I move amendment No. 3:
In page 6, subsection (1), line 8, to delete "European Commission" and substitute "Commission of the European Communities".
This is a drafting amendment to correct the definition of the European Commission.
SECTION 3.
We are talking about the European Communities here. Does that entity still exist? Where is the European Union? Could the Minister explain that?
The European Union is a political definition.
Whereas the legal title is European Communities, in the plural? That means when the BBC refers to the European Communities that is correct; I always thought it was wrong.
The political title is the European Union but the legal title is the European Communities and the legal definition for this Bill is "Commission of the European Communities".
Amendment agreed to.
I move amendment No. 2:
In page 6, subsection (1), line 10, to delete "of the Community".
This is a technical amendment.
What is the significance of this amendment?
"Member state" is defined in section 3 as "a member state of the European Communities" so effectively the phrase "of the Community" is redundant.
Amendment agreed to.
Amendments Nos. 3, 4, 5, 6 and 8 are related and amendment No. 7 is consequential on amendment No. 8. Amendments Nos. 3 to 8, inclusive, can be taken together. Is that agreed? Agreed.
I move amendment No. 3:
In page 7, subsection (1), lines 37 and 38, to delete "certificates representing securities or any other similar instrument" and substitute "and certificates representing securities".
Amendments Nos. 3 and 4 are designed to clarify and improve the definition of "investment instruments" in section 3. They do this by dividing the definition. Paragraph (a) contains a list of investment instruments specifically included in the definition. Paragraph (b) refers to instruments which confer rights relating to instruments of investment but excludes options to acquire such instruments. Paragraph (c) deals with options in investment instruments as a separate item. Paragraph (d) is new and is intended to ensure the inclusion of investment instruments which are in dematerialised form — that is instruments which exist only electronically; this is necessary because the trend is towards paperless systems, in which instruments and records of their ownership exist only electronically. Finally paragraph (e) makes more precise the existing reference to investment instruments which are similar to investment instruments specifically defined in the Bill.
Amendment No. 5 deals with paragraphs (I) to (IV) inclusive, which list items not to be included in the definition of investment instruments. Cheques, which are a form of bill of exchange, should not be included in this definition and accordingly paragraph (II) in section 3 excludes them. However, other bills of exchange are included in the definition in the term "other instruments", creating or acknowledging indebtedness" in paragraph (a) on page 7. This is as it should be. Accordingly amendment No. 5 deletes the inadvertent reference to other bills of exchange in paragraph (II) to ensure they are not excluded from the definition of investment instruments.
Amendment No. 6 deletes the reference to "heritable security" because those are not a feature of investment business here; they are Scottish mortgages. Amendments Nos. 7 and 8 remove paragraph (IV) on page 8, which refers to "any instrument which confers rights in respect of two or more investment instruments". This could be interpreted as meaning collective investment schemes, and since these are rightly covered by the definition of investment instruments in paragraph (a) on page 7, I propose to delete the potential reference in this set of exclusions so they will remain included in the definition of investment instruments, as they should be.
Is the purpose of these amendments to define investment instruments?
Yes.
Much of what the Minister said lost most of us from the beginning. Only a few experts in the Department of Finance would have been able to follow him. That is not a criticism of the Minister, but this is an attempt to define something which is indefinable. In the last five years the number of financial instruments has increased and the ways of doing such business have changed dramatically.
Every day companies and financial intermediaries are coming up with new products. In 50 years' time terms will be used in stock exchanges which have not been dreamt of today. Investment instruments will not include anything mentioned in the Bill. The Minister used the phrase "any investment in dematerialised form". That is the first time I have seen this phrase and I congratulate the genius who thought of it.
I understand what the Minister is trying to do in defining these instruments, but is there not a simplier way of doing it? It is impossible for any expert to envisage what will happen in the future. Is there a catch all definition which will include any such product developed in the future?
Deputy McCreevy mentioned the phrase "dematerialised form", meaning the instrument exists in a computer record rather than on paper. For an instrument of property to be legal it must exist on paper so one must wonder about the move in this direction. Instruments of this kind may have a legal import for ownership, for example, so what is the legality of their existence in this computerised form, which can easily be lost?
To reply to Deputy McCreevy, the list here would not have been envisaged by people in 1799. Dematerialised instruments would have been far beyond the scope of anyone's imagination. The detail given about the items recognised as investment instruments has been taken from the directive on investment services, where these products are defined. The catch all phrase is "any other instruments", which allows for any other similar instruments to be included. In reply to Deputy Connor, the point about dematerialised instruments is that they are capable of being reproduced on paper if so required.
