Select Committee on Finance and General Affairs debate -
Wednesday, 3 May 1995

SECTION 20.

Mr. J. Higgins

I move amendment No. 28:

In page 25, between lines 27 and 28, to insert the following subsections:

"(5) When an authorised member firm wishes to provide investment services within the territory of another Member State for the first time but does not propose to establish a branch in that other Member State, it shall notify the Bank in writing setting out the Member State in which it proposes to provide those services and a programme of operations stating in particular the investment service or services it intends to provide.

(6) The Bank shall communicate the information referred to in subsection (5) of this section to the relevant authority in that other Member State in accordance with the provisions of Council Directive 93/22/EEC of 10 May, 1993 1, within one month of receiving all that information.

(7) Where an authorised member firm wishes to change any particulars concerning a programme of operations supplied under subsection (5) of this section it shall notify in writing the Bank and the competent authority in the other Member State in which it proposes to provide or provides investment services of any such changes before carrying out the changes so as to allow the competent authority in the other Member State to carry out its obligations under the provisions of Council Directive 93/22/EEC of 10 May, 1993 1.".

Mr. Cullen

This amendment again raises the question of the relationship between stock exchanges and investments in other member states of the EU. The Minister spoke earlier about electronic and other means of conveying information. We are not isolated in terms of the operations of the Stock Exchange. The operations of members of the Stock Exchange can have far-reaching effects in other member states.

I will not go back over the argument about the independence of the chairman. The Minister is making the way we in this country handle the matter unique. Why is he introducing this amendment?

Mr. J. Higgins

There is a good reason for it. The purpose of the amendment is to cover the position of Irish authorised member firms who want to provide investment services abroad, but which do not propose to open a branch abroad for that purpose. Therefore, the amendment transposes the relevant provisions of the Investment Services Directive to ensure that the position of such member firms is covered. Without having the obligation to open a branch abroad they can transact business abroad.

The new subsection (5) provides that a member firm wishing to provide investment services abroad but without opening a branch must, however, notify the Central Bank and must provide the relevant details. The new subsection (6) obliges the Central Bank to pass on this information to the competent authority in the host member country. The new subsection (7) obliges the member firm to notify any changes of its proposals to the Central Bank so that the competent authority in the host member state can carry out its obligations under the directive.

In other words, there would be liaison with the competent authority here and the competent authority in the host country so that there is absolute exchange of information in relation to the firm in question and its operations.

Mr. Cullen

I would imagine this is normal practice and probably occurs on a daily basis. Are we not engaging in a paper chase? Where an urgent deal needs to be done the delay which might arise in informing the bank and waiting for approval might hinder the swift progress of business that needs to be carried out. This information could mount up — a number of deals could go through every day. How is it proposed to deal with it efficiently and swiftly?

Mr. J. Higgins

First, it is information in relation to the companies so there would be a standard procedure. There is already a pre-determined list and specification of what information would be transmitted. Second, we are using the provisions of the Investment Services Directive, which obliges us to ensure there will be compatibility and synchronisation between the member countries as to the modus operandi of companies. We are merely complying with the provisions of the ISD.

Mr. Cullen

Yes, but the Central Bank is not involved in other countries as the regulatory authority so there is a difference. There may be a problem about swift procedure in the interests of best practice.

Mr. J. Higgins

From the point of view of a paper chase or red tape, we are not obliging a member firm transacting business in another country without establishing a branch there to notify us of every deal. It is only the detail and data about the company itself that are required. Once the company has established its bona fides and been accepted it can transact all the business it wants. It is a case of ensuring the bona fides of the companies operating in other countries are notified to the host countries. This is a standard requirement. All the data will then be available so the host country can be assured a company from Ireland transacting business there is a recognised company working to the provisions and under the guidance of the Central Bank of Ireland.

Mr. Cullen

That means once a company has been notified to the host country it can carry out its business. Is there any review of that practice or a mechanism to play devil's advocate or require further notification if matters go awry or there is a change in status of the company?

Mr. J. Higgins

As the Deputy knows, within the provisions of the Bill changes in the status of the company, changes in its operations, changes to its rules, etc., must be notified to the Central Bank of Ireland. The central bank in the regulating country — the country of origin — would be fully an fait with any material changes to the composition or activities of a company.

Mr. Nealon

The Minister is trying to facilitate the commercial activities of the various member firms. I do not suggest that arising from that we might have a repeat of what happened to Baring's Bank in the Singapore derivatives market. Nonetheless, is there a parallel facility in this Bill to enable the Central Bank or the regulatory authority to monitor the activities of the Irish firm abroad?

Mr. J. Higgins

That is the purpose of this provision; that a member firm which is not establishing a branch abroad would be cleared by the competent authority here — the Central Bank — to operate abroad. Whatever information or data on the bona fides of the member firm operating abroad would be notified to the competent regulatory authority — which is not the central bank in any of the other countries. It would then be reassured as to the bona fides and good management practice of the company.

Mr. Nealon

I appreciate that but from the other viewpoint is there any method of reporting back to the competent authority here on the activities of the member firm abroad, so there would be an early warning system for the Irish authorities if something went wrong? It can happen to the best of firms — what more established firm could there be than Baring's, the oldest bank in London? Yet something went wrong through the activities of a single person, or perhaps others in association with him. It is necessary that there be reporting back to a competent authority here.

Mr. J. Higgins

Across the board cooperation between all member states would apply under the aegis of the Investment Services Directive which regulates the practices of all the member firms operating in every country. There is a two-way interaction between the regulatory authorities of member countries to ensure synchronisation of the policies and actions of any companies operating in another country either with or without a branch.

Amendment agreed to.

Section 20, as amended, agreed to.