Amendments Nos. 28, 29 and 31 are related to amendment No. 1 and may be discussed together.
Investment Funds, Companies and Miscellaneous Provisions Bill 2005: Committee and Remaining Stages.
Section 1 agreed to.
SECTION 2.
Government amendment No. 1:
In page 8, line 1, after "Act" to insert "(other thansections 75 and 76)”.
I said on Second Stage that we would propose some amendments to the Industrial and Provident Societies Acts in connection with financial limits on co-operative societies. Under the Industrial and Provident Societies Acts of 1893 to 1978, there are statutory limits on the maximum amount a member of a society may have by way of interest in the shares of a society and on the amounts that may be distributed by way of testamentary nomination or on intestacy. The limits were last adjusted in 1985 and 1990, and the co-operative movement has requested that they be increased.
The effect of amendment No. 28, if accepted, will be to increase the limits concerned to the amount stated in the text of the amendments. In the case of shares, that is €150,000, or 1% of the total assets of a society. In the case of nominations and intestacy, it is €15,000 and €10,000, respectively.
In the course of preparing the financial limits, it became evident that the power of the Minister to alter the statutory limits by means of regulations had been inadvertently removed by the Credit Union Act 1997 and that the regulations then in place had lapsed. The purpose of amendment No. 29 is to validate the financial limits provided in the regulations. The limits will be replaced by the new limits provided in amendment No. 28, which, by virtue of amendment No. 1, will immediately come into operation on the enactment of this legislation. The amendments necessitate a change in the Long Title of the Bill, which is reflected by the contents of amendment No. 31. I commend the amendments to the House.
I do not quite understand the impact of the amendment on section 2. Perhaps the Minister of State can indulge me by telling me what is "an industrial and provident society". What are the essential characteristics of such a society? Frankly, I do not really know.
Co-operative societies and credit unions, for example, are covered under the Industrial and Provident Societies Acts. The amendment will increase the value of the shares that a member of a society may have to €150,000 or 1% of the society's total assets. An inadvertent omission in the Credit Union Act 1997 meant that an increase in one's shareholdings, testamentary nominations or intestacy transfers was not allowed. The amendments under discussion will correct that mistake.
Am I right to state that credit unions and building societies will not be affected by the amendments?
Yes.
What type of institution will be affected?
Co-operative societies will be affected.
Okay.
I welcome the Minister of State's amendments, which are being introduced as an enabling measure for co-operative societies. I am happy to welcome the changes, which have been approved by the Irish Co-operative Organisation Society.
I welcome the Minister of State to the House. I commend him and his staff on the amendments they have proposed. The co-operative movement, particularly the Irish Co-operative Organisation Society, has been seeking an increase in the current limits on co-operative shares for some time. The proposed new limits should meet the development needs of the co-operative movement for some years to come. I welcome the Minister of State's proposals.
Amendment agreed to.
Section 2, as amended, agreed to.
Sections 3 to 5, inclusive, agreed to.
SECTION 6.
Question proposed: "That section 6 stand part of the Bill."
Will the Minister of State clarify the references in section 6(2) to "a management company" and "a custodian"? I understand that a custodian will act as a trustee, in effect, but I am not quite clear about it. I would like to know how the respective roles of a management company and a custodian are defined. I understand that a custodian will act as a trustee, but I do not understand it fully. Perhaps the Minister of State will help me in that regard.
Section 6(2) clarifies the meaning of references to "a management company" and "a custodian". Any reference to "a management company" is construed as a reference to the person in whom the powers of management relating to property of the fund are invested. Any reference to "a custodian" relates to a person in whom such property is entrusted for safe keeping.
The custodian acts as a trustee.
Yes.
Ownership is vested in the trustee but the management company basically deals with it.
Yes.
I do not understand the wording of sections 6(3) and 6(4). It seems to apply section 18 of the UCITS regulations to the authorisation or non-authorisation of the non-UCITS CCFs being established in this Act. Is that a reasonable interpretation? It seems that the amendment is plucking out one section of the other regulations and applying it to this legislation. It seems to be a strange way of dealing with the issue.
Under section 18 we have regulations 63, 77-85 and 98-105 already in operation under the UCITS regulations. They will now apply under the non-UCITS regulations. That is what section 18(3) does. Subsection 4 provides for the relevant provision of the UCITS regulations as applied by section 18 of this part to be jointly construed with this Bill. The set regulations already in place for UCITS will apply also in the case of non-UCITS regulations.
They are the ones listed under section 18 of this Bill.
Yes.
Question put and agreed to.
SECTION 7.
Question proposed: "That section 7 stand part of the Bill."
This is a fundamental section which sets up the non-UCITS CCFs. It defines it in an entirely negative fashion. It says that a non-UCITS CCF is one that is not a UCITS CCF, or one that is not a partnership or a trust. For those of us who are not experts in these matters it is quite difficult to imagine what it is. It is an investment fund vehicle that does not fall into any of the other categories.
Perhaps the Minister of State can give us some background on the usual structure for investment funds in this country. I understand that UCITS are a minority sport and are often dealt with as unit trusts or as partnerships. In his response perhaps the Minister of State can provide the House with an outline of the structure of a non-UCITS CCF. I understand it is not a company but a contractual management system of some kind. As it is defined solely in a negative way one does not get an idea of what the Minister of State envisages.
I take the Senator's point. Subsection 2 contains an express statement that non-UCITS CCFs will not constitute a partnership under the Partnership Act 1890 or a unit trust under the Unit Trust Act 1990. This ensures that it will not be subject to the provisions of those Acts. Unless an express statement was included to this effect, the CCF vehicle might otherwise be subject to the provision of the Partnership Act 1890 or the Unit Trust Act 1990. Perhaps I could come back to this topic if the Senator wants a more detailed definition.
I do, because this is important. The whole purpose of this part of the Bill is to set up the concept of a non-UCITS CCF.
It is only a fund. It is a common contractual fund. As the Senator has pointed out it is not under the company legislation or the Partnership Act. It is a separate entity.
The whole point of it is that it is to be regulated in a different way. This House has difficulty in that it allows Irish Financial Services Regulatory Authority to set out the form of regulation that will apply. We assume this will be a lighter form of regulation than the regulations that apply to UCITS. We are not told the expected form of the CCFs nor what the regulations will be because that is an enabling power that is given to the bank. It is very difficult to get an idea of what is intended.
I will rehearse paragraphs from my Second Stage speech which deal with the different vehicles of investment as this may clarify matters for the Senator. In 1989 EC regulations on undertakings for collective investments on transferable securities, UCITS, were signed into law, transposing the relevant EU directive which makes provision for collective investment vehicles capable of being sold throughout the European Union. In the ensuing years a number of other types of fund vehicles were legislated for and existing law was updated so that today the funds industry can offer its products through entities established under the Unit Trust Act 1990, Part 13 of the Companies Act 1990, the Investment Limited Partnership Act 1994 or the 2003 EU regulations on undertakings for collective investment in transferable securities which include four amending regulations.
With a view to providing the greatest flexibility to the funds industry while at the same time keeping appropriate controls in place, the Bill makes a number of changes to the existing law. It provides for the introduction of a new type of investment fund vehicle which is the non-UCITS common contractual fund. It also provides for the introduction of cross investment and segregated liability.
I do not intend to pursue this matter but I do not have a mental picture. It is not a trust, partnership or company and is not covered by UCITS regulations. It is not a political party. I do not know what it is.
It is an investment fund.
Managed by a management company and maintained by a trust.
