Amendments Nos. 1 to 3, inclusive, are related and may be discussed together by agreement.
Companies (Amendment) (No. 3) Bill, 1999: Committee Stage. SECTION 1.
I move amendment No. 1:
In page 3, subsection (1)(a), line 22, to delete "the earliest public announcement" and substitute "the trading commences".
Can the Minister of State clarify the commencement date or the announcement date with regard to the date of the establishment of the price of the issue? I tabled amendments Nos. 1 to 3, inclusive, in an effort to remove any confusion about when the 30 days begin in case there is a difference between the date of allocation and the date of trading.
Amendments Nos. 1 to 3, inclusive, are designed to bring about changes in relation to the stabilising period. The definition of the "stabilising period" in section 1 achieves two separate objectives. In relation to any stabilising action undertaken within this State it signposts the fact that the meaning to be attributed to "stabilising period" is to be found in the stabilisation rules. It is defined at the bottom of page 7 of the Bill. With regard to stabilising action outside of the State in other countries the present definition has effect. This ties in with section 2(b) where any action taken during the stabilising period in a jurisdiction other than this State but in accordance with paragraph (b) will not be regarded as having contravened section 108 of the Companies Act, 1990. Section 2(b) further provides that such actions will be exempt only if the action taken is in all material respects permitted by or is in otherwise in accordance with all relevant requirements applicable to such actions in the jurisdiction where the action is effected.
The stabilising period begins to run from the date on which the issue or offer price is stated, or in the case of debentures or other debt securities, on the date when the earliest public announcement on such issue is made. If we were to substitute what Senator Coghlan suggests the stabilising period would be shortened to the period from when trading commences to the earliest of 30 days after the closing date or the earlier termination of stabilising action as notified by the stabilising manager. This would reduce the period when the benefit of the exemption provided by section 2 (b) is available.
Moreover, if this change is made, different stabilising periods would obtain within the State pursuant to Rule 1 and outside the State because of the proposed change. We would have one rule in this jurisdiction and a different rule outside the jurisdiction. That would be difficult, tricky, serious and complex and it could undermine the flotation of a company.
If the same amendments were proposed in respect of Rule 1 in the Stabilisation Rules it would impact on the period during which stabilising actions could be taken under Rules 3 and 4. Of course this would be equally unacceptable. The changes proposed would reduce the period during which a stabilising manager operating abroad could benefit from the exemption contained in section 2 (b) and I do not consider that appropriate. Accordingly, I regret I cannot accede to these amendments.
My intention was not to reduce the period. Perhaps this is the reason there is confusion. The stabilising period as defined in the Bill refers to "the period beginning with the date on which the earliest public announcement of the issue or offer for sale . . . ". The public announcement will precede trading. My intention was to allow the 30 days to commence on the first trading day and not to reduce the period. I do not want to reduce the period. Hopefully, the manager will not need to, but if he does – which is what the Minister is providing for in law – he will only be able to go into the market place on a trading day and buy at or below the issue price. I was seeking to give him 30 days from the date of commencement of trading.
The difference between what is contained in the present rules, that is when the public announcement of the issue price is made, and Senator Coghlan's suggestion of the trading date, in practice may not be more than a matter of days, if any, but there could be a difference between them. However the important point is that the stabilising manager must be able to avail of Rules 3 and 4 as soon as the price is announced rather than wait until trading on the market com mences. This is the reason Senator Coghlan's amendment is not appropriate.
We can consider it from another point of view, for example, if there is a bank holiday somewhere and the announcement is made. We could be in a different time zone – it might involve Tokyo or another stock exchange. There would be a vacuum period in which the stabilisation managers would be restricted.
The Minister need say no more, he has explained it. I accept that. Trading will commence before the first formal day on the stock exchange and there could be a time lag and an operation in, say, New York or London.
We have to be uniform, irrespective of the location.
Once the price is stated, there will be trading without it necessarily taking place on the floor of the stock exchange.
That is right.
Amendment, by leave, withdrawn.
Amendments Nos. 2 and 3 not moved.
Section 1 agreed to.
Sections 2 and 3 agreed to.
Amendment No. 4 not moved.
Section 4 agreed to.
SECTION 5.
I move amendment No. 5:
In page 5, lines 36 to 42, to delete subsection (2) and substitute the following:
"(2)Each regulation made under this section shall be approved by both Houses of the Oireachtas before it is valid and such approval shall be without prejudice to the validity of anything previously done thereunder."
The purpose of this amendment is to express things positively. We felt that as the Bill is approved by both Houses, rather than allowing a Minister to interfere by order, which is the accepted or preferred practice, this would be an improvement.
