I move amendment No. 44:
In page 37, subsection (2), line 26, to delete "which holds itself" and substitute "who holds himself".
This is a drafting amendment.
SECTION 31.
Amendment agreed to.
Amendments Nos. 45 and 46 are related and may be discussed together.
I move amendment No. 45:
In page 37, subsection (3), lines 31 to 33, to delete all words from and including "in" where it first occurs in line 31 down to and including "concerned" in line 33 and substitute "may impose conditions or requirements or both on an approved stock exchange or member firm".
These are technical amendments. Amendment No. 45 ensures that the Central Bank can impose conditions or requirements relating to advertising on an exchange or member firm at any time not only when the exchange is being approved or the member firm is being authorised. Amendment No. 46 ensures that the Central Bank can impose conditions or requirements relating to advertising on all member firms of an exchange, including member firms authorised by a competent authority in another member state and not only member firms authorised by the Central Bank.
Is there a code of practice as regards advertising? Does the Minister intend to define that area?
I understand there is no code of practice. Members will notice that in another section there are certain requirements as to what constitutes good advertising from the point of view of enforceability of contracts and so on. There is provision in the Bill to cover what is an enforceable contract which in some cases is determined by the composition or the data being advertised.
This is an issue from the investor's point of view. We live in a world of junk mail which causes confusion as well as concern because the large print catches the eye, while the small print is consistently missed. The best marketers and advertisers do not consider the circumstances of an individual who might have a small investment to make and who is captured by inviting marketing efforts. I am concerned about the banking of financial services. We are now moving into an era which encourages people to invest in stocks and shares because this is not only in their own — but in the national — interest. Governments in Europe encourage people to hold shares. There is no satisfactory code of practice at present. Misleading information is given because the small print is often different from the large message one first sees. We should be concerned about this.
I accept the Deputy's point. The bank may — it does not have to — include specific requirements in relation to advertising and not just general guidelines. Section 31 (3) states:
Without prejudice to the generality of any section of this Act empowering the Bank to impose conditions or requirements or both, the Bank, in approving a stock exchange, or in authorising a member firm, may impose such conditions or requirements or both on the stock exchange or member firm concerned or may set out rules or approve of rules in the rules of an approved stock exchange in respect of advertising by an approved stock exchange or authorised member firm as the Bank considers necessary, in the interest of—
I am less concerned about what the bank might want to do than about what we might want to do. There is a difference between the two. I am not saying the bank will not be competent in this regard, but we, as legislators, might want to set out some guidelines for the circumstances which might prevail. The issue relates specifically to this Bill, but it also has a wider context. I understand the section the Minister read out, but that leaves it open to those who are involved, instead of us, to set the guidelines.
I am sure the bank will look at possible circumstances and determine accordingly in relation to the type of guidelines and requirement it sets down for member firms. Section 31 (3) (b) states that the Central Bank will also have regard to the protection of investors.
The spirit is correct and that is why I dealt with investors. I accept what the Minister says, but the Department should, in the incubation period of this new stock exchange, keep a close eye on it to ensure best practice. It is easier to continue if we start on the right note, but if things go wrong at an early stage, a lot of damage could be done.
Amendment agreed to.
I move amendment No. 46:
In page 37, subsection (3), line 35, to delete "authorised".
Amendment agreed to.
Amendments Nos. 47 and 48 are related and may be discussed together.
I move amendment No. 47:
In page 38, subsection (7), line 27, after "provisions" to insert "of subsection (1) or (2)".
Section 31 relates to control of advertising by stock exchanges and their member firms. The section states that a contract between a client and a member firm will automatically be unenforceable if entered into as a result of an advertisement which constitutes an offence or which is in contravention of a Central Bank direction or conditions or requirements. In such circumstances automatic unenforceability would mean that a client could refuse to complete his side of a bargain if an investment relating to it had breached even a minor Central Bank condition or requirement. The member firm would have to go to the High Court if it wanted to force the client to complete the bargain, but it would have no guarantee of success.
Both the Stock Exchange and the Central Bank are concerned about the implications of the section as drafted. The Stock Exchange points out that automatic unenforceability is a severe penalty for a member firm because it leaves the member firm responsible for completing its client's side of the bargain. In addition, a widespread ability for clients to walk away from bargains would risk jeopardising the completion of stock exchange transactions by clients generally and this is in no one's interest. The Central Bank is also concerned that widespread availability of unenforceability would restrict its ability to regulate advertising because of the possible implications for the market and for member firms if infringement of a bank condition or requirement were to make contracts automatically unenforceable.
Amendments Nos. 47 and 48 amend the section to meet these concerns, while preserving automatic unenforceability for serious cases. The amendments mean that investment agreements will be automatically unenforceable only where advertising has been in breach of a Central Bank direction or of a section 31 provision for which an offence has been provided; in other words, where an advertisement breaches only a Central Bank condition or requirement, automatic unenforceability will not apply, although the Central Bank will be able to refer the breach to a section 65 committee. Automatic unenforceability will not be widespread or risk jeopardising investor confidence in the completion of transactions. However, automatic unenforceability will apply to advertising which breaches a Central Bank direction or which constitutes an offence. Everyone will agree this is as it should be.
Amendment agreed to.
I move amendment No. 48:
In page 38, subsection (8), line 42, after "provisions" to insert "of subsection (1) or (2)".
Amendment agreed to.
Section 31, as amended, agreed to.