As a solicitor, the Senator will be aware of what happens when a contract is signed.
That is the cause of my trouble.
Question put and agreed to.
Section 8 agreed to.
SECTION 9.
Amendments Nos. 2 and 3 are related, and may be discussed together by agreement.
Government amendment No. 2:
In page 11, lines 33 to 35, to delete subsection (2) and substitute the following new subsections:
"(2) The Bank shall ensure that the register is kept at a specified office of the Bank and is made available for inspection by members of the public during the ordinary business hours of that office.
(3) If the register is kept in a form that is not immediately legible, the Bank shall make available a version of it that is in legible form.
(4) A person who, during the ordinary business hours of the Bank, attends the office at which the Bank keeps the register is entitled—
(a) to inspect the register without charge, and
(b) on payment of a fee (if any) prescribed under section 33K (inserted by the Central Bank and Financial Services Authority of Ireland Act 2003) of the Central Bank Act 1942, for the purposes of this subsection, to obtain a copy of any entry in the register.”.
Section 9 is based on section 3 of the Unit Trust Act 1990. However, section 3 of that Act was amended by the Central Bank and Financial Services Authority of Ireland Act 2003, Part 14 of Schedule 1 and consequential amendments to other Acts. Amendment No. 2 is framed to reflect the changes made by the 2003 Act, which were not taken into account when the Bill was drafted. The import of the provision is self-explanatory.
Amendment agreed to.
Government amendment No. 3:
In page 11, lines 44 to 48 and in page 12, lines 1 to 5, to delete subsections (5), (6) and (7) and substitute the following new subsections:
"(5) The Bank shall include in its annual report to the Minister of Finance under section 6I (inserted by the Central Bank and Financial Services Authority of Ireland Act 2003) of the Central Bank Act 1942 a report on the performance of its functions under this Part.
(6) The Bank shall give to the Minister a copy of the report on the performance of its functions under this Part referred to insubsection (5).”.
This is a related amendment concerning the reporting arrangements for the Central Bank under this part. The current draft provides for reporting to the Minister for Enterprise, Trade and Employment. However, under the Unit Trust Act 1990 the bank reports to the Minister for Finance. For consistency it is proposed to change the provision to require the bank to report on its functions to the Minister for Finance but to give a copy of this report to the Minister for Enterprise, Trade and Employment. This will avoid duplication of information being laid before the Oireachtas, given that the bank's annual reports to the Minister for Finance is required to be laid before the Oireachtas under section 6(1) of the Central Bank Act 1942, inserted by section 7 of the Central Bank and Financial Services Authority of Ireland Act 2003. I commend the amendment to the House.
Amendment agreed to.
Section 9, as amended, agreed to.
SECTION 10.
Question proposed: "That section 10 stand part of the Bill."
This section concerns the powers of the banks to regulate the UCITS which are currently regulated in a number of ways. The diversification of the assets that they manage is specified in the regulations so that some may be held as stocks or shares and other as transferable securities in particular jurisdictions or in other forms. I am interested to learn how the Minister of State envisages the Central Bank to apply these regulations in terms of the diversification of assets to the new structure. I am also unclear on the enforcement of the regulations. The Bill does not appear to contain a provision allowing for the imposition of penalties in situations where regulations by the bank are disobeyed.
Differences exist among the legal vehicles used by the funds industry to meet investors' requirements. In this regard, some management companies are concerned with pooling investments. Some investors may wish to expose to particular markets or may be prepared to take a long-term view and others may need the investment for a short period or may be prepared to take risks in the hope of higher returns. These variables must be considered when determining the most suitable vehicle for a particular investor. However, it remains the case that the vehicle must be authorised by IFSRA and will remain subject to ongoing supervision by the authority. In this context, while there may be greater flexibility for non-UCITS, whether part 13 companies, unit trusts, investment limited partnerships or, under Part 2 of the Bill, non-UCITS CCFs, in the areas or percentages of their investments which may be invested in particular assets, products or markets they remain subject to authorisation and supervision by the regulatory authority.
I thank the Minister of State for the explanation. I understand UCITS regulations specify that all UCITS diversify their assets so they do not put all their eggs in one basket. Is it intended to specify in the regulations that all non-UCITS CCFs will be obliged to diversify or is it intended to deal with it by authorising particular investments on a case by case basis?
IFSRA will issue notice in the first instance on the compliance requirements of the CCF. Through a combination of sections 10 and 19, IFSRA can ensure compliance.
Question put and agreed to.
Sections 11 to 17, inclusive, agreed to.
SECTION 18.
Question proposed: "That section 18 stand part of the Bill."
I again wish to pursue the issue of regulation. Currently under the UCITS structure investors with a certain level of assets are afforded protections in terms of the risks that may be taken with the investment. No such constraints effectively exist for institutional investors. Is it intended to maintain this discrimination between different types of investor? The majority of customers for these vehicles are expected to be large companies so it perhaps does not apply.
IFSRA has not yet decided upon the content of notices. I understand discussions are ongoing between the officials and the industry but a decision has not been made yet on the approach they will adopt.
I do not want to sound pernickety but in a sense this goes back to where we were on Second Stage. We are looking to create a more lightly regulated form of CCF. That is fair enough in so far as it goes but if we have any purpose at all in this House it is our duty to try to ensure that a satisfactory level of regulation is maintained. Essentially, the Minister of State is telling me to trust IFSRA because it will do the business. Perhaps that is what we have to do, although I am not suggesting all the regulations should be set down in primary legislation. I accept we cannot do that but will the Minister of State indicate what he believes will be contained in the regulations? I do not want chapter and verse but perhaps he could give me some idea of what they will contain.
I accept the point the Senator is making and understand the query about what will be contained in the regulations.
I do not want the detail.
I cannot say what will be contained in the regulations because this is a new instrument that is being introduced. The Senator is correct in that it is a more lightly regulated form of investment than the UCITS but at the same time they will be dependent on IFSRA's authorisation. IFSRA will also be the body responsible for regulating. We have to wait for details of the regulations to come forward.
Question put and agreed to.
Sections 19 and 20 agreed to.
SECTION 21.
Question proposed: "That section 21 stand part of the Bill."
I appreciate that we are talking about summary offences and I assume the provisions in this section constitute the maximum sentence for summary offences but is there provision in the amendments for indictable offences? If we are talking about the creation of summary offences, these are fairly light fines in an industry where people have very deep pockets. The maximum fines that can be imposed are €5,000 or €15,000.
Under section 21(b) a person shall be liable on conviction on indictment to a fine not exceeding €15,000 or imprisonment for a term not exceeding five years.
In an industry where hundreds of millions of euro change hands or potentially are at risk if investment is carried on in a reckless fashion, these fines appear to be fairly low.
I take the Senator's point. Perhaps that is something we can examine.
Question put and agreed to.
Sections 22 to 24, inclusive, agreed to.
SECTION 25.
Question proposed: "That section 25 stand part of the Bill."
The Minister will have to help me with this section. This is the section that essentially deals with the business of segregated liability. My understanding is that it does not apply retrospectively; it will only apply in so far as sub-funds are created going forward or if a management company agrees to do that.
I appreciate that this section is intended to encourage speculative investment but is there a danger in creating the possibility for a fund to hive off its most high-risk investment where the risk of insolvency is greatest, which is what we are principally concerned about, and where there is, in effect, no recourse to the rest of the assets of the fund for an investor if that sub-fund becomes insolvent? I can almost anticipate the Minister of State's response. He will say that if somebody is investing in something that is high risk, it is probably no harm that everybody else is to be segregated from them. Nonetheless, there should be a warning with this, so to speak, in that the Minister of State is telling people that if they go down this road there is a far greater risk that that particular sub-fund will become insolvent at some time in the future, which is tough. Am I correct in my understanding of the purpose of the section?