While I understand the concern expressed by Senator Coghlan about the making of regulations under the powers contained in section 5 as proposed, I assure the Senator that matters which can be dealt with by such regulations must fall within the principles and policies contained in this proposed legislation. I see this section as enabling the Minister to remove any difficulties in the stabilisation rules which are not fundamental to the rules but which, unless amended, could cause some technical difficulty in the application of the rules. Accordingly, I believe this flexibility is required. I am satisfied the present mechanism of laying the rules before each House of the Oireachtas is the appropriate mechanism. In these circumstances, I am unable to accept Senator Coghlan's amendment.
Amendment, by leave, withdrawn.
Section 5 agreed to.
Sections 6 and 7 agreed to.
SCHEDULE.
Senator Quinn has tabled amendment No. 6. Amendments Nos. 6 and 7 are alternatives and may discussed together by agreement.
I move amendment No. 6:
In page 9, paragraph 5(1)(b), to delete lines 43 to 49 and substitute the following:
"WARNING: In connection with this issue [name of stabilising manager] may overallot or effect the transactions which stabilise or maintain the market price of [description of relevant securities and of any associated securities] at a level which might not prevail under open-market conditions. Any such action will be carried out in conformity with the rules of the Stock Exchange on which the transaction is carried out, and disclosure of all such transactions will be made immediately to that Stock Exchange.“
The purpose of this amendment is to make the notice which must be put in flotation documents much clearer to warn prospective investors that stabilisation might actually take place. When one looks at the flotation document it may not be obvious that someone is interfering with the marketplace – that someone is deciding to manipulate the price and deciding the open marketplace between a buyer and a seller with full knowledge of what is happening is likely to be interfered with.
The existing wording is somewhat obscure. It raises the question whether the intention is to hide the stabilisation from prospective shareholders so they do not know it may take place. We would all agree that is totally unacceptable. I am sure nobody intends that to take place. We can reduce the possibility of that happening by inserting clearer wording which will be understood. That is the reason I have proposed inserting the term "warning" in documents which will be issued.
The changes I propose include prefacing the notice with the term "warning". That is our objective and precisely the purpose of the wording. I propose replacing the words "which might not otherwise prevail" with "which might not otherwise prevail under open-market conditions". That makes our meaning clear. The cur rent wording may obscure it and we should not take any chances.
I am sure the Minister of State will accept this amendment because it has rational and logical reasons. I doubt any Minister would reject this amendment. If there is any danger of me being accused of not being even-handed I put in two statements which should have the effect of reassuring people about stabilisation. I put them in to show how fair I can be.
This Bill is going through quickly because of the Telecom Éireann sale. That may well be the reason this Bill is before us. However, it will be the law of the land and will apply to every flotation, not only State flotations. In creating this arrangement we should advise the investor and risk-taker to be warned that someone may interfere with the marketplace during the first month. We owe it to the citizens and investors, some of whom will invest their life savings in something they believe is right, to remind them and not use obscure language. I urge the Minister to accept the amendment.
I apologise to the House for not being present during the Second Stage debate or earlier during the Committee Stage debate.
I agree with Senator Quinn's amendment for very fundamental reasons. The reasons given for the stabilisation procedure are not very convincing. I agree that this is rigging the market. It is a gross interference with the free market to come in 30 days after a privatisation or flotation of this sort. What is worse is the blatant attempt to conceal this from the dealers and the public. What is happening is that there are people dealing on a different basis from those who will be supporting the market here. This is insider dealing and this is the reason there is an exemption from the insider dealing rules. We are creating a situation whereby one person will be dealing with the full knowledge that he or she is just a support for the market and is not a genuine buyer, but another person, who is a genuine seller, will think he or she is selling to a genuine buyer. This is contrary to all principles of the free market and the stock market. It is not good enough for people to say that this happens everywhere in the world. So does rape, murder and other occurrences which we do not like, but it does not mean we must accept them.
The reason this is taking place is that it will give the Government, promoters and anyone going public in a privatisation a great advantage over anyone dealing in the open market. I ask the Minister the fundamental question as to why this always happens on the purchase side and not on the sell side. All the references in the Bill are to the Government or promoters buying the shares and supporting the markets to "stabilise" it. What will happen when Telecom comes on the market and shoots up to a 40 per cent premium? Why are they not stabilising the markets downwards by selling shares into the market?
It is a pity Senator Ross was not present during the Second Stage debate. He is engaged in scaremongering by saying that rape and murder occurs throughout the world. When we move into the new European market, more and more shares of this kind will be offered on the market. Therefore, unless we set up a market which is equal and on a level playing pitch with the rest of the world this will not work. Irish companies will suffer and be at a disadvantage in the home market compared to the foreign markets because there will not be equality. We need to create an environment whereby investors from other countries will feel confident to come in and buy the stocks.
That is nonsense. If a company's shares are good value people will buy them. It is very simple; that is what markets are about. Supporting an artificial market will not give people confidence.
Amendment No. 7 proposes to insert "subject to a maximum of 30 days in accordance with section 1". This is proposed to keep it in line with section 1, therefore I thought the wording would make sense.
