Seanad Éireann debate -
Thursday, 1 Jun 1995

Vol. 143 No. 14

Stock Exchange Bill, 1994: Committee and Final Stages.

Sections 1 to 8, inclusive, agreed to.

SECTION 9.

Mr. Mulcahy

I move amendment No. 1:

In page 13, between lines 9 and 10, to insert the following new subsection:

"(3) The trading activities of an approved Stock Exchange shall not take place otherwise than in public.".

I thank the Minister of State, Deputy Coveney, for coming to the House for this debate. He was also here last week for the Second Stage debate when we recalled that the central function of this Bill is to bring the operation of the Irish Stock Exchange to Ireland. The Irish Stock Exchange looks to London more than to Dublin, although some regulations are now being made here. However, reform must come ex-London. I welcome this Bill because it makes the Central Bank the regulatory authority of the Stock Exchange.

The purpose of this amendment is to ensure that the trading activities on the floor of the Stock Exchange take place in public. I do not know if this rule applies now, but I remember going to the Stock Exchange on one occasion and being told that I had to be accompanied by a person from one of its member firms. I did not feel welcomed and it was not indicated to me that public facilities were available to view its important economic function. There is a precedent for this because the old coin exchange on Dame Street was open to the public as is the New York Stock Exchange.

There should be no mystery or surprise about raising capital or trading shares on an open market. Many of these companies are public and have thousands or millions of shareholders. The public own the companies on the Stock Exchange, whether by direct share investment or through pension or mutual funds. There is no reason the public should not be able to view the activities of the Stock Exchange as part of a healthy free enterprise economy. People may not avail of such an opportunity, but there is an onus on members of the Stock Exchange, if they are of the view that it would be dangerous or detrimental to trivialise the activities of the Stock Exchange, to advance that argument and to say why the public should not be allowed to attend.

The Minister may say this is not necessary, but I ask him to consider an amendment to this section if he does not accept the one I have tabled.

Mr. Quinn

I support Senator Mulcahy. If the Stock Exchange is to command the respect and support of the nation, it must operate in an open and transparent way. We must move away from the old idea that the Stock Exchange is an insider's club, as it used to be, because it is there for the benefit of the many and not a few. There was a time when the Stock Exchange was believed to exist for a small number of people. Every pensioner and contributor to a pension fund is involved, although not directly, in the results of the Stock Exchange.

I accept what Senator Mulcahy said — that the Minister may be able to explain why there is no need for this amendment. I visited the Stock Exchange on a few occasions and I was surprised when I was told I had to be accompanied by a person from one of its member firms. I am not sure if that is accurate. Perhaps the Minister could put our minds at rest on this issue.

In the past we relied on our connection with the London Stock Exchange to build a reputation for the Irish Stock Exchange. This Bill was introduced as a result of an EU Directive which states that every member state must have its own independent regulatory system. It is ironic that Europe seems to be forcing us away from the integrated system we had with Great Britain. This contrasts with what is happening elsewhere. I hope the separation between the London and Irish Stock Exchanges will be seen as a first step towards a different type of integration, where each stock exchange will operate in a different member state. This must happen in an open, clear and transparent way.

I welcome this Bill. We must ensure that the Stock Exchange does not operate behind closed doors and that we can visit it. I hope the Minister will accept this amendment.

Minister of State at the Department of Finance (Mr. Coveney)

I thank Senator Mulcahy for tabling this amendment. Although I do not agree with it, that does not mean I do not appreciate the reasons behind it. Senator Quinn mentioned integration. Although it starts with separation from the London Stock Exchange, it brings us into the mainstream of a European network where exchanges and people can operate in different countries. It starts with separation, but it brings it into a European context.

The amendment proposed by Senator Muclahy to section 9 would appear to require all the trading activities of an approved stock exchange to take place in public. It is fair to say that when most people think of an exchange they still think of a trading floor with brokers shouting orders to each other. This is an image from the past. It does not match the reality of trading on modern stock exchanges. On the Irish Stock Exchange, as in modem exchanges generally, most trading is done off the floor of the exchange, usually by telephone between brokers working from their offices on the basis of the most recent prices quoted on the exchange which will be available to the brokers and to any subscribers to the service on the screen.

There is a simple reason for screen based trading; it is cheap, efficient and quick, for both stockbrokers and clients. It is the way business is done on modern exchanges and to require the Irish Stock Exchange to operate otherwise would be a step backwards. I am not clear that this is what the Senator proposes. I am taking his words rather literally.

The role of the stock exchange in this trading environment is to ensure that the market operates efficiently and that all clients are treated fairly. To this end member firms are required to inform the stock exchange of all deals done off the floor of the exchange within five minutes of the transaction taking place, and the exchange has indicated that in practice the exchange will be informed within one minute. Prices are then posted on the screen by the exchange and are available to all other member firms. If a transaction takes place after hours it must be communicated to the exchange before the following morning's opening and is posted on screen before the opening.