Section 256A of the principal Act provides a mechanism by which segregated liability will apply to umbrella funds, that is, that the assets of one sub-fund are protected from claims arising against other sub-funds. To protect creditors, section 256A includes a mechanism pursuant to which any existing umbrella fund that wishes to avail of the benefits of segregated liability must obtain approval by way of special resolution of the members. The creditors of an umbrella fund may apply to a court for an order delaying the implementation of the special resolution. Any such special resolution will not take effect if a creditor has successfully applied to a court for an order delaying the commencement date of the special resolution. Umbrella funds that convene a meeting for the purposes of passing the special resolution necessary to give effect to segregated liability must also notify their creditors at the time of the proposal.
Section 256E of the principal Act sets out the requirement to be complied with by umbrella funds to which section 256A applies, that is, those availing of segregated liability. Subsection (1) requires a statement to that effect on letterheads used by the umbrella fund and disclosure of that fact in any other dealings with third parties.
That can only be done prospectively. Can it be applied to existing assets? If, for example, a fund has a stock of Russian property can it suddenly decide to say that this is a sub-fund which it is now creating for its Russian property in the border regions of Chechnya or whatever? In other words, does it apply to existing assets or only to assets acquired after the Act is in place?
The new funds and so on that the Senator referred to have to go through the procedure under section 256A.
There is no prohibition on including existing assets in it, is that right?
Under section 256B they have to give the notices as well. People can then apply to court if they are not happy with what is being offered to them. They have to go through all the procedures.
Question put and agreed to.
Sections 26 and 27 agreed to.
SECTION 28.
Amendment No. 4, which is a Government amendment, is consequential on amendment No. 5 and amendment No. 6 is related. Is it agreed to take amendments Nos. 4 to 6, inclusive, together? Agreed.
Government amendment No. 4:
In page 24, subsection (1), line 21, after "1972" to insert ", regulations undersection 29”.
The purpose of these amendments is to allow the Minister to make regulations under this Act for the purpose of implementing the EU market abuse directive, market abuse regulation and supplemental directives. It is recognised that it can be particularly difficult to sustain and prosecute an allegation of market abuse, so much so that the new EU directive focuses on administrative sanctions rather than requiring member states to have criminal sanctions. In the case of Ireland, such administrative sanctions will be provided for in the transposing regulations.
While that is the case, it is considered that the criminal sanction regime that was provided for in Part V of the Companies Act 1990 should be retained. It had been intended to make these regulations under the European Communities Act 1972. However, section 3(3) of that Act states that regulations under section 3 shall not create an indictable offence. Consequently, for legal certainty it is proposed to use the power in the new section 29 and under the European Communities Act 1972 to transpose the market abuse directive.
Amendment No. 5 gives the regulation making power to the Minister. Amendment No. 6 creates the penalty that can be imposed for a person found guilty of an offence in this context. Amendment No. 4 is a consequential amendment. I commend these amendments to the House.
While the new regime of administrative sanctions is welcome, it is important to retain a criminal sanction regime similar to the one which is currently in operation. While provision is made in Part V of the Companies Act 1990, it will be repealed in the regulations transposing the market abuse directive. We should use whatever mechanism provides maximum legal certainty for that purpose.
For the sake of our country, economy and growth, we must put in place the strictest regime on market abuse, manipulation and insider trading. Without being specific, we are all aware of instances of what Senator McDowell alluded to as "very big boys behaving badly". We must, therefore, be very stringent and correct in our approach.
Subsection (2) of the new section 29 appears to give the Minister the power to create indictable offences by regulation, which is a dubious if not undesirable way to proceed. The usual practice has been to create indictable offences through primary legislation. The power is now being given to the Minister and perhaps even to IFSRA. Indictable offences can incur fines of up to €10 million. If such offences are to be created, it should be done through statute law.
The offence is set out in section 30 which provides that a person guilty of an offence created by Irish market abuse law shall, without prejudice to any penalties provided by that law in respect of a summary conviction for the offence, be liable on conviction on indictment to a fine not exceeding €10 million or imprisonment for a term not exceeding ten years or both. As the regulations must be cross-referenced with the section, the Minister will not set out the offence himself or herself.
What does subsection (2) of the new section 29 mean? It does not make much sense to me. It stipulates that regulations under the section may contain such incidental, supplementary and consequential provisions as appear to be necessary or expedient for the purposes of those regulations, including provisions creating indictable offences. It seems to provide the Minister with the power to create indictable offences in regulations.
Subsection (2) is for the most part a copy of the provision set out in the 1972 Act, including provisions creating indictable offences. The provision was set out on the advice of the Office of the Attorney General. Further advice has been requested and the matter will be clarified when we receive it.
Amendment agreed to.
Section 28, as amended, agreed to.
NEW SECTIONS.
Government amendment No. 5:
In page 25, before section 29, to insert the following new section:
"29.—(1) The Minister may make regulations for the purposes of giving effect to the 2003 Market Abuse Directive, the Market Abuse Regulation and the supplemental Directives.
(2) Regulations under this section may contain such incidental, supplementary and consequential provisions as appear to be necessary or expedient for the purposes of those regulations, including provisions creating indictable offences."
Amendment agreed to.
Government amendment No. 6:
In page 25, before section 29, to insert the following new section:
"30—A person who is guilty of an offence created by Irish market abuse law shall, without prejudice to any penalties provided by that law in respect of a summary conviction for the offence, be liable, on conviction on indictment, to a fine not exceeding €10,000,000 or imprisonment for a term not exceeding 10 years or both.".
Amendment agreed to.
Section 29 deleted.
SECTION 30.
Question proposed: "That section 30 stand part of the Bill."
While those of us who are not expert in the field or who do not have much connection with it think we know what constitutes insider trading, I have no recollection of a high-profile prosecution under market abuse law in Ireland. Are the provisions theoretical or does it happen? How frequently have prosecutions taken place under market abuse law and what has been the typical outcome? We have all read of instances in which insider trading has been alleged, but I do not recall anything serious coming before the courts or criminal sanctions being imposed.
While a number of people have been alleged to have taken part in insider trading, I am aware of only one case which has been successfully prosecuted. I said speaking to sections 28 and 29 that the purpose of the amendments was to allow the Minister to make regulations. I continued:
It is recognised that it can be particularly difficult to sustain and prosecute an allegation of market abuse, so much so that the new EU directive focuses on administrative sanctions rather than requiring member states to have criminal sanctions. In the case of Ireland, such administrative sanctions will be provided for in the transposing regulations.
While the Senator was right to think significant numbers of people had not been prosecuted due to difficulties with the current legal framework, it is hoped that the changes implemented in regulations will make it easier to bring successful prosecutions.
Section 30 seems to provide a civil remedy in so far as it allows a person to seek compensation in the event that he or she has lost out as a result of the use by another person of insider knowledge. The provision seems to be contingent on it being proved in the first place that somebody has contravened the law. It will not be a question of taking a civil case in the normal way where one must prove that on the balance of probability someone has done something wrong or been negligent. Under the provisions of section 30, it appears one must sustain a suit for damages against a person who has already been convicted of a civil offence or has contravened the law.