I am pleased Senator Ross is present. I missed him during Second Stage because I thought he would bring a bit of colour to the debate. Now that he is here, he has added a little colour to the debate. He used the word "concealment". There is no attempt whatsoever to conceal, be innocuous or vague. We are here to make the legislation transparent and sustainable.
Both these amendments suggest changes to the wording that is required to be set out in any preliminary offering circular, preliminary offering prospectus, final offering circular or final offering prospectus relating to an issue or offering of securities.
In relation to the amendment proposed by Senator Coghlan, the fact is that the law provides that the stabilising period ends within the thirtieth day after the closing date, or the earlier date, if the stabilising manager determines that he or she will take no further action to stabilise or maintain the market price of relevant securities. "Closing date" is defined by reference to the date on which the issuer of the securities receives the proceeds of the issue, or the first instalment or, in the case of an offer of securities, where the offerers receive the proceeds of the offer. In other words, it is set out in law that there is a 30 day outer limit within which stabilising action may take place. Accordingly, I considered it unnecessary to include the reference to the time limit in the way proposed by Senator Coghlan.
In relation to the changes proposed by Senator Quinn, the proposed new sentence is inaccurate in that any stabilising action will be undertaken in conformity with the stabilisation rules contained in the Schedule to the present Act rather than, as expressed in the Senator's amendment, in conformity with the rules of the stock exchange on which the transaction is carried out. The dis closure requirements to the stock exchange are already contained in the stabilisation rules, and for the reasons just given in respect of Senator Coghlan's amendment, I do not see this as necessary. Accordingly, I am unable to accept the Senator's proposed amendment.
I might also make the point that in circumstances where an issue or offering is made on a number of exchanges simultaneously, for instance, on the Dublin and London exchanges and, perhaps, New York and elsewhere, and to facilitate the publication of the necessary information, the wording contained in rule 5(1)(b) reflects the same wording that would apply in the London market. If we were to change the content of such legend, it could make it more difficult for the manager to ensure that documents issued in the differing markets did not transgress requirements in the other markets. Therefore, we must be absolutely consistent by day, performance and information.
In the circumstances, I am satisfied that the proposed wording is appropriate and I am unable to accept the Senators' proposed amendments.
There is some confusion here. The Minister seems to be talking about one particular flotation. He probably has Telecom in mind. However, we are enacting legislation which must last for some time. Of course this is in the interests of the person creating the flotation and the owner of that company, whether the State in the case of Telecom, or someone going public having developed a business. What we are doing is not in the interests of the citizen, the consumer or the person buying the shares. It is certainly in the interests of the stock market, the owner of the company, the stockbrokers and the advisers. This is probably why other countries allow some "fiddling" with the marketplace. I am asking to include the words ". . . . at a level which might not prevail under open-market conditions." The Minister has said that he does not want to include this. It would make our market more attractive and more acceptable throughout the world if the Dublin Stock Exchange insisted that any stabilisation should be made public. We would then become a healthier and better stock market and stock exchange. Companies and their shares will be more highly valued in the long-term because they will not have been fiddled.
What really jolted me was the Minister of State's speech on Second Stage. He said, in reference to stabilisation, that the information which is communicated to the stock exchange will not be disclosed to the market. That is outrageous. It cheats the share buyer. We will be saying to those who invest in shares that the stabilisation will be kept secret from them because the stock exchange will not disclose the information to the public. That is wrong. If we wish to have a healthy share dealing environment, we should accept that when stabilisation takes place we must remind potential buyers that the environment is likely to be interfered with in the first 30 days because we are going to interfere with open market conditions.
I urge the Minister of State to consider my suggestion. It would be to the long-term benefit of the Irish share buyer and, therefore, the consumer and the investor. If we are to have a healthy, open market economy, we should establish standards which will not allow somebody to manipulate or rig the market.
Senator Quinn and I exchanged views on this matter on Second Stage. I indicated that my sympathies lay with his comments in the context of ensuring there would be a good price for those investors who will dip into the market for the first time.
Senator Ross will agree that the purpose of buying shares is, to be brutally frank, to make money. It is the sole purpose for getting involved in the stock market. It is a volatile, high risk investment. In the financial information packages one receives from financial institutions when one seeks information on investing one's money, one will always see the inclusion of a proviso to the effect that stock market investment is a high risk venture.
With that in mind, the Government is about to launch the largest flotation in the history of the State. I have repeatedly said – the evidence and Senator Ross, a stockbroker, can confirm it – that there has been a traditionally conservative attitude in this country to investing in shares. One of the reasons this economy has not benefited over the last 20 years from the amount of wealth it has generated is that people have hoarded their money. They have not become involved in venture capital projects but have put their money into banks. People have significant sums of money tied up in low interest bearing deposit accounts in banks and building societies. If an adviser were to suggest that they do something else with the money to maximise the return, they would look at him as if he had two heads. Their response would be: "The banks and building societies are safe; I will not go down that road because I know nothing about shares".