The Irish Stock Exchange has detailed conduct of business rules which govern how the member firms of the exchange do business with their clients. They specifically require the member firms to deal to the best advantage of their clients in all circumstances. As part of the enforcement process for these rules, the exchange monitors all trading on the exchange and keeps records which enable it to reconstruct all the details of a specific day's trading and of a specific transaction.

The Irish Stock Exchange rules, including conduct of business rules for member firms, will, under the Bill, be subject to approval of the Central Bank and the bank will be able to require those rules to be amended where it considers this to be necessary. In this context, because I assume Senator Mulcahy's amendment arises from a desire to ensure that investors are treated fairly, it is important to note that the Central Bank will be required, as regulator under the Bill, to act in such a way as to promote the proper and orderly regulation and supervision of stock exchanges and their member firms, the proper and orderly regulation of financial markets and — I stress this point — the protection of investors.

The EU Investment Services Directive imposes detailed reporting requirements for transactions on stock exchanges which will apply to all European exchanges and which will he enforced in this country by the Central Bank as competent authority under the directive. While I understand the motivation behind Senator Mulcahy's proposed amendment, I trust that I have explained why modern commercial realities dictate that much business here, as elsewhere, is done by brokers sitting in their offices rather than on the floor of the exchange. We cannot put the clock back, but we can do our utmost to ensure that trading is conducted fairly, and Stock Exchange rules in addition to the Central Bank's regulation should ensure this.

Mr. Mulcahy

I accept the Minister's remarks. The activities he mentions cannot be undertaken in public. Perhaps my amendment is not worded accurately enough, but the Minister could have been more helpful if he proposed an amendment to the Bill which would incorporate what I wrongly assumed he might have known I was thinking. I am referring to the trading floor. The Minister will be aware that in other stock exchanges — for example, the New York Stock Exchange — there is a large trading area. The trading floor in Anglesea Street is an open area where people can come and go. The rationale behind my amendment was to cover the type of situation referred to by Senator Quinn, where somebody wanted to go down to the floor of the central exchange and see what was going on.

I will not press the amendment because if the Minister——

Mr. Coveney

I agree that I may have reacted literally to the Senator's words, which I had to do, but I have no problem in contacting the exchange on the points made by the Senator. Although unlike the Senator, I have not visited the exchange, I understand that there is a certain amount of public access to the exchange. There must be security measures because one cannot have crowds charging in and out. I was concerned to explain and emphasise the protection available to investors. However, if there is an issue regarding access by the public, I will take it up. It is not necessary to amend the Bill on this basis. I know what the Senator is saying and why he is saying it.

Mr. Mulcahy

In the light of the Minister's remarks I will withdraw the amendment, but I will do so with the caveat that the Minister consider an amendment — it would not be a large amendment — which would have the effect of ensuring that there is public access to the principle trading floor of an approved stock exchange.

Mr. Coveney

I will not consider an amendment, but there is no problem in taking up the matter and we will do so.

Mr. Mulcahy

In that event I must press the amendment.

Mr. Cregan

May I suggest a compromise, because I understand the viewpoint of both the Minister and the Senator. Will the Senator consider the idea of an approved area for information for the public? The vast majority of people in Dublin will not go Anglesea Street to see stocks and shares being transferred. However, those who have an interest, such as pensioners, should be able to go to an area of the exchange where information is available to them. While those engaged on the Stock Exchange may not be on the floor of the exchange, given the modem transaction methods described by the Minister, is it possible to provide a screen and information area where an update could be provided to interested parties and would the Senator agree to this proposal?

Mr. Coveney

My understanding is that there is public access. The point raised by Senator Mulcahy is that such access is unnecessarily difficult as a result of people having to have people with them and so on. This is a detail and it does not require an amendment to the Bill. I am, therefore, not prepared to accept the amendment. I understand what the Senator is saying and I will make inquiries. I am not fully aware of the degree of public access at the moment. Senator Quinn mentioned the need to be in the company of a member and so on. We will take the point, but it does not require an amendment. I accept the spirit of the Senator's point that it should be as open as possible, consistent with proper security and the running of the business.

Mr. Quinn

I believe that Senator Mulcahy will probably not press the amendment. The objective here is to win the respect and support of likely customers who are going to be investors, either directly or through other shareholders. The Stock Exchange will meet this challenge. I accept what the Minister has said. The Stock Exchange will become, and is already, market driven. Facilities are available and it is possible to visit. On the two or three occasions I have visited the exchange I have never seen it packed. There is probably no need to do any more other than have the Central Bank remind the Stock Exchange — it does not even have to be reminded — that it is a market driven force. All the facilities are in place and it will thrive.