Section 30 deals with civil cases. Section 109 of the Companies Act 1990 makes provision for civil liability for unlawful dealing. The action currently before the High Court involving Fyffes and DCC is such a case. It is considered that the capability should be retained in Irish company law going forward. As it does not arise directly from a requirement in the market abuse directive, it is being included in this legislation in primary law.
Are we providing that a person must first be shown to be guilty of an offence under market abuse law before he or she can be sued for compensation by somebody who has lost out? Is it a requirement to first convict a person?
No.
Can one take a case for compensation and allege during its course that somebody has contravened the law without that having previously been proven?
Yes.
Question put and agreed to.
Section 31 agreed to.
SECTION 32.
As amendment No. 8 is consequential on amendment No. 7, the amendments may be discussed together, by agreement.
Government amendment No. 7:
In page 27, paragraph (g), line 2, to delete “;” and substitute “,”.
Section 33AK of the Central Bank Act 1942, inserted by section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003, lays down the rules for the bank and IFSRA on the disclosure of confidential information. It is considered that the same considerations arise regarding the prospectus directive. Section 32 has already added the relevant market abuse directives to the directive listed in section 33AK of the Central Bank Act and amendment No. 8 adds the prospectus directive to the list. I commend amendments Nos. 7 and 8 to the House.
Amendment agreed to.
Government amendment No. 8:
In page 27, between lines 2 and 3, to insert the following new paragraph:
"(h) the 2003 Prospectus Directive (within the meaning of Part 5 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005);”.
Amendment agreed to.
Section 32, as amended, agreed to.
SECTION 33.
Question proposed: "That section 33 stand part of the Bill."
What markets is it intended to include?
Section 33 allows the Minister to proscribe by provisional order any market to which market abuse law shall apply. It is important that requirements under the market abuse directives should be capable of being applied to any new market. Any provisional order made by the Minister must be confirmed by an Act of the Oireachtas. It is understood that the Irish Stock Exchange proposes to establish a new market, the Irish Enterprise Exchange, for smaller companies which will not fall within the definition of "regulated market" as defined at present in the investment services directive, nor as redefined in the revisions being made by directive 2004/39 to the investment services directive 93/22 which is due for transposition by member states by 2006.
The exchange's action is understood to be a direct response to a similar initiative taken by the London Stock Exchange. Following discussions with the IFSRA it is our view that the market abuse directive requirements should be capable of being applied to any such new market. This section will allow the Minister to prescribe any market to which the market abuse regulations should apply. Subsection (1) gives the Minister authority to provide by a device called a provisional order that one or more provisions of Irish market abuse law may apply to any market specified in that order. The Minister must consult with the competent authority, namely IFSRA, before making the order.
Subsection (2) allows the Minister to amend or revoke any order made under this section. As this type of order is different from those provided for in section 4 of the present Bill a separate right for amendment or revocations needs to be provided for. Subsection (3) provides that any such order must be confirmed by an Act of the Oireachtas and shall not come into effect until so confirmed.
Will the effect of this power in practice be that insider trading legislation will apply to more smaller companies? Is that, in effect, what we are saying?
My understanding is that the market abuse directive will apply to all new markets and funds.
It applies to all regulated exchanges at present. As Senator McDowell is aware, the Irish Enterprise Exchange has been established very recently by the Stock Exchange. We can apply the regulations if we so wish.
Question put and agreed to.
SECTION 34.
Amendment No. 9 is consequential on amendment No. 12 and No. 11 is consequential on amendment No. 13. Amendment No. 13 is related to amendment No. 12 and amendment No. 14 is consequential on amendment No. 12. Amendments Nos. 9 and 11 to 14, inclusive, may be taken together by agreement. Is that agreed? Agreed.
Government amendment No. 9:
In page 27, subsection (1)(a), line 42, after “1972” to insert “, regulations under section 42”.
The purpose of these amendments is to allow the Minister to make regulations under this Act for the purpose of implementing the prospectus Directive and prospectus regulation. Section 42 provides for penalties on convictions on indictment for offences under Irish prospectus law. This would cover a situation where securities are offered to the public or listed without issuing a prospectus. Again, like the market abuse transposing regulations I spoke about earlier, it had been intended to make these regulations solely under the European Communities Act 1972. However, section 3(3) of that Act states that regulations under section 3 shall not create an indictable offence. Consequently, for legal certainty, it is proposed to use the powers under the new section 42 and under the European Communities Act 1972 to transpose the prospectus directive. I commend these amendments to the House.
Amendment agreed to.
Section 34, as amended, agreed to.
Section 35 agreed to.
SECTION 36.
Government amendment No. 10:
In page 30, subsection (1), line 8, to delete "sections 43 to 52," and substitute "sections 43 to 47, 49 to 52,".
The amendment corrects an error in the text which had come to our notice. Section 48 was already repealed by the Companies (Amendment) Act 1983 and for legal certainty it should not have been included here. I commend the amendment to the House.
Amendment agreed to.
Section 36, as amended, agreed to.
Section 37 agreed to.
SECTION 38.
Question proposed: "That section 38 stand part of the Bill."
The Leas-Chathaoirleach is racing ahead of me. I made this point on Second Stage but we did not have time to tease it out. The directive applies only to public offerings of €2.5 million or more. I am no expert on these matters but I would be interested to know how often we would have offerings of this kind. I suspect we would not have more than a few a year. This would appear to exclude from the scope of the directive most cases where shares are sold to the public. Has the Minister given any thought, for example, to the possibility of lowering the limit so as to provide some protection to people who subscribe in circumstances where the offering is less than €2.5 million?
I outlined the approach we were taking to offers of securities to the public. In essence, we are moving to a situation of accepting the threshold set out in the prospectus directive as the threshold that should determine whether a full prospectus must be prepared. Where securities are offered to the public or listed on a recognised stock exchange, the prospectus directive provides that where the offer is for securities of less than €2.5 million it is not necessary to prepare a prospectus.
Section 42 is designed to require the inclusion of certain warnings for potential investors. It is difficult to know what use will be made of the reduced requirements that this approach will generate. It removes bureaucracy for the company seeking to raise investment and to that extent it is a welcome reduction in regulation for entrepreneurs to raise capital. Investors do not have as much information as they would get in a full prospectus but they must be aware that such investment may be riskier. It can be costly to raise capital and for small entrepreneurs this could prove to be a significant step in their growth. This is an initiative that can be monitored and reviewed after it has been in operation for a number of years. I do not know how many people have invested.
Does the Minister of State have any idea?
I do not.
Is it reasonable to say fewer than a dozen in any given year would be over that threshold amount?
We have no idea. We have no statistics on this area.
The point I am trying to make is that we are talking about the exception rather than the rule.
The Minister of State is correct, section 44 provides that various warnings are to be given to potential investors to the effect that past performance may not be a realistic guide to future performance, simulated performance may not be a reliable guide to future performance and so on and so forth. After a while these things become meaningless. We hear them every day on the radio. I am not altogether sure people pay a great deal of attention to them.
When people are acquiring securities or shares they should know there is a measure of risk but I am not convinced that including these pro forma warnings actually adds much to the information provided. At least the directive sets out the requirements under the EU directive and also gives a comeback against the various individuals responsible for drawing up a prospectus. A greater degree of protection is provided to members of the public subscribing to securities. If we are, in effect, excluding most offers from the requirement to produce a prospectus then we are back to these pro forma warnings.