That is the environment in which this share flotation is taking place. It is vital for the future wellbeing of this economy that there is a significant uptake of Telecom Éireann shares by the public. That is the Government's position and, no doubt, the Minister of State will take the opportunity to reiterate it. Is it not important, therefore, when the shares start trading that they increase in value and do not decrease? People who watch the stock market will argue that Telecom Éireann will be a blue chip share among the top five highly capitalised shares in the Irish market and that it is, in racing parlance, a nap. That is my view and I am actively encouraging people to register and, if they have £1,000, to invest it in Telecom Éireann shares. That is better than leaving it in the banks or in the investment vehicles I mentioned earlier.
Bearing that in mind, is it not proper for the Government to ensure that if the occasion arises, there is legislation in place which will make certain that the share price will not decrease? Am I to take it that, in the event of the shares decreasing in value from the offer price of, let us say, £1 when they commence trading – stock markets are volatile animals and the environment might not be right or something awful might happen elsewhere in the world – and sentiment turns against the share, this legislation will ensure that the stabilisation manager will be able to go into the market to ensure the securities will not fall and that there will be certain protections for investors? That will, therefore, inspire confidence not only among investors but also in the market, notwithstanding Senator Quinn's remarks about the alleged secrecy or lack of transparency.
I am trying to deal with this from the other side of the market. I am thinking of the citizen who will be encouraged through a barrage of publicity during the next four weeks to put their hard earned money and savings into buying something about which they know very little and which they will take on trust from the Government. Having taken this flotation on trust, they will tiptoe into the market with a certain amount of trepidation. The financial pages of the national newspapers will be well thumbed in the early days by people who will watch every nuance and change in sentiment in the market as they see how their money performs. All of them will have their fingers and toes crossed, as I will, that the shares will increase significantly in value so they can reassure themselves that they took the right decision.
If we can get over the hump of the credibility gap in the public regarding stock market investment, it will open the way to further investment in future privatisations. Ultimately, we are talking about the long-term viability of this economy. We are selling off part of the family jewels and we must get the sale as right as is possible. From that point of view, I have no difficulty with what is proposed in the legislation, notwithstanding the valid points about manipulation in the marketplace.
This is a unique flotation in the Irish context. As future flotations come on stream, I hope confidence will build in the market and that there might not be a need to implement this legislation. However, at least it will be available as a safety net. I look forward to the Minister of State's clarification of its various aspects and I support the view he has already expressed.
Senator Mooney and I spoke about this subject previously. If this is to be a unique flotation and if the legislation is being introduced as a result, let us call it a special Telecom Éireann Bill which only applies to Telecom Éireann. However, the Bill before the House will apply to all future flotations.
It is impossible to believe Senator Mooney. He is saying that if a share is issued at £1 and for whatever reason it falls to 70p, somebody will manipulate the market to con the possible investor. I cannot believe it. He is saying that about all issued shares in the future. In the first 30 days of the issue of such shares, manipulation can take place. That cannot be in the interest of the investor or in the interest of the trust and confidence we must have in our stock market.
This is not a Telecom Éireann Bill. It will apply to all future share issues. If we are to make this apply only to the Telecom Éireann share offer, let us call it a Telecom Éireann Bill.
The more I hear, the more alarmed I get. What happens if the share price falls after a flotation and the promoting broker, on behalf of the Government, buys the shares to stabilise the market over a period of 30 days? When the 30 day period is over that support scheme will be withdrawn. The people who bought at the same time during that 30 day period will be at a disadvantage because they are buying into a falling market without knowing that it is being propped up artificially. I would not worry about the institutions but about the innocents who bought during that 30 day period when the price fell from £1 to 60p without knowing the support mechanism would be withdrawn. They will suffer as a result and the share prices will be weaker that they would normally be. Those people will be at a serious disadvantage because they do not know what they are doing. What remedy will be open to them or will it be a case of tough luck because they did not know about the support mechanism?
I am worried about Senator Mooney's comments that there will be manipulation but that we can justify this concealed behaviour because it is important for the country, the people and future privatisations that the market should be manipulated as it will be to the benefit of the greater number in the long run. However, a minority will suffer and these are the people for whom we always create a fair market. Otherwise, we would have an unfair market all the time.
Senator Mooney said it is difficult to persuade people to move money from low bearing instruments, such as deposit accounts which pay 1 or 2 per cent interest, out of the banks and into Telecom Éireann shares, but that we must do so because this privatisation programme must get off the ground and be a success. I do not agree with him because that is dangerous. I do not know, nor does anyone else, that investing in the stock market or privatisations will necessarily be any better than having money in an account which pays 1 per cent interest. I do not want to deceive people into buying Telecom Éireann shares or other privatisation shares and take them out of a safe but not overly lucrative investment into a high risk investment by giving them the impression that it is safer and more profitable than it is.
