money is going, how it is being invested, to whom and under what circumstances it is being advanced. If we as the Seanad, give a certificate to a particular institution, are we in effect giving a licence to that institution to provide money to whoever turns up at the door of that institution? Recently, we had in the public prints and elsewhere the case of a very substantial property empire which was built upon advances of substantial moneys by important financial institutions. There can be little doubt in any of our minds that some of the sums involved in that may well have been trustee investments. It is neither the time nor the place to go into the precise financial details of that operation. The Chair may feel that I am bordering upon the irrelevant, but the point I am trying to make is that we have a situation in which substantial moneys were advanced for operations which were essentially paper operations in terms of what they were dealing with, but which by manipulation of this money led to what could have been, and possibly in other cases may well have been, and may still in this particular instance turn out to be, very substantial profits for an individual or small group of individuals, and this was based upon the manipulation of moneys and investments which may have come from trustee sources.
I should like to make myself very clear. I am not insinuating or in any way suggesting that there is anything illegal in these operations or that they contravene the rules by which this type of thing operates. What I am referring to is a situation in which one has small investors, trustee investments, trustee savings and the accumulation of funds on a trustee basis and these moneys being used to accumulate very substantial profits for property speculators.
At the same time we have a situation where very large numbers of people are struggling to buy houses for themselves and for their families. They are enduring and will endure very substantial hardships. In many cases they have committed themselves to payments of one kind or another, premiums on loans and so forth. They now find themselves possibly redundant or unemployed and in order to get their hands on the bricks or tiles of their houses, are struggling to acquire relatively small sums of money. Yet at the very same time, we have institutions prepared to advance very substantial sums to people in the speculative area and often on what appears, by recent accounts, to be very small security.
What I should like to ask is this: have we, in this House, any way of referring to this problem? Have we any way of indicating to these institutions that, on behalf of the people who are in this situation, we take a very poor view of some of the operations which have taken place?
I should like the Minister, when he is concluding, to answer two questions. Firstly, what are the criteria by which people who vet these applications decide that one institution rather than another is suitable for this kind of investment or suitable to be designated under this legislation? Secondly, I should like him to indicate and in particular to indicate to the people of Dublin West who are involved in this kind of situation where they have participated in the democratic process, what the policy of his Government is on the subject of the manipulation of investment and trustee moneys in order to provide speculative gains for a small group of individuals.
I thank the two Senators for their contributions. Senator Dooge's suggestion about a consolidation Bill will be considered.
With regard to the institution mentioned by Senator O'Connell, there is a merchant bank attached to the firm to which I think he is referring. That merchant bank is not authorised under this Bill or by any order. As regards the question of scrutiny, there is very tight scrutiny maintained by the Central Bank on all banks. I am sure that the question of misuse of trustee funds is taken into account every time they scrutinise the authorised banks. That is the instrument of scrutiny.
I again thank Senators for their contributions.
Question put and agreed to.