The philosophy behind this particular section is to make it less costly for small entrepreneurs to raise money and not to have them tied up in the considerable red tape and detail required under the prospectus directive. As Senator McDowell stated and as I said, there is a certain amount of risk involved in this area but we are not talking about large amounts of money. The people who would invest that type of money would weigh up the risks against the advantages. I do not believe this type of investment would be for the ordinary investor. That is my personal belief.
The purpose of the directive is to give some sort of comeback against individuals who are involved in drawing up the information included in the prospectus. We are then going on to say that, in fact, most companies offering shares need not bother doing this, which appears to me to devalue the whole purpose of the directive in the first place. I understand where the Minister is coming from.
The threshold of €2.5 million was set by the EU. We are accepting that in our legislation.
Question put and agreed to.
SECTION 39.
Government amendment No. 11:
In page 32, line 46, to delete "a relevant offence within the meaning ofsection 42” and substitute “an offence created by Irish prospectus law”.
Amendment agreed to.
Section 39, as amended, agreed to.
Sections 40 and 41 agreed to.
NEW SECTIONS.
Government amendment No. 12:
In page 34, before section 42, to insert the following new section:
"42. (1) The Minister may make regulations for the purposes of giving effect to the 2003 Prospectus Directive and the Prospectus Regulation.
(2) Regulations under this section may contain such incidental, supplementary and consequential provisions as appear to be necessary or expedient for the purposes of those regulations, including provisions creating indictable offences.".
Amendment agreed to.
Government amendment No. 13:
In page 34, before section 42, to insert the following new section:
"43.(1) A person who is guilty of an offence created by Irish prospectus law shall, without prejudice to any penalties provided by that law in respect of a summary conviction for the offence, be liable, on conviction on indictment, to a fine not exceeding €1,000,000 or imprisonment for a term not exceeding 5 years or both.
(2) In proceedings for an offence created by Irish prospectus law, it shall be a defence for the defendant to prove—
(a) as regards any matter not disclosed in the prospectus concerned, that he or she did not know it, or
(b) the contravention arose from an honest mistake of fact on his or her part, or
(c) the contravention was in respect of matters which, having regard to the circumstances of the case, was immaterial or as respects which, having regard to those circumstances, he or she ought otherwise reasonably to be excused.”.
Amendment agreed to.
Section 42 deleted.
SECTION 43.
Government amendment No. 14:
In page 35, subsection (4), lines 9 and 10, to delete "a relevant offence within the meaning ofsection 42” and substitute “an offence created by Irish prospectus law”.
The purpose of these sections is to put an onus on individuals drawing up a prospectus to ensure that its contents are correct, but we seem to be going out of our way to make this onus a light one, as this amendment allows people to evade responsibility if they did not know that something was wrong. We do not put them under any obligation to determine, or at least make reasonable inquiry, as to whether something was wrong.
Section 42 states that it shall be a defence to say the contravention arose from an honest mistake of fact on the part of an individual, and that with regard to any matter not disclosed in the prospectus concerned that he or she did not know it. We are facilitating people to wash their hands of any responsibility and liability. If people are responsible for drawing up a prospectus they should have some responsibility for what is in it. They should not be allowed to walk away simply on the basis that they were not aware of what was in it in the first place.
This retains what is in existing law. Under the directive we were not required to do this, but to ensure there is a comeback against people who would abuse the law we are retaining section 49.
Has anyone ever been convicted or sued on foot of a misstatement or a wrong—?
I might know a lot but I do not have all of those statistics in my head.
I do not want statistics. I would like an indication that the section has been applied in any serious sense.
Would it be cost-effective to investigate that, or would it be a waste of taxpayers' money?
We are transposing a directive which puts responsibility on people drawing up a prospectus. It is partly replacing or replicating existing law. It would be useful for the debate — I appreciate that the Minister of State does not have the information here — if we had some idea of whether the existing law is applied. Perhaps I should know that, but I do not. It would be helpful to inform our debate if we had some idea of whether this is purely academic or whether it has any real meaning.
I understand the Senator is asking whether section 49 has ever been applied. If it is possible to find that out, I will do so.
Amendment agreed to.
Section 43, as amended, agreed to.
SECTION 44.
Government amendment No. 15:
In page 36, between lines 22 and 23, to insert the following new subsection:
"(4) No offering document prepared for a local offer shall be issued by or on behalf of a company or in relation to an intended company unless, on or before the date of its publication, a copy of the offering document has been delivered to the registrar for registration.".
This amendment provides that an offering document prepared for a local offer must be sent to the Companies Registration Office, CRO, for registration. It is considered that the CRO should be the place that all information on companies is disclosed to third parties. The CRO has invested heavily in ICT systems and processes and where information is filed in the CRO it can be viewed on-line within a short time of receipt.
Amendment agreed to.
Government amendment No. 16:
In page 36, subsection (4), line 25, after "law" to insert "or by the registrar of companies".
This amendment allows the registrar of companies to bring summary proceedings for an offence under this section.
Given that it is intended that local offering documents should be filed with the CRO the registrar should be in a position to take proceedings if the need arises.
Amendment agreed to.
Question proposed: "That section 44, as amended, stand part of the Bill."
In light of the advance of e-commerce it seems the following wording is old-fashioned, "An offering document prepared for a local offer shall contain the following statements in print in clearly legible type". Would it be possible for that to be downloaded from the Internet? This would remove the need for all of this paperwork and could perhaps be provided for on Report Stage.
We will investigate whether e-commerce legislation covers the points made by Senator Leyden.
Question put and agreed to.
Sections 45 to 48, inclusive, agreed to.
SECTION 49.
Government amendment No. 17:
In page 38, to delete lines 6 and 7 and substitute the following:
"(b) in subsection (3), by substituting ‘section 53’ for ‘the said sections 53 and 54’.”.
This amendment corrects an error in the text in section 36. It is section 54 that is being deleted. Consequently, in (b) it is section 53 that replaces the said sections 53 and 54.
Amendment agreed to.
Section 49, as amended, agreed to.
Sections 50 to 53, inclusive, agreed to.
SECTION 54.
Question proposed: "That section 54 stand part of the Bill."
I know the Minister of State will be familiar with the fact that for some years now the CRO has been striking off companies for not filing returns. Perhaps he can give us some information on that. Is that campaign still continuing and to what extent has it been successful? I assume this section and the following section are intended to facilitate that.
As Senator McDowell stated, the CRO approached the concept of striking off companies with great vigour some years ago and returns improved significantly following that mission. The CRO is not pursuing companies to strike them off as it did in the past but it has the power to do so if it feels this is necessary.
Why is it considered necessary to introduce the power to reserve a name? The procedure for incorporating a company is a relatively simple one and I do not understand why it is necessary to have an initial procedure of reserving a name.
Sections 54 and 55 provide for the reservation of a company name with the CRO. An application may be made to the registrar to reserve a company name and a fee must be paid. A name may be reserved for 28 days and an applicant may seek an extension of this period for another 28 days only. The CRO checks the suitability of all proposed names, having regard among other matters to the similarity of the proposed name to company names already on the register. A company name could be checked and reserved while the documentation for incorporation was being prepared. The registration of the final documents would be greatly expedited. A name reservation facility would assist with incorporation and would also facilitate almost immediate incorporation of a company electronically. It would be undesirable however if a name could be reserved indefinitely and repeatedly.
The CLRG, at paragraph 7.3.3 and 7.3.4 of its first report recommended the introduction of a company name reservation service. The group recommended that the name reservation fee should be offset against the incorporation fee if the person who reserved a name went on to incorporate a company with that name because the pre-approved name would not have to be checked by the CRO on receipt of the application for incorporation. The group further recommended that it should be possible to reserve a name for 28 days and, if requested by the applicant, for one further period of 28 days.