There will come a time when, if we have a privatisation programme, one of the privatisations will go belly up. The price will be too high, the market will go down, there will be a stabilisation process which will end after 30 days and then the price will collapse. How big is this privatisation? How far are we prepared to support the price? What happens if all the institutions, particularly American institutions, which take up Telecom Éireann shares in June or July decide at the end of July they do not want them because of factors which could not be anticipated? They will dump them on the market. The trend in America is to dump them at any price because they do not care; they just want out. Will the Government buy all those shares as well? We will make asses of ourselves by interfering in the free market and buying all the shares. I do not know if this has been thought out, but it has not been brought into the public arena.
I would like to know about stabilising the selling side. If the Minister of State is so worried about the price going down and he wants to buy shares, why does he not stabilise the selling side? Why would the Government not prevent an abnormal move upwards in the initial days of the flotation when the indications would be that there is a false market the other way and we had sold too cheaply?
Why would we do that?
I do not know.
I have listened with interest to the contributions of experienced Members, particularly Senator Ross who has a long record of involvement in the stock market, and Senator Quinn, who is the head of a good company. I am baffled at the questions asked. Senator Quinn said that a warning is required. The disclosure statement is intended to give potential investors the information that stabilisation may take place. That is the warning. The disclosure will increase investor confidence in the issue or offer and, therefore, the term "warning" is inappropriate.
Why do people go to the marketplace? Senator Ross is an expert in this area. They go to the marketplace to ensure their company capitalises on growth, profit and performance. I do not know if Senator Quinn could float his company. If he did, I would go to Senator Ross for advice and I am sure it would be positive. I would love to have money in his company.
There would be no need for a stabilisation manager.
No. When people go to the marketplace they hand over private ownership of an asset base as a going concern to the public. The bankers who advise or manage the funds of Senator Quinn's company would not like it to be floated without a guarantee that it would be protected and sustained on the stock exchange and that the value of the company would be decided by the laws of supply and demand based on the financial instruments available for operation. A stabilisation manager, which is an international mechanism, will ensure that the net value of that company is protected for 30 days so that the markets recognise its real value. The laws of supply and demand will then take its course and the market will dictate its value.
On the other hand, if Senator Quinn's company was floated and reached its zenith, I am sure he would not like his stabilisation manager, Senator Ross, to pull the negative lever and drag the company down when Senator Quinn might have his eye on an acquisition in the UK, Holland, the Isle of Man or Northern Ireland. That would be an impediment to the flexibility of normal business management. The board of directors and advisers to the company would not be in a position to grow that company and to see what other streams of activity would be vital for its commercial sustainability and its growth and return on investment.
This is a simple mechanism for 30 days to ensure that the net value is protected and the laws of supply and demand takes their course. I see no difficulty with it and nothing has been concealed.
Senator Quinn is correct that this is a law for everyone. He suggested we call this legislation the Telecom Éireann Bill. We could not do that as it would be unconstitutional. What is good for the Government must be good for the citizens and what is good for the citizens must be good for the companies they operate. We must have equalisation and equality of opportunity in law. If the Government has a stabilisation mechanism for its corporate float, why should the citizen who wants to float their business not have the same mechanism? We are ensuring equality of law in this Bill. I do not want a negative lever to pull down the value of a company and inhibit its capacity to grow in the marketplace nor do I want the State to get preferential treatment in its flotation compared to a citizen or small company who wants to enter the marketplace.
We must remember we are living in wonderful times. We are moving into a new millennium and we have joined a common currency. There are great opportunities ahead and new incentives are important for indigenous companies to ensure they have the capacity to compete with the best international companies. Despite the fact that this is a small economy, a number of companies are able to perform with the best in the world and make an impact whether in the United States, the United Kingdom or Europe. We cannot put any impediments in the way of companies to float and ensure their liquidity grows in the future. That is what this Bill is about. I am confident we are doing the right thing and it is important the laws meet the opportunities. Not only must they conform to the best practice nationally but they must conform to the best practice internationally. That is exactly what we are doing.
I accept the commitment to the European ideal. We need no greater evidence of that. I accept the Minister's argument about not pulling the negative lever. Why would he then not call it a support operation rather than a stabilisation operation? It is, after all, a support mechanism in that case, not a stabilisation operation. It would convey a more honest message to the public if it were so called. What does the Minister intend to do for those unfortunate people who are buying in the first 30 days on the basis of a free market but in fact are buying in the midst of a support operation?
What we are debating here is whether we should warn potential investors that stabilisation may take place. Senator Ross asked earlier what happens after the 30 days. Let us suppose the shares in any flotation slip back from £1 to 70p or 60p and are stabilised, some citizen decides to invest at £1 because he or she believes they are worth a £1 and after 30 days the shares collapse. What onus of responsibility is on the State, if it is a State flotation? Could a citizen sue and say he was misled? I believe a citizen can sue if a warning is not given in the flotation document. Therefore, that is the reason this amendment urges the Minister to include terms that protect a citizen, who claims he did not realise the shares could be manipulated, from attempting to sue.