It will be a challenge for the country to realise that it is not linked to Britain and that we do not have the controls that were there. We must do a good job in this if we are going to earn the respect of the financial institutions around the world. We are capable of doing so, as is the Irish Stock Exchange. I am sure that Senator Mulcahy will not press his amendment.

Mr. Mulcahy

I take the good sense of what the Minister and Senator Quinn have said, but there is a very important principle here. Dáil Éireann is open to the public, as is City Hall. Given this, I do not see why the premier floor of the Irish Stock Exchange, which will be regulated by the Central Bank, a public institution, should not be open to the public.

Mr. Coveney

It will be open to the public.

Mr. Mulcahy

I am disappointed that the Minister is not taking the trouble to move himself with a little intellectual effort and put into the Bill that members of the public have the right of access to an approved stock exchange. In view of this, I am going to press the amendment.

Acting Chairman (Mr. Fitzgerald)

To correct you. Senator, the Dáil and Seanad are not open to the public except with the approval of Members. A Member must accompany a person in the Houses. There is very little difference between the Minister and the Senator. However, as Acting Chairman, I do not want to interfere with the debate. Does the Minister have any final comments to make with regard to the amendment?

Mr. Coveney

I have listened carefully to the Senator's points. There is public access to the Stock Exchange, as there is to the Houses of the Oireachtas, although there are some limitations. For security and business reasons, there could not be unlimited access. If the access to which the Senator referred is unnecessarily hindered, we will take it up with the Central Bank and the Stock Exchange. I do not think it merits an amendment to the Bill.

Amendment put and declared lost.

Section 9 agreed to.

Sections 10 to 13, inclusive, agreed to.

SECTION 14.

Mr. Mulcahy

I move amendment No. 2:

In page 18, subsection (1), between lines 15 and 16, to insert the following new subparagraph:

"(i) has failed to comply with a direction of the Bank,".

The objective of this simple amendment is to give a wide ranging and discretionary power to the Central Bank, as the regulatory body, to revoke the approval and licence of a stock exchange where that exchange has failed to comply with a direction of the bank.

A general discretionary power should be vested in the Central Bank. This would not be unusual because several discretionary powers are already vested in the board of the Central Bank. The Minister is responsible for the bank, while both he and the Government are ultimately answerable to Dáil Éireann.

It is possible that situations could arise which are not covered by any of the phrases or formulae in the Bill and for which the bank might wish to have a general discretionary power. It may issue a direction to an approved stock exchange, with which it does not comply. In itself, that should be a sufficient ground on which to revoke the licence of an approved stock exchange.

Mr. Coveney

I thank Senator Mulcahy for putting down the amendment. Section 14(1) sets out the circumstances where the Central Bank itself can revoke an approval and refers to the limited situations in which it can do so. Subsection (2) sets out the circumstances where the bank must go to the High Court to get an order to revoke such an approval. The case mentioned by the Senator comes under that heading.

It will be noted that subsection (1) deals with straightforward cases — for example, where an exchange asks for its approval to be revoked, or where it is being wound up or where it is not operating as an exchange. The Central Bank can clearly revoke an approval in those cases. However, subsection (2) deals with cases where matters of judgment arise and it is appropriate to go to the court for an order revoking the approval. The revocation of an exchange's approval is a very important power since it involves not only the exchange itself, but also its member firms and their clients. Issues of natural justice also arise.

Clearly, in such an issue involving contentious circumstances the bank must get the sanction of the court. Senator Mulcahy's amendment proposes that subsection (1) be amended so as to give the bank itself, without reference to the court, the power to revoke an approval where the exchange has failed to comply with a direction of the bank. Directions under the Act refer essentially to section 29, which empowers the bank to issue directions in the following circumstances: the exchange is unable to meet its obligations; or is not maintaining adequate capital; or has failed to comply with any condition or requirement and the soundness of the exchange is affected by this failure; or where the safety of client money is jeopardised. These are all very serious matters.

However, I cannot accept the amendment because to do so would be to enable the Central Bank to revoke an exchange's approval where a direction was not being complied with, without reference to the court. This would be going too far since the bank has power under section 29 to go to the High Court to ensure that a direction is being met. Furthermore, the issues about which the Central Bank can issue directions under the Act are covered in section 14(2) as grounds on which the bank can go to the High Court for an order to revoke an exchange's approval.

The bank's power in relation to matters on which it may issue a direction, which is to go to the High Court to seek a revocation, is quite adequate. I doubt if giving the bank the power proposed by the Senator would make much difference because the exchange in question would be virtually certain to appeal the bank's decision to the High Court in a case of that type. For these reasons, it is more appropriate to leave the Bill as drafted.