I do not understand how this makes the process easier. At present, all that is required to incorporate a company is a secretary, a number of directors, a registered office and a name. I cannot see how reserving the name first and carrying out the other processes at a later stage makes company incorporation any easier. There is no issue of principle involved here, I simply do not understand how this will simplify matters in practice.
The Senator is aware of the Company Law Review Group, which comprises people from different professions. The first report of the CLRG recommended this type of reservation system. The group was of the view that this would improve the registration process and that is why it is included in the Bill. Time will tell how it will work in practice.
Question put and agreed to.
Sections 55 to 60, inclusive, agreed to.
NEW SECTIONS.
Government amendment No. 18:
In page 44, before section 61, to insert the following new section:
"61.—Section 22 of the Companies (Amendment) Act 1986 is amended—
(a) in subsection (1)—
(i) in paragraph (a), by substituting ‘shall be guilty of an offence’ for ‘shall be liable on summary conviction to a fine not exceeding £1,000’, and
(ii) in paragraph (b), by substituting ‘Summary proceedings’ for ‘Proceedings’,
and
(b) in subsection (2), by substituting ‘in respect of each such failure be guilty of an offence, but—’ for ‘in respect of each offence be liable on summary conviction to imprisonment for a term not exceeding 6 months, or, at the discretion of the court to a fine not exceeding £1,000 or to both so, however, that—’.”.
This amendment seeks to make it possible for the offences dealt with in section 22 of the Companies (Amendment) Act 1986 to be prosecuted on indictment. It is considered that such an option should be available in more serious instances where, for example, a company fails to follow fundamental accounting principles under section 5 of the Act, or where, having opted not to follow such principles, the company fails to publicly draw attention to that decision, the reasons for it and the financial consequences thereof under section 6 of the Act. The option of dealing with such offences summarily will remain.
Amendment agreed to.
Section 61 agreed to.
Government amendment No. 19:
In page 44, before section 62, to insert the following new section:
"62.—(1) Subsection (3) of section 20 of the Act of 1990 is repealed.
(2) Notwithstanding the repeal by this section of subsection (3) of that section 20, that subsection (3) shall continue to apply to material information (within the meaning of that section 20) seized under that section before the commencement of this section.".
Subsection (3) of section 20 of the Companies Act 1990 provides that any material information seized by officers of the Director of Corporate Enforcement, under subsection (2) of the section, may be retained for a period of six months or such longer period as may be permitted by a judge of the District Court or if within that period any proceedings have commenced to which the information is relevant until the conclusion of those proceedings. The Office of the Director of Corporate Enforcement has had considerable difficulties with the operation of section 20(3) of the Companies Act 1990, as inserted by section 30 of the Companies Act 2001.
The position under all criminal justice legislation, other than for the ODCE and the Competition Authority, is that material seized on foot of a search warrant is retained until the conclusion of the relevant proceedings. There is no valid reason for the exception that currently pertains to the ODCE and the Competition Authority.
The ODCE is currently applying to the District Court on a weekly basis to renew warrants, with all of the associated arrangements, such as preparing court documents, alerting the other parties, briefing counsel, attending court and so on. It is a disruption to genuine investigative work, halts the progress of the investigation and is completely unwarranted. It also gives rise to an increased threat of successful legal action by companies and others under investigation. Not only does the ODCE have to defend the validity of the original warrant, it has to secure each retention application, as well as defending the validity of the resultant retention decisions in the subsequent criminal proceedings. The ODCE is also exposed to the risk of missing a renewal application date through an administrative oversight. The burden of criminal proof is already very high and section 20(3), as it stands, is adding to the difficulties of the ODCE. This amendment provides for the repeal of section 20(3).
Subsection (2) of the proposed new section is required to preserve the entitlement of persons whose documents were seized under a regime involving the ongoing judicial control of the duration for which the documents could be seized. For example, where the ODCE holds documents on foot of a warrant which requires that, in order to retain them, it is obliged reappear before a judge within six months, the outright removal of this obligation is considered inappropriate.
Amendment agreed to.
Sections 62 to 65, inclusive, agreed to.
SECTION 66.
Amendment Nos. 20 and 21 are consequential on amendment No. 22 and amendment No. 23 is related to amendment No. 22, therefore, amendments Nos. 20 to 23, inclusive, may be discussed together by agreement.
Government amendment No. 20:
In page 46, line 25, to delete "and".
The purpose of these amendments is to correct the typographical error in section 37(d) of the Companies (Auditing and Accounting) Act 2003. The purpose of that provision was to remove the reporting requirement for auditors under section 194(5) of the Companies Act 1990, as inserted by section 72 of the Company Law Enforcement Act 2001 in respect of indictable offences under section 125(1) and 127(12) of the Companies Act 1963. While the reference to section 127(12) is correct, the reference to section 125(1) should have been to section 125(2). Subsection (1) of section 125 creates an obligation. Non-compliance with that obligation is a breach under subsection (2) and hence it is the latter subsection that creates the offence.
I am tempted to ask the Minister of State a question.
Amendment agreed to.
Government amendment No. 21:
In page 46, line 27, to delete "." and substitute ", and".
Amendment agreed to.
Government amendment No. 22:
In page 46, between lines 27 and 28, to insert the following new paragraph:
"(d) in section 194(5), (inserted by the Company Law Enforcement Act 2001) by inserting ‘(other than an indictable offence under section 125(2) or 127(12) of the Principal Act)’ after ‘an indictable offence under the Companies Acts’.”.
Amendment agreed to.
Government amendment No. 23:
In page 46, between lines 27 and 28, to insert the following new subsection:
"(3) Paragraph (d) of section 37 of the Companies (Auditing and Accounting) Act 2003 is repealed.”.
Amendment agreed to.
Government amendment No. 24:
In page 46, line 33, to delete "No's." and substitute "No.".
This amendment corrects a typographical error in the Bill.
Amendment agreed to.
Section 66, as amended, agreed to.
NEW SECTIONS.
I draw attention to the fact that there is a printing error in Government amendment No. 25, in subparagraph (a)(ii). The word “and” should appear after the first occurrence of “1999” and not at the end of the subparagraph.
Government amendment No. 25:
In page 46, before section 67, and in Part 6, to insert the following new section:
"67.—Section 110A of the Company Law Enforcement Act 2001 (inserted by the Companies (Auditing and Accounting) Act 2003) is amended—
(a) in subsection (1)—
(i) in paragraph (c), by deleting ‘and’,
(ii) in paragraph (d), by substituting ‘1999, and’ for ‘1999;,’
(iii) by inserting the following after paragraph (d):
‘(e) in respect of functions that, under the Companies Acts, are to be performed by the Central Bank and Financial Services Authority of Ireland—
(i) the Chief Executive of the Irish Financial Services Regulatory Authority,
or
(ii) a person appointed by some other person to whom the Chief Executive of the Irish Financial Services Regulatory Authority has delegated responsibility for appointing persons for the purposes of this section;',
(b) by inserting the following after subsection 8:
‘(8A) A document purporting to be a copy of, or extract from, any document kept by the Central Bank and Financial Services Authority of Ireland and that is certified by—
(a) the Chief Executive of the Irish Financial Services Regulatory Authority, or
(b) any person by the Chief Executive of the Irish Financial Services Regulatory Authority,
to be a true copy of, or extract from, the document so kept is, without proof of the official position of the person purporting to so certify, admissible in evidence in all legal proceedings as of equal validity with the document so kept.'.".