What happens after the 30 days? Do the shares go on the open market and then collapse? If the investor who has lost money claims he was misled and the response is "hard luck, we allowed you to buy them on day 20 but on day 30 they collapsed" , we will be guilty in the case of a State company of having misled the investor.
A point I made on Second Stage has been drawn to my attention. It was not quite the same case because that was during a takeover. Stabilisation or support of shares took place during the takeover by Guinness of Distillers seven or eight years ago and the market was not informed. The people who did this – four board members and the chief executive – went to jail for exactly what is now being made legal. I understand they supported shares to give them a value that was not genuine in order to ensure they could buy the other shares. That occurred during a takeover period. I am told that is different from a launch but I do not see a difference. I see the widow, the pensioner, the person who decides to invest, as Senator Mooney is encouraging, his or her life savings into the stock market, loses it and claims to have been misled. I thought it was illegal to do that because I read some years ago that the directors of Guinness went to jail for that same sort of thing. The Minister is saying it will be made legal and correct but after 30 days the person who bought the shares will be told it is his hard luck, that he bought them when there were genuine open market conditions. All I am asking is that a warning be given that these may not be open market conditions. I think the Minister should accept this amendment.
To take up Senator Quinn's last comment – I say this with all the strength at my command – I hope there is nobody out there be they pensioner, grandma or grandad who would seriously, or even half-seriously, consider putting their life savings, or any portion of it, into the stock market. While there are people who do it, that is not what stock market investment is about. What I have said and continue to say is that all the indications are that this flotation will be successful.
This Bill is not about a flotation.
People who have money on deposit which they do not need for everyday needs should seriously consider putting it into the Telecom Éireann flotation. That is the wider issue. Will Senator Ross and others agree there has not been an unsuccessful flotation of public utilities? If so, I would be interested to hear about it. I am not sure there is one. There was the case of which Senator Ross would be aware, Kleinwort Benson European privatisation fund, which was linked to public privatisations. That was a unit trust.
The Senator is incorrect about that. That was a very successful launch.
Senator Ross set the tone of this by saying he was trying to look at the issues. I single that one out because it was marketed in anticipation of the flotation of public utilities in Europe. It was in that climate it was sold. It did not outperform the market or achieve the expectations. The fund was wound up and sold off. I hasten to add that is not a reflection on anybody. I have the height of respect for Senator Ross and bow to his greater expertise. This debate is enhanced by his contribution. I do not mean to be patronising. It is important that people such as Senator Ross and Senator Quinn who have—
An Leas-Chathaoirleach
We are not debating Senators Ross, Quinn etc. Will the Senator—
It is important in the context. I wish to address the points they have raised and I would be grateful if the Minister would clarify this. In relation to the shares that are to be sold, from the date of commencement to the 30 day period, am I correct in saying that the vast majority of the shares that would be made available in a public flotation will already have been pre-sold? In order words the flotation price will be announced. Under the system being operated, people will already have paid their money and bought the shares before trading commences. We are talking about those who will enter the market having been made aware by this legislation of the possibility of stabilisation. Is it not true that this vehicle is in keeping with the existing Stock Exchange rules and that it cannot be compared with the example to which Senator Quinn referred? Am I not right in saying that stock market investment is in some instances for the long-term?
I agree with Senator Ross that the Americans have a different culture in regard to the purchase and sale of shares than Europeans. They have no sentiment whatsoever about shares. They will dump them at the least quiver. However, there is a different culture in Europe. In general there is a tendency to hold on to shares. The encouragement in respect of these shares is not only to purchase but to hold on to them. Am I not right in suggesting that even after the 30 day period if there is a dip in the market, and there has been volatility in the market since time immemorial, that does not detract from the underlying strength of this share which I believe will be capitalised at approximately £5 billion if the market price is the one being touted in the financial press? I hope the Minister of State will take the opportunity to allay the fears of people about this share flotation. The other flotations can be examined when they come on stream, although I appreciate that the legislative framework is being put in place for all future flotations.
I am anxious that the Minister addresses these issues because the Government is obliged to point out that share investment is a risk, but that it is taking every step possible to ensure there is a successful flotation. I have taken my position in that context, notwithstanding the points made about manipulation of the free market. Senator Ross used the phrase "being honest". I see it for what it is, although the Minister of State does not have to respond in this way. The purpose of it is to bolster the market and to ensure that it is not a failure as a flotation. Perhaps the Government should come out and say that.
This Committee Stage debate is most interesting. When a large number of new securities are released onto the market at once, as happens in a new issue or offer, it sometimes takes a number of weeks for them to settle. Nobody would be better able to tell us about that than Senator Ross. The stabilisation mechanism encourages a more orderly transition from the abnormal trading volume when a new security is issued to a normal volume some time later.