Section 3 paragraph (II) excludes from the definition cheques, bills of exchange, banker's drafts or other letters of credit. If we are looking forward to items which are not included, the Minister should be given power specifically to exempt new types of banking documents. I raise this now although I did not prepare an amendment on it but it would be worth while considering for Report Stage that the Minister should be entitled to exempt other classes of documents cognate to cheques, bills of exchange and banking documents.
Seven pages of the Bill are given over to definitions. This must be a record and I do not envy the task of the drafters of the Bill in incorporating all the definitions. I see the catch all phrase, "any other instrument", but as Deputy McDowell suggested the Minister should consider making another amendment to do the same in reverse.
We are trying to be as precise as possible.
If a new form of bank credit comes into existence which does not fit into one of these categories the Minister should give himself the power to apply the exemption to it also. It would be foolish to tie himself to what is in the Bill.
We will look at that.
Amendment agreed to.
I move amendment No. 4:
In page 7, subsection (1), lines 49 to 51, and in page 8, line 1, to delete all words from and including "and" in line 49 down to and including line 1 in page 8 and substitute the following:
"(c) options in any instrument referred to in paragraph (a) of this definition,
(d) any investment instrument in dematerialised form, and
(e) any instrument similar to investment instruments defined in subparagraphs (a), (b), (c) or (d) of this definition,".
Amendment agreed to.
I move amendment No. 5:
In page 8, subsection (1), line 7, to delete "or other bill of exchange".
Amendment agreed to.
I move amendment No. 6:
In page 8, subsection (1), line 12, to delete "a heritable security".
Amendment agreed to.
I move amendment No. 7:
In page 8, subsection (1), line 13, to delete "or".
Amendment agreed to.
I move amendment No. 8:
In page 8, subsection (1), to delete lines 14 to 17.
Amendment agreed to.
I move amendment No. 9:
In page 8, subsection (1), line 36, after "Limited" to insert "and the body known as the Irish Stock Exchange Limited after the coming into operation of this Act".
Amendment No. 9 relates to the definition of the Irish Stock Exchange.
Section 3 says the "Irish Stock Exchange" means the body commonly known on or before the coming into operation of this section as the Irish Unit of the International Stock Exchange of the United Kingdom and the Republic of Ireland Limited". Is the Irish Stock Exchange commonly known by that name? It may be legally known but it is not commonly known by that name.
It is commonly known in law. This is a technical amendment to the definition of the Irish Stock Exchange and it is intended to ensure that the provisions of section 2 will apply to the Irish Stock Exchange. For example, section 10 allows the Irish Stock Exchange to stand "approved" under the Act providing that the exchange applies to the Central Bank for approval within three months of the coming into operation of section 10.
The Irish Stock Exchange, which is now a branch of the London Stock Exchange, will formally separate from the London Stock Exchange when the legislation comes into effect. The mechanics of this separation will be as follows: the exchange, which will in any case be required by the Act to incorporate, may form a company, the Irish Stock Exchange Limited, before the Act comes into effect; on the day the Irish Stock Exchange separates from London, the new company will take over the functions and business of the Irish Stock Exchange and the Irish Stock Exchange, as such, will cease to exist. This amendment will ensure that the company set up by the exchange will be enabled to operate as an exchange under the provisions of section 10.
In this context, I suggest the word "limited" should be dispensed with as soon as possible. It is ridiculous in this context to require a stock exchange to put the word "limited" after its name. It will waste time, it looks ridiculous, is unnecessary and nobody in his right mind would require it to be put on to a public liability company.
This imposition is not coming from us. The Exchange suggested it as part and parcel of its title.
I know. Will you contact it before Report Stage to see can you all agree to remove the word "limited"?
We will talk to it. It will be a company limited by guarantee.
Amendment agreed to.
I move amendment No. 10:
In page 8, subsection (1), line 39, after "investment services" to insert "within the meaning of paragraphs (a) or (b) or (c), or any or all of these, of the definition of ‘investment services'".
Amendment No. 10 makes it clear that authorisation as a member firm will apply only to persons primarily involved in the regular business of stockbroking; that is in transmitting and carrying out clients' orders and dealing in investment instruments. Authorisation by the Central Bank will be required before a member firm can operate as a member of the stock exchange but will not confer membership of the exchange.
Amendment agreed to.
I move amendment No. 11:
In page 9, subsection (1), line 14, to delete "shareholder" where it secondly occurs and substitute "person".
Amendment agreed to.
I move amendment No. 12:
In page 10, subsection (1), line 11, to delete "other".
Amendment agreed to.
I move amendment No. 13:
In page 10, subsection (1), line 20, to delete "Consolidation" and substitute "Consolidated".
Amendment agreed to.
I move amendment No. 14:
In page 10, subsection (1), line 30, to delete "other".
Amendment agreed to.
Section 3, as amended, agreed to.