Given the new functions assigned to the Central Bank and IFSRA, under Parts 3 and 4 in particular, the bank sought equivalent provisions to those already afforded to the ODCE, CRO, officers of the Minister and inspectors, to facilitate the discharge of its functions under company law. The powers in question of the existing bodies are set out in section 110 A of the Company Law Enforcement Act 2001, inserted by section 52 of the auditing and accounting Act 2003 and relate to the certification of certain matters pertaining to documents and related issues. It is intended that IFSRA will be the competent authority for market abuse and prospectus and this amendment gives IFSRA equivalent powers.
Amendment agreed to.
Amendment No. 30 is consequential on amendment No. 26, therefore, amendments Nos. 26 and 30 may be discussed together by agreement.
Government amendment No. 26:
In page 46, before section 67, and in Part 7, to insert the following new section:
"67.—(1) Subsection (6) of section 45 of the Competition Act 2002 is repealed.
(2) Notwithstanding the repeal by this section of subsection (6) of that section 45, that subsection (6) shall continue to apply to any books, documents or records seized or obtained under that section before the commencement of this section.".
This amendment is similar to amendment No. 19 concerning the Office of the Director of Corporate Enforcement. Section 45(6) of the Competition Act 2002 provides that any books, documents or records that are seized or obtained under subsection (3) of that Act may be retained for a period of six months or such longer period as may be permitted by a judge of the District Court, or if within that period any proceedings commence have commenced to which the books, documents or records are relevant, until the conclusion of those proceedings.
The Competition Authority has been experiencing difficulty with this provision. Section 45(6) permits the relevant District Court judge to make only one order for continued retention of evidence seized. In the event that the judge gives an order granting a short time period in which it is not possible to begin proceedings, for whatever reason, then the evidence which is the subject of the particular retention will be almost certainly lost to the Competition Authority and to the DPP as it is unclear if the court can grant further retention periods. The time period for retention does not take into account the complexity of cartel investigations.
The 2002 Act makes allowances for the time consuming nature of these investigations by extending the normal time limit within which to bring summary prosecutions from six months to two years. However, the authority is merely allowed to retain evidence for a period of six months, after which it must seek an order from the court for continued retention of this evidence. The Act is silent on how long the District Court can extend this period. It has been the authority's experience on at least one occasion, however, that a continued retention period of 18 months has been deemed excessive and this was reduced to 12 months. The authority can therefore only retain the evidence seized in this instance for a maximum period of 18 months. The provision in section 45(6) effectively defeats the provision in the Act allowing up to two years for summary prosecutions and severely restricts the position of the DPP in bringing cases on indictment. There is also an inconsistency in that different District Courts grant different time periods for the continued retention of evidence in the same investigation. This amendment necessitates a change to the Long Title and amendment No. 30 reflects this. I commend these amendments to the House.
I understand the Minister's explanation, but I do not quite understand what is the effect of the amendment. Are we doing away with any retention period altogether, or what provision are we actually making? Are we just abolishing or repealing subsection (6)?
Subsection (6) of section 45 of the Competition Act 2002 is repealed. Despite that, subsection (6) shall continue to apply to books, documents or material obtained before the commencement of the section.
I understand that but what is the effect of this? The Minister of State was saying that six months was not sufficient time even with the add-on of another 12 months by the District Court. In repealing this subsection, is no period provided any longer for the retention of documents or are we prolonging it until such time as an offence is prosecuted or what are we doing?
There will not be any period of retention for the future. As regards what is in the pipeline, the status quo will be maintained.
I understand the Minister of State to be saying that this will assist in bringing uniformity to bear on the manner in which District Court judges operate and on how they deal with these matters.
It will be taken out of the District Court's hands altogether under the new legislation.
Where will it be?
Such cases will not have to go to court. The Office of the Director of Corporate Enforcement and the Competition Authority will be able to seize the goods and retain them for as long as necessary, pending prosecution.
I understand.
Is there any obligation after the documentation has been completed, to hand back the goods and documentation?
I am sure this is already in the legislation, but we will check this out to ensure that goods may not be held on to ad infinitum.
The purpose of ceding documents is to facilitate prosecution. Once the prosecution is over, there should surely be an obligation on the Competition Authority to hand back the documentation.
We will check this out to ensure it is already provided for. If it is not, we will see that this is amended.
Amendment agreed to.
Section 67 agreed to.
SECTION 68.
Government amendment No. 27:
In page 47, line 7, to delete "€5,000" and substitute "€50,000".
This is to substitute an increased maximum fine. The original intention was that the maximum would be €50,000 and not €5,000, as it appears in the Bill. I commend the amendment to the House.
Amendment agreed to.
Question proposed: "That section 68, as amended, stand part of the Bill."
This section and a number of subsequent sections simply increase the fines for various offences under a number of different Acts that are consumer related. Neither the Bill nor the explanatory memorandum specifies the offences. If the Minister of State has this information in his speaking notes, it would be useful to know. Specifically on this section, I would like to know precisely what is the offence regarding which we are increasing the potential fine.
My briefing states that section 68 amends section 26 of the Prices Act 1958 to increase the maximum penalties, on conviction, under the prices Acts. It goes on to state the maximum penalty for a summary conviction is from €127 to €3,000. For a conviction on indictment, the penalty is increased from €635 to €50,000.
Do we know what the offence is?
I presume that is outlined in the Prices Act 1958.
I should know this but I do not. Is the offence a breach of the prices order? The Minister of State will recall there has been some discussion as to whether the prices order as it relates to certain groceries should be retained. Can we interpret the fact that the Minister of State appears to be increasing the potential fines as meaning he has taken a view on the retention of the order in the first instance?
As I mentioned earlier, and this has been confirmed to me, the offences are outlined in the original legislation. In effect, we are just increasing the level of fines.
I know that. In a sense we are wandering in the dark here. We are increasing the fines for offences, but we do not know what these are. I appreciate the offences already exist. In a sense, if we are to make any serious assessment as to whether the fines should be increased, we should know what the offences are in the first place. Specifically on this section, is the offence we are talking about covered under the prices order and does that imply that the Minister of State has decided he is going to retain that order, which effectively restricts below-cost selling?
The groceries order.
Yes, the groceries order.
That is the only order that remains, in effect.
Senators will be aware that the Restrictive Prices (Groceries) Order 1987 was one of the issues considered by the consumer strategy group and was the subject of recent deliberations before the Joint Committee on Enterprise and Small Business, as to the merits or otherwise of the order in managing grocery prices. In any event, all arguments as regards the groceries order will be considered by the Government before any action is decided on. All interested parties will be invited to submit their views as part of the national consultative process. I understand some parties have interpreted the provision to increase fines for breaches of the groceries order as a signal of some type about the future of the order. This is not the case.
What we are seeking to do in sections 68 to 74, inclusive, is to bring outdated fines for breaches of consumer protection legislation up to date. As long as legislation is on the Statute Book, there is an onus on Government to keep it relevant and up to date. It would not be appropriate to neglect this particular provision because it happens to be the subject of public debate at this time.
What the Senator is asking about is outlined in the consumer protection legislation.
The order should be retained. It is a necessary guarantee of protection against the abuse of a dominant position by large supermarket chains. While it would be nice if ordinary competition were to regulate these matters, the fact is that if an organisation has deep pockets, it is in a position to sell below cost and remove competitors. That is an abusive position and so the order should be retained.