In relation to the point made by Senator Quinn that parties will not be aware of the possibility of stabilisation, under rule 5(2)(a) there will be prominent disclosure that stabilising may occur. The point is that this is enabling legislation; it is not necessarily the case that it must be done. It is an enabling mechanism and if the markets maintain the asset value of the floated company, it will not be necessary to operate it. It is best international practice with which we must deal.
Senator Ross said it should be changed from stabilisation to support. I need stabilisation and support at this time. As a member of the Government I need the support of my parliamentary party and Members of the Oireachtas, in addition to the tremendous support of the people who advise me, work with me and assist me, to stabilise my efforts. I also require support among the populace. Stabilisation is a different mechanism from support. The provisions will stabilise the floatation. This will be done for 30 days and, at the end of that period, the populace will decide the net value of the shares. It is a simple mechanism which provides confidence, sustainability and a structure. It is a good place to put a few bob and the market will then decide. Let us hope that there are not many failures in any of the many flotations which will take place in Ireland in the future. The legislation is designed to accommodate the many proposals, projects and companies which will be floated.
I must declare an interest because of the company which Senator Mooney kindly brought into the public arena.
Not mischievously.
An Leas-Chathaoirleach
It is appropriate for the Senator to declare it.
Yes. I was chairman of that company. However, it was not a company which was privatised. It was an investment trust which is a completely different animal from the one we are discussing.
I fully accept that, but it invested in public utilities.
It did so all over Europe. It should not be compared to the privatisation which is being discussed. It was a completely different animal.
Question put: "That the words proposed to be deleted stand."
Senators
Vótáil.
Will the Senators who are claiming a division please rise?
Senators Henry, Quinn and Ross rose.
As fewer than five Members have risen I declare the question carried and the amendment lost. In accordance with Standing Order 56 the names of the Senators dissenting will be recorded in the Official Report and the Journal of the Proceedings of the Seanad.
Question declared carried.
Amendment declared lost.
Amendment No. 7 not moved.
I move amendment No. 8:
In page 13, paragraph 8, line 13, to delete "publish that information in such form as it sees fit" and substitute "make public that information not later than the start of business on the following day".
Is amendment No. 9 being taken with this amendment?
No, unless the Senator so wishes.
No, I had feared we would only have one more vote rather than two.
We have covered some of this area already. The purpose of this amendment is to impose an obligation on the Irish Stock Exchange to inform the public when stabilisation has ceased. I see no reason not to be open about this and if we do not impose this obligation it may suggest a cover-up. There is no reason that this information should be in the public domain and every reason that it should.
Referring to when stabilisation will take place, the Minister said on Second Stage that, in this instance, the information communicated to the Stock Exchange would not be disclosed by it to the market. It is important that we adopt openness and transparency and on that basis I urge the Minister to accept the amendment. It will emphasise that the Irish Stock Exchange is a healthy and open market.
I support this amendment because it makes sense to do this rather than to allow the Stock Exchange to publish information in such form as it sees fit. It is more definitive and is in the interests of openness, transparency and accountability.
I support the amendment because it is much clearer and I would be glad if the Minister of State considered it. We are inclined to speak about the Bill as if it were only concerned with the Telecom Éireann flotation but it will apply to future floatations and we must ensure it will suit them also.
I have some sympathy with what Senator Quinn proposes but I am concerned that his wording could give rise to difficulties. "Made public" is an indeterminate term whereas the present wording of the Bill requires the Stock Exchange to publish the information. It leaves discretion with the Stock Exchange as to the form in which this is done but it has existing mechanisms for notifying the market of information which it receives and I expect this will be the manner in which the information it receives pursuant to rule No. 8 will be disclosed. If any difficulties arise in the operation of this rule, the powers in section 5 would be available to redress such difficulties. Accordingly I am satisfied that the existing wording is appropriate and I am not prepared to accept this amendment.
Question put: "That the words proposed to be deleted stand."
Senators
Vótáil.
Will the Senators who are claiming a division please rise?
Senators Coghlan, Henry, Quinn and Ross rose.
As fewer than five Members have risen I declare the question carried and the amendment lost. In accordance with Standing Order 56 the names of the Senators dissenting will be recorded in the Official Report and the Journal of the Proceedings of the Seanad.
Question declared carried.
Amendment declared lost.
I move amendment No. 9:
In page 13, paragraph 9, line 21, after "day" to insert "and this record shall be made public by the Irish Stock Exchange Limited not later than the start of business on the following business day".
The propose of this amendment is to inform shareholders of any stabilisation activities if and when they occur. There is no reason they should not have this information immediately. There is no way in which the release of the information could inhibit or frustrate the stabilisation process. Releasing the information in this way would remove to a large degree the problem I have had with the stabilisation programme and the concept itself, namely that it suggests the market is being rigged and manipulated. This amendment would overcome that. If the public was immediately informed about what was being done, it would limit the damage to the concept of an open marketplace. The only possible reason for keeping this information under wraps is because one is ashamed of the fact that one has been manipulating the market. I urge the Minister of State to consider this amendment seriously because of the benefit it would bring to the value of the trust and confidence in the concept of an open marketplace.