Mr. Mulcahy

Given the Minister's final point, I think he supports the logic of my amendment. In effect, he said that if the bank acted unreasonably, arbitrarily or incorrectly, the decision would be subject to review by the courts. This is the position. Every decision of a public body, by way of judicial review or otherwise, is subject to the laws of natural justice and fair procedure. However, it is highly unlikely that the bank would act in an arbitrary, capricious or superfluous manner.

Since every decision of the bank in this regard would be subject to judicial review, it would be quite proper and appropriate to give a wide ranging power to the Central Bank to enable it to revoke a licence where the approved stock exchange has failed to comply with a direction of the bank. The Minister did not say that he can foresee every circumstance where the bank might want to give such a direction. The bank should have a catch all ability to revoke a licence where a direction is given but not met. I intend to press the amendment.

Mr. Coveney

The amendment would provide the power to revoke the entire exchange. In itself, that would have the effect of revoking all the companies within the exchange. This is a wide and all embracing power. As it would be made on foot of a judgment — I am not suggesting that the bank would make an illjudged decision, but it could — and would have such serious consequences for people other than the exchange itself, it is more properly dealt with by the High Court.

In any event, it is almost certain in such circumstances that the exchange would appeal to the High Court. There is provision in the Bill whereby the Central Bank can move quickly on foot of issuing an instruction. If the instruction is not accepted, the bank can go straight to the High Court, which can act quickly in emergencies, as the Senator is aware. The powers are balanced and adequate and I do not intend to accept the amendment.

Amendment put and declared lost.

Section 14 agreed to.

SECTION 15.

Mr. Mulcahy

I move amendment No. 3:

In page 21, subsection 1(a), line 29, after "kept" to add "and such books or records are to be available for inspection by members of the general public at normal office hours".

This amendment seeks to provide as much information as possible to the public. Section 15 concerns the maintenance of books and records by approved stock exchanges. It reads:

(1)(a) An approved stock exchange shall keep at an office or offices within the State such books and records...as may be specified, from time to time, by the Bank and shall notify the Bank of the address of every office at which any such books or records are kept.

I am sick to the teeth of the words "transparency, accountability and openness" but the public has a right to information — the old fashioned Bill of "information" or a citizen's right to know. There is no reason a public body which receives a licence from the Central Bank of Ireland should not be prepared to keep its books and records in a place where a person, during reasonable office hours, can ask to see them. The argument must be seen from the other perspective. If one wishes to keep something from the public or to keep it confidential, surely the public can argue about why that should be so. The Minister said, when speaking on amendment No. 1, that all these deals and information are available on screens and so forth. Why should they not be available to somebody who visits the offices of the Stock Exchange to see its books and records?

The Minister might ask what possible interest Joe Citizen could have in the books and records of a stock exchange. The Stock Exchange is the body that will regulate the operation of its member firms. Its members firms will have a huge influence on the companies which sell shares on the open market. I ask the Minister to accept this amendment unless he has a compelling reason for not doing so.

Mr. Coveney

We are discussing the books and records of the business of the Stock Exchange. The Senator's amendment would oblige the Stock Exchange to make all its books and records available for inspection by the public during normal office hours. The amendment appears to go too far and there are a number of reasons I cannot accept it.

The Stock Exchange will be required by this Bill to incorporate, that is, to become a company. It will accordingly be subject to the usual obligations under the Companies Acts, including the obligation to file audited accounts annually with the Companies' Office where they will, of course, be available for inspection by the public in the usual way. Section 15 of the Stock Exchange Bill provides that the Central Bank can specify books and records, including books of accounts, which must be held by a stock exchange. These books and records will be available to the auditor of the Stock Exchange and the auditor will be obliged under section 34 of the Bill to report to the bank if he has reason to believe that the exchange is not complying with the provisions of the Act. The Central Bank will be entitled to send a second auditor into a stock exchange where the bank has a real and substantial concern about its audited accounts.

The bank itself will also monitor the exchange's operations and the authorised officers of the bank will be entitled to see the books and records specified by the bank under section 15. In addition, the bank will, if necessary, be able to appoint an inspector into the affairs of the Stock Exchange or to ask the High Court to appoint one. The operations of the Stock Exchange will be subject to very close scrutiny on behalf of the public. The Senator will recall that section 9 of the Bill requires that the board of the Stock Exchange must be broadly based and include a number of independent directors so as to promote the maintenance of proper standards. The chairperson, of course, will also be independent.

However, the most telling point is that the Stock Exchange is a commercial operation. It is not appropriate that it should be required to make available all its books and records to the general public, including its potential commercial rivals. To do so would be to put it at a complete disadvantage commercially. I am sure the Senator would not wish that. In these circumstances I cannot accept the amendment.