It seems strange the Minister of State is seeking to amend legislation he is not sure will be retained. However, I will let that pass.
As I indicated on Second Stage, I take a similar view on this to Senator McDowell. The Joint Committee on Enterprise and Small Business is unanimous on this point. We were struck by some of the submissions we received, especially those from consumers represented by Crosscare, Combat Poverty and the Society of St. Vincent de Paul.
Question put and agreed to.
Sections 69 to 74, inclusive, agreed to.
NEW SECTIONS.
Government amendment No. 28:
In page 49, before the Schedule, to insert the following new section:
"75.—The Industrial and Provident Societies Act 1893 is amended—
(a) in section 4(a), by substituting ‘€150,000 or an amount equal to 1 per cent of the total assets of the society, whichever is the greater’ for the amount standing specified in that section,
(b) in section 25 (as substituted by section 5(1) of the Industrial and Provident Societies (Amendment) Act 1913)—
(i) in subsection (1), by substituting ‘€15,000' for the amount standing specified in each place where that amount occurs in that subsection, and
(ii) in subsection (3), by substituting ‘€15,000' for the amount standing specified in that subsection,
(c) in section 26(1) (as substituted by section 5(2) of the Industrial and Provident Societies (Amendment) Act 1913), by substituting ‘the limit specified in section 4(a) of this Act’ for the amount standing specified in that subsection,
(d) in section 27(1), by substituting ‘€10,000’ for the amount standing specified in that subsection, and
(e) in Schedule II, in paragraph 5, by substituting ‘the limit specified in section 4(a) of this Act’ for the amount standing specified in that paragraph.”.
Amendment agreed to.
Government amendment No. 29:
In page 49, before the Schedule, to insert the following new section:
"76.—(1) Notwithstanding the repeal of section 35(1)(i) of the Credit Union Act 1966 by the Credit Union Act 1997, the specified regulations made under that section continue, and shall be deemed always to have continued, to have full force and effect from the coming into operation of the specified regulations until the passing of this Act.
(2) Nothing in this section shall affect any proceedings commenced in any court concerning the validity of the specified regulations where those proceedings were commenced before the passing of this Act.
(3) In this section ‘specified regulations' means—
(a) the Industrial and Provident Societies (Financial Limits) Regulations 1985 (S.I. No. 392 of 1985), and
(b) the Industrial and Provident Societies (Financial Limits) (Amendment) Regulations 1990 (S.I. No. 246 of 1990).”.
Amendment agreed to.
Schedule agreed to.
TITLE.
Government amendment No. 30:
In page 7, line 23, after "2003;" to insert "TO AMEND THE COMPETITION ACT 2002;".
Amendment agreed to.
Government amendment No. 31:
In page 7, line 27, after "CONSUMER"to insert "; TO AMEND THE INDUSTRIAL AND PROVIDENT SOCIETIES ACT 1893".
Amendment agreed to.
Title, as amended, agreed to.
Bill reported with amendments and received for final consideration.
Question proposed: "That the Bill do now pass."
I thank the Minister of State and his officials for their attention to this Bill. The Minister of State has a great record in bringing legislation before this House. It was a very technical Bill, but it was necessary to comply with European regulations. The Minister of State has received tremendous support from the Department of Enterprise, Trade and Employment. I received such support myself in the 1990s. I never had to rely on any advisers from the then Department of Industry and Commerce, but I always found that the services there were second to none. The civil servants there are very sharp and au fait with their briefs. I commend the Minister of State on the Bill and I thank colleagues on all sides of the House for their co-operation with this legislation.
I compliment the Minister of State and his officials on the manner in which they dealt with this Bill. Ireland is already a significant international jurisdiction for these funds. This legislation is necessary to allow Ireland to compete in this important marketplace. It provides much direct and indirect employment and we need the framework in place to allow it to grow and flourish. I welcome the Minister's action in referring some regulatory matters to the Company Law Review Group. Those matters which do not directly involve financial and accounting matters should not impinge on the daily business of people, especially those who are non-executive directors. If there are breaches of any particular law outside of the accounting area, the companies deserve to be prosecuted. Given his profession, I think the Minister of State has an appreciation of this fact. He has referred these issues to the group and hopefully they will be back before us in a desirable fashion.
I agree with Senators Leyden and Coghlan. The Bill is important as it sets up an entirely new structure and facilitates cross investment and segregated liability. In essence, we have been asked to repose our trust in IFSRA to ensure that this new structure is properly regulated. I am happy enough to do that. The Houses cannot go any further than that. We cannot reasonably expect that regulations can be set out in detail in legislation.
Nonetheless, the message should be clear that we expect a balance. We have a duty to facilitate this industry as it brings much investment and employment into this country. However, we must safeguard our reputation as a well regulated environment for investment funds. I understand the difficulties which non-executive directors have with the directors' compliance statement. However, I take a slightly different view from Senator Coghlan as I believe it should at least serve as an amber light to directors to pay some attention to issues which they might not have done previously. I hope the Company Law Review Group does not prove to be a black hole from which it will never emerge. We may need to look at the detail of the statement of compliance, but some provision is appropriate and I hope the Minister of State has not just buried it. I am happy to support this Bill and I wish the Minister of State well in bringing it before the Dáil.
We have had a very useful debate in this House for the past week on this technical and complicated Bill and I appreciate the input of Senators to the debate.
Part 2 introduces a new contract fund structure, called the common contractual fund, or CCF. A CCF is a contractual arrangement established under a deed which provides that the investors participate as co-owners of the assets of the fund. It is a regulated investment fund structure which will allow for the pooling of assets of a number of pension funds. The CCF is not a separate legal entity and is transparent for Irish legal and tax purposes. It is called a non-UCIT CCF to distinguish it from a CCF authorised under the UCIT regulations.
Part 3 introduces investment funds segregated liability and cross investments, facilitating the ring-fencing of liability at sub-fund level and allowing for cross investment between sub-funds in an umbrella structure. The legislative provisions in Parts 2 and 3 are required to be enacted as a matter of urgency in order to maintain Ireland's position as a centre of excellence in the provision of financial services. They will also allow the IFSC to maintain its leading position in a competitive world market.
As reflected during the debate on Second Stage, the financial services industry plays an important role in the economy. We have been exceptionally successful in attracting international financial services companies and we want this trend to continue. Therefore, we must continue to be innovative and develop the appropriate skills and expertise. A flexible, responsive and business-focused regulatory system has been the cornerstone of Ireland's development. Our regulatory environment is a key component, both of our competitiveness and our international reputation.
Parts 4 and 5 of the Bill facilitate the implementation of the EU market abuse and prospectus legislation. Part 6 makes a number of amendments to the Companies Acts. These arise from difficulties with the operation of existing provisions in the law, facilitate operators under electronic technology and rectify incomplete or incorrect cross references in existing law.
Part 7 makes some necessary amendments to consumer law, mainly increasing the level of fines that can be imposed on conviction for breach of consumer protection legislation. In the House today we also agreed amendments to the Competition Act and to the Industrial and provident societies legislation.
Should any further amendments be made in the Dáil, I will bring the Bill back to the Seanad and Senators will have a further opportunity to give their views. I thank the Senators for their valuable contributions. I also thank the staff of the Office of the Parliamentary Counsel and the Office of the Attorney General for their assistance in the drafting of the legislation. I say a special word of thanks to my officials in the Department of Enterprise, Trade and Employment.
Question put and agreed to.