I support this amendment and it brings more certainty to the position. As the Minister of State said when speaking on other aspects of the Bill, there is nothing to hide. He has provided properly in the legislation that the public must be notified of various matters that could arise following the passage of this Bill. In keeping with what he said about other sections, I urge him to ensure the knowledge is imparted immediately. By doing so he would be seen to be more consistent and to properly serve the public. I join with Senator Quinn in urging him to accept this amendment.
This amendment is directly contrary to what is contained in section 3. The market will be forewarned before the securities are offered or issued that stabilising action is a possibility and may be engaged in. The Irish Stock Exchange Limited is the competent authority to ensure that Part V of the Companies Act, which contains the prohibition on insider dealing, is not contravened. By ensuring that the Stock Exchange receives notification of any stabilisation action undertaken by a manager, it would be better able to monitor what is happening in the marketplace and to ensure no breaches of Part V occur. However, the disclosure to the marketplace that the stabilising manager had engaged in stabilising actions will almost definitely frustrate a manager's stabilising action, for instance, allowing third parties to take advantage of this information. There is no doubt about that. If the information is available about what is happening and how it is happening, that can be manipulated and used in another way to contravene and change the thrust of the progress of the flotation. Regretfully, I will not be able to accept the Senator's amendment.
I understand but disagree with what the Minister of State said. I congratulate Senator Quinn on initiating this debate. It has been very useful and it is one that probably would not have been aired without his initiative. It is something which has seen the House performing a very useful function.
Is the amendment being pressed?
Yes.
Amendment put and declared lost.
Schedule agreed to.
Title agreed to.
Bill reported without amendment and received for final consideration.
Acting Chairman
When is it proposed to take Fifth Stage?
Now.
Question proposed: "That the Bill do now pass."
I sincerely thank Senators who participated in this debate and those who tabled amendments. We teased out the emphasis in the Bill. Anybody who reads the record in future will know from where we are coming. Through our efforts and those of Senators who participated by tabling amendments and responding to them, the legis lation is more sustainable and better focused for the future.
I congratulate the Minister of State on the Bill – I offer my congratulations as a member of the defeated team. I congratulate him on his grasp of the issues in the Bill. The civil servants who drew up the Bill had a good grasp of its objectives. I am not happy with those objectives. I disagree with them.
My main concern about the Bill is the way it was handled. We seemed to conclude regularly that it was about the sale of Telecom Éireann shares. I accept this was not the intention of the Minister of State or those who supported the Bill, but the debate was focused on that. We must remind ourselves that this Bill will become law and that law will apply to every future flotation. The debate was distracted by the sale of Telecom Éireann shares. I wish the company every success with its flotation. I hope our efforts in querying aspects of the Bill will not be taken to suggest there is anything but full support for the Telecom Éireann flotation. We may return to this matter on another occasion. This is not good or healthy legislation, but the Minister of State handled its passage through this House well and I congratulate him.
I thank the Minister of State and his officials for the fine way they worked with us in dealing with the Bill in the House. I agree with Senator Quinn that it was regrettable the debate focused too much on the Telecom Éireann share issue. This legislation deals with all share issues. I congratulate the Minister of State on the way he pressed his cogent arguments on the amendments he tabled. His contribution and that of Senator Ross added to the debate. As Senator Ross said, that is something we welcome; it gives us reason to justify our existence and realise we have something to add to legislation.
It is important to ensure there is a level playing pitch for all companies that wish to float their shares on the Stock Exchange, which will ensure that foreign investors will know we have confidence in our market. If we do not have a level playing pitch, any future share issues may not be as successful as they should be. The objective of the legislation is to level the playing pitch and that has been done.
I join with Senators Cox and Quinn in complimenting the Minister of State on piloting his Bill safely through the House. I congratulate Senator Quinn on the way he applied his mind to the Bill. I agreed with him on the last two amendments. I might not agree with what he said about the overall structure, but it is important to reflect in national law what is available and regarded as best international practice in terms of stabilisation. As I said on Second Stage, that is important in the national interest and for the benefit of all Irish companies. Unfortunately, the focus on Telecom Éireann, given its imminent flotation, was annoying because the Bill will be the law unless it is amended. As this practice is accepted and controlled in other stock markets throughout the world, we should not tie the hands of Irish companies which wish to float. For those reasons, I am very much in favour of the Bill. Senator Quinn did a marvellous job in teasing out aspects of it. I was a little sad that his final amendments were not accepted. The Bill will make good law and the other House will no doubt also take a critical look at it.
Question put and agreed to.
Acting Chairman
When is it proposed to sit again?
Tomorrow at 10.30 a.m.
The Seanad adjourned at 6.55 p.m. until 10.30 a.m. on Wednesday, 12 May 1999.