Mr. Mulcahy

Section 15 does not specify all books and records — it refers to "such books and records...as may be specified, from time to time, by the Bank". If the bank is entitled to see them, why not the public? Again, I publicly chastise the Minister for keeping the lid on another aspect of Irish society that does not require it. If the public can see these books and records at reasonable office hours with reasonable notice — whatever wording is used — there is no reason this great shroud of secrecy over the Stock Exchange should continue. I do not believe the Minister is doing a good day's work for democracy or for the economy when he is keeping the dealings of an approved stock exchange a secret and a mystery when the public has a right to know. He is going down the wrong road in this regard.

Mr. Coveney

The public interest is being safeguarded. This Bill brings the Stock Exchange into the open. I better not use the word "transparent" again; if you ask me, we have all heard enough of it. The Central Bank is the guardian of the public interest here. We do not have a situation in this country where every public utility allows total access to the public to call and examine the books.

Mr. Mulcahy

We have a bad record of opening documents to the public.

Mr. Coveney

One cannot operate a commercial stock exchange on the basis that every person is allowed to demand the books and look up all sorts of confidential information. In America one cannot call in and find out precisely the private business affairs of every investor. The Stock Exchange would collapse if such a situation was created. It is important that the Central Bank has a strong regulatory role on behalf of the people of Ireland. It has that role. The Senator is going too far in expecting it to allow public access and allowing the public to demand books and private information. The Bill amply safeguards the public interest.

Amendment put and declared lost.

Question proposed: "That section 15 stand part of the Bill."

Mr. Mulcahy

Now I know how the opponents of Bunreacht na hÉireann felt.

Question put and agreed to.

SECTION 16.

Question proposed: "That section 16 stand part of the Bill."

Mr. Quinn

I have a view about the chairmanship of the Stock Exchange, although I am not sure if this is the right section. This section refers to membership of the Stock Exchange and section 55 refers to the authorised officers. I suggest that the Minister consider the possibility of appointing an independent chairman of the Stock Exchange. The Stock Exchange presents an image of being an old boys' club and I am not certain that there is the freedom to appoint an independent chairman. Perhaps it is not dealt with in this section.

Mr. Coveney

The Bill provides for the appointment of an independent chairman along the lines the Senator suggests.

Question put and agreed to.

Section 17 agreed to.

Mr. Mulcahy

On a point of order, must we go through every section?

Mr. Cregan

Yes.

Sections 18 to 52, inclusive, agreed to.

SECTION 53.

Mr. Mulcahy

I move amendment No. 4:

In page 56, subsection (1), line 35, after "faith" to add "and/or negligently".

I feel confident that the Minister will agree to this amendment because his opposition to it would, in effect, mean that the Central Bank, in the exercise of its duties and functions under the Bill, would be able to act negligently and not be liable, but if it acted in bad faith, it would be liable. The concept of negligence is a concept of a duty of care — this is important. When dealing with a stock exchange and with a public company, one is dealing with people's money and life savings. In the recent past people have lost their life savings on shares which turned out to be grossly over-valued.

Mr. Cregan

And companies.

Mr. Mulcahy

We have seen situations, such as the County Glen case, where irregular activities occurred resulting in a situation where the shares of that company became virtually worthless and could not be traded on the Stock Exchange. We have seen situations where there is growing and serious public disquiet about the level of pay that the directors of public companies are giving themselves. There is a huge onus on public companies to run their affairs properly and to comply with the rules of the Stock Exchange and there is a huge onus on the Stock Exchange to police those companies so that people who invest in them are not ripped off, do not lose their investment and, accordingly, that the Stock Exchange and the working of a free market economy continues unhindered.

Just as there is an absolute need for a stock exchange to police its members, there is also ipso facto— logically — a vital need for the Central Bank, as envisaged in this Bill, to be meticulous, rigid, comprehensive and professional in its policing of the Stock Exchange. It is a chain reaction. If that does not happen, it follows on down the line. If the policing of the Stock Exchange does not work, then the policing by the Stock Exchange of the member firms may not work, the policing by the member firms of public companies may not work and people may lose their money.

Why should the Central Bank be able, under this Bill, to act negligently and get away with it? Why should it not have a duty of care to the public to ensure that its policing of the Stock Exchange is up to standard? The Central Bank and its officers, servants and agents should be liable in damages for negligence — as we all are if we are negligent. If I drive negligently, I am liable in damages for negligence. Why should the Central Bank not be liable in damages to the people who lose because of their negligence? The Minister has assured us of the high degree of competence of the bank in this role. I am sure he will assure us that all the people who will be in that role will be highly committed, highly trained, highly professional and highly competent. If that is the case, they are not going to be negligent: they will never be negligent. Will the Minister accept that on some occasions they may be negligent; they may not pay enough attention to the affairs of the bank? There might be a bad employee among the servants or agents who, through a mishap, a slip up or a lack of effort or diligence, does not do something, the result of which is loss. It is covered by bad faith. I am also suggesting that it should be covered by the concept of negligence or, to use the common phrase, by carelessness. If the bank is careless and somebody suffers, why should it not pay in the same way as servants or agents have to pay if they act in bad faith?

Mr. Coveney

The Senator has made an impassioned plea but the implications for the taxpayer are serious. Section 53 (1) provides that the Central Bank and its officers and employees

.... shall not be liable in damages for anything done or omitted in the discharge or purported discharge of any functions carried out under this Act unless it is shown that the act or omission was in bad faith.

The purpose of this provision is to ensure that making the Central Bank the regulator of stock exchanges and member firms does not expose it to claims for damages. The bank would be particularly susceptible to such claims because of the intrinsic nature of the supervisory task and also the widespread perception that it is a deep pocketed institution. Such claims could obviously be large, given the nature of stock exchange business, the fact that such business is often done with international clients and financial institutions and the large sums of money potentially involved. It is essential to protect the Central Bank — and ultimately the Irish taxpayer — from an exposure of this magnitude. The exemption from liability does not apply where the Central Bank is shown to have acted in bad faith, that is, maliciously or with intent to deceive.

It will be clear why I cannot accept the Senator's amendment. It would expose the Central Bank and — as I have said — ultimately the Irish taxpayer to potential substantial claims over matters which would be matters of opinion because negligence is very much a disputed issue: it is not a matter of fact.

Mr. Mulcahy

It is a matter of law.

Mr. Coveney

Ultimately. If a person loses their money and the Stock Exchange cannot pay up or the company collapses and they see the Central Bank — in other words, the Irish taxpayer — as a good mark, they will go for a claim for negligence. These claims could include claims from overseas institutions and clients dealing with Irish Stock Exchange member firms. They could also come from stock exchange member firms in other EU member states which are doing business here on foot of authorisation from their home member state. In such a complex arena, it may not be too difficult to claim, in hindsight, that an action had been negligent. The result could be the making of large awards against the Central Bank and, thus, the Irish taxpayer.

Furthermore, the result of the Senator's proposed change would potentially be to transfer to the Central Bank the day to day responsibility for making certain that stock exchanges and member firms act properly and prudently in the conduct of their business. That responsibility rests, and must be seen to rest, with the directors and management of exchanges and member firms and not with the Central Bank.

The final point is that the Senator's amendment could undermine the system of regulation being introduced by this Bill as it would necessarily make the Central Bank cautious about all its actions in case they were accused of negligence afterwards. This is obviously not in the interest of either effective regulation or investors and it could also lead to claims of negligence. The bank could be accused of failing to act in situations where it was in fact trying to protect itself against charges of acting negligently.

I share, as we all must, the concern of people who may lose their money, particularly small investors. In that context I would refer to the existence of the compensation fund in the Irish Stock Exchange which facilitates the repayment of moneys to people who lose money in circumstances which are wrong. For all of those reasons, I cannot accept the amendment. I am sorry.

Mr. Mulcahy

I want to express my extreme surprise at the concept being proposed by the Minister, which is that certain organs of the State are to be above the common law of negligence. If a garda is negligent in the exercise of his or her duty, Ireland is negligent and Ireland must pay up. There are many such cases. If I walk into a public building and fall as a result of the negligence of Ireland who owns that building, Ireland is liable and must pay. The Minister is now in effect creating a new category of exclusion.

Mr. Coveney

That is not true.

Mr. Mulcahy

In effect he is. He is accepting that the servants or agents of the Central Bank may act negligently and nobody can be compensated. The Minister will accept, as I think his speech accepted, that this is the actual result. A servant or agent of the Central Bank can act negligently in the discharge of their statutory duty and a third party will have no redress. That is a staggering proposal, because to my knowledge it is one of the few exceptions in Irish statutory law to the general negligence principle.

One interpretation of the Minister's position is that he showing a lack of confidence in one of two sets of people. He is either afraid that somebody in the Central Bank will act negligently in the discharge of their statutory duty, or he is afraid that some judge or some part of the administration of Irish justice will not reach a high enough standard in determining a claim. If the Minister has proper confidence in the Irish judicial system and in the servants or agents of the Central Bank, there is no logical reason why he should not make the latter accountable for their own carelessness or negligence. Letting the servants or agents of the board of the Central Bank off the hook is a considerable disservice to a person who may suffer loss as a result of negligence, which the Minister will ultimately accept may happen.

Mr. Cregan

I wish to make just two points, because I am listening to matters which are inclined to be above me and I am afraid I might be getting a little confused. The point of the Senator's amendment is that if the Central Bank, as the watchdog of the Stock Exchange, was negligent, a company could do something wrong which would cost us and the shareholders of that company money. That has often happened before.

The Senator is also saying that the Minister is not taking responsibility. I ask the Senator to look at recent events where a sum in the region of £45 million was spent and nobody was blamed or charged. That did not happen under this Minister. An inquiry was held which cost £45 million and nobody was blamed or charged. If we really want to talk about negligence, we can talk about that. There have been companies who have done their shareholders enormous wrong and yet nobody was blamed. We had inquiries and High Court judges making decisions but nobody was charged. I want to remind the Senator of that.

Is there a danger that international people involved in Irish companies or who have shares in the Irish Stock Exchange could see an opportunity? The fact that the Irish taxpayer was prepared to pay could lead them to use their own resources and ability to undermine a company or the Stock Exchange itself and make money both ways. Did the Senator think of that at all? There are people who are prepared to do that. One has only to look at what happened during the devaluation in 1993 and what those with outside resources did to us while making millions of pounds out of it. I do not want a situation where people can undermine us on one side and can gain from us on the other and I would not agree to it.

I am not carrying a flag for the Central Bank and I do not know any of these people. I might have a few stocks and shares but I did not make money out of them. At the same time I am conscious that it is not just the people of Ireland who are putting money into stocks and shares. There are also outside investors who might see an opportunity. They saw it before and cost the Irish taxpayer up to £800 million over a very short period when our interest rates went up to 40 per cent. We should not create opportunities for international people to undermine Irish society again.

Mr. Doyle

I want to make a brief comment in view of the remarks made by Senator Mulcahy. He is a little unfair to the Central Bank and to its staff and its agents who have served it well. It has a regulatory function in many financial institutions, including building societies and so on, and has performed well. There will always be people who will invest in the Stock Exchange, and there is always the possibility of a dishonest stockbroker. The Central Bank cannot be responsible for everything that goes wrong in the Stock Exchange, but it will act as a regulator. Up until now the Stock Exchange regulated itself and it is only right that we should now have an independent regulator in the Central Bank. As the Minister said, it is only when the Central Bank acts in bad faith that people can claim against it and that is important. I have no record of the Central Bank ever acting in bad faith.

Mr. Calnan

I wonder if the amendment was necessary and I ask the Minister to reply to this. Is it not strong enough to say at the end of subsection (1) that it must be shown that "the act or omission was in bad faith."? Does that not cover the situation? This Bill provides for the regulation of the Stock Exchange and much work has gone into the drafting of the Bill. We do not want any section of it to be open to abuse, particularly in this compensation culture. I can see the Minister's point. The fact that the act or omission must be shown to have been in bad faith should cover Senator Mulcahy's point.

Mr. Coveney

I do not have much more to add except to thank the Senators for their support. I do not want to put the regulator, the taxpayers of Ireland, in the position of being sued for the acts of the culprits. A company could act in an illegal way or the stock market itself could do something illegal. The bank's regulatory role cannot possibly operate on a day to day basis and therefore it could in theory miss something. I do not want the Irish taxpayer to be subject to a claim for negligence from people who see it as the best mark——

Mr. Cregan

That is right.

Mr. Coveney

——and a bank that has a large pocket. It is in that context that I ask Senator Mulcahy to understand why I could not accept his amendment.

Amendment put and declared lost.

Section 53 agreed to.

Sections 54 to 70, inclusive, agreed to.

First Schedule agreed to.

Second Schedule agreed to.

Title agreed to.

Bill reported without amendment and received for final consideration.

Question proposed: "That the Bill do now pass."

Minister of State at the Department of Finance (Mr. Coveney)

I thank the Senators for their contributions to the Bill on both Second and Committee Stages. I thank Senator Mulcahy in particularly, despite what he might think of my responses, who obviously put a lot of time and effort into this.

The enactment of the Bill will mark a further stage in the regulation of the financial sector in this country following on the various Acts affecting that sector in recent years. The Irish Stock Exchange will separate from the London Stock Exchange once the Bill comes into effect. The Bill will allow the exchange and its member firms to operate under a modem system of regulation more suited to the needs of our time and in line with modern international practice and the requirements of European law.

The Stock Exchange Bill, 1994, is part of a wider process under which firms providing financial services will be allowed to trade freely throughout the European Union. This will obviously bring challenges as well as opportunities and I wish the Irish Stock Exchange and its member firms well as they meet these challenges. I also take this opportunity to thank the exchange and its member firms for their help in advising us in the preparation of some aspects of the Bill. I also thank the Central Bank for its contribution to the Bill.

The Bill, as I mentioned on Second Stage, is one part of the legislation which is required to transpose the EU Investment Services Directive. I expect to be back here shortly with the other part, the recently published, Investment Intermediaries Bill, 1995. This will implement the directive in respect of investment intermediaries which are not member firms of a stock exchange and will regulate the investment activities of investment intermediaries generally in this country. I look forward to the cooperation of the House in dealing with it.

The Stock Exchange Bill, 1994, has been a long time in preparation and in its passage through the Oireachtas. I commend the Bill to the House and trust the Irish Stock Exchange will add a long and proud future to its 196 year history.

Finally, I thank the officials and staff in my Department who took on a greenhorn Minister last week and managed to get me through Second and Committee Stages of a Bill I had never seen prior to that. I am grateful to them and the country is lucky to have people who can guide us in that way.

Mr. Mulcahy

On behalf of the Fianna Fáil Party, I thank the Minister and his officials for their time today and in the preparation of the Bill. It is pleasantly ironic that the Bill should pass today. Yesterday, and this morning, we have a symbol of England visiting Ireland from the UK in the form of His Royal Highness, Prince Charles. We have in the passing of the Bill a symbol of taking a little part of England back to Ireland. There is great symbolism in this. By the way, this is the hand that shook the hand——

Acting Chairman

We will all be down to the Senator in a minute.

Mr. Mulcahy

——if anybody wants to shake it. It is always great when we can fully develop our institutions in line with our own particular traditions and genius, no less so than when we are involved in the commercial aspects of our life. The Bill has been a long time in coming. The end of rule by the London Stock Exchange comes with no bitterness. I am sure they are probably glad to be rid of us to a certain extent, although one would not know. I encourage people who want to organise another stock exchange to do so. The Bill specifically provides for that. The Minister gave me an assurance, which I am now happy to read into record, that any application for a second or even a third stock exchange would not meet a wall of resistance or bureaucratic intransigence if it fulfilled the correct criteria. I wish the Dublin Stock Exchange well and any other stock exchange that may be approved in Ireland.

Mr. Cregan

There is money in it.

Mr. Mulcahy

Fianna Fáil are proud to be associated with this new Bill. It will bring about a totally new era in the commercial life of Dublin to fruition.

Mr. Quinn

I congratulate the Minister. The debate was good and amendments were accepted in the process. I congratulate the Minister for his graciousness in recognising that the work was done by a greenhorn Minister, as he says himself, with the support of his officials. It is an important Bill. Everybody nowadays has some sort of involvement, although maybe not directly, in the success of an active, thriving stock exchange. It is important to regulate them and, having now been given the first chance to regulate it ourselves, that we do a good job. I congratulate the Minister and, particularly, those behind him who put the work together and have succeeded in getting the Bill through.

Mr. Cregan

I welcome the Minister to the House and I can assure him and the House that he is no greenhorn. I wish him well in his new position. I think his officials will find him to be fair and hardworking.

We are looking at a Stock Exchange restructured first in 1799, then in 1918 and now today. It is historic. Although some people might have shook the hands of royalty, I am the same everyday. I would like to think we are now the people of Europe. It is important to make the point that it was not only Anglesea Street that had a stock exchange. Cork had its own stock exchange until a few years ago. Some people always say that the border was in the wrong place. We should have been cut off. We could have been much better off, but we have to make sure we are up here to run the country because you would make a bad hand of it.

We are looking to the future. The Bill is broadminded. We should not be afraid to inform the public, particularly from an educational point of view. Our young people should be informed of how our Stock Exchange works and of the regulations regarding stocks. They should know about the Central Bank and we should make no apologies for it.

Mr. Calnan

I, too, would like to be associated with what was said about the Minister and everybody in the Department of Finance on the way they have compiled this Bill. We are talking about something which dates back to 1799; the next date mentioned was 1918. When dealing with finance and stock exchanges and so on in a democracy, we must be extremely careful. An unusual degree of accuracy and care was required in the compilation of this Bill so that it would be right.

We are talking about a sensitive issue — people's savings, investments, lifeblood and money, which deserve great care. The Central Bank has been given a front seat in the running of the affairs of the Stock Exchange. For the first time the Minister for Finance and the Minister for Enterprise and Employment will have a large part to play because appeals can be made to them. I do not believe those provisions were there before.

The separation between London and Dublin is timely. While it gives us independence, it prepares us for Europe because the situation must be right where foreign exchanges and so on are concerned. I compliment the Minister and his staff for coming up with a comprehensive and excellent Bill which will be good for the Stock Exchange, the Central Bank, the Government and for democracy.

Question put and agreed to.

The Seanad adjourned at 3.15 p.m. until 2.30 p.m. on Wednesday, 7 June 1995.