Amendments Nos. 1, 3 and 49 form a composite proposition and I suggest, by agreement, that they be taken together.
Unit Trusts Bill, 1970: Report Stage.
Government amendment No. 1:
In page 2, between lines 27 and 28, to insert the following:
"‘holding company' has the same meaning as in the Companies Act, 1963;".
These amendments are consequential on amendment No. 43, which brings the terms "subsidiary" and "holding company" into section 12. Their effect is to transfer the definitions of these terms from section 14, to which they were confined, to section 1, where they will affect the Bill as a whole. During the Committee Stage, Senator FitzGerald made the point that all definitions should be in one section. He also said he did not think that the definition of "subsidiary" in the Companies Act was a good definition and suggested that the definition in the North of Ireland Act, 1960, ought to be adopted. Having considered this matter I do not think it desirable to depart from the definition already in the Companies Act.
I am pleased to agree to these amendments which meet the points that I made on Committee Stage. I am sorry the Minister will not consider the advantages of the definition of "holding company" in the North of Ireland Act, 1960, but I can well understand why he does not want to depart from the definitions which we have incorporated in the existing Companies Act. I accept these amendments.
Amendment agreed to.
Government amendment No. 2:
In page 2, between lines 28 and 29, to insert the following:
"‘officer', in relation to a body corporate, includes a director or secretary;".
This amendment is a technical improvement to the Bill which was also suggested by Senator FitzGerald on the Committee Stage.
This amendment meets entirely what I asked for in relation to this and I accept it.
Amendment agreed to.
Government amendment No. 3:
In page 3, between lines 7 and 8, to insert the following:
"‘subsidiary company' has the same meaning as in the Companies Act, 1963;".
Amendment agreed to.
Amendments Nos. 4 and 23 are cognate.
Bill recommitted in respect of amendments No. 4 and 23.
Government amendment No. 4:
In page 3, line 15, after "whatsoever", to insert ", but does not include any such arrangement participation in which is obtained by effecting a policy of assurance upon human life with the holder of a licence under the Insurance Act, 1936".
The effect of these two amendments is to exclude from the scope of the Bill schemes of collective investment associated with policies of life or industrial assurance effected with assurance companies licensed under the Insurance Act, 1936. These schemes fall into two broad categories. The first is a fund for investment either in securities or other property which forms an integral part of the insurance company's funds; for example, the Irish Life property modules. The second is an arrangement whereby a separate management company, which is a subsidiary of the insurance company, manages a separate fund under a trust deed and the investments are held by a trustee; for example, the Norwich Irish units policy.
I decided to introduce these amendments after very careful consideration of representations which had been made to me by the insurance companies, and on being satisfied that the exclusion of insurance linked schemes would not affect the two main objectives of the Bill, which are to provide protection for investors and to promote investment in this country.
Investment in this country is assured by the long-standing gentlemen's agreement with the life assurance companies under which they have undertaken to invest a proportion increasing to 80 per cent of their total funds here by the end of 1977.
These two amendments are to exclude this category and it is arising from strong representations which have been made to me by insurance companies in this regard that I decided to introduce both these amendments at this stage.
I am glad we are in Committee for this one. I can understand that the Minister would have been under pressure to have an amendment of this kind, but I should have thought he could have made a concession which would have assisted the insurance companies in question. Without such a concession the Minister loses all control over such institutions because, as I understand this, all the restrictions on proportions that are proposed to be made by the Minister, all the protections that are to be given to citizens who subscribe for units in these modules—these property life-backed insurances—will lack the protection that this Bill gives them. There will be no register in which will appear the information that the public or financial writers might wish to obtain about them. There are no restrictions of any kind imposed on them as to the sort of things they would say, or as to the documents they would issue looking for subscriptions.
I should have thought that, in relation to vested interests of great strength and authority, to yield to them a position which is denied to everyone else seems to me to be too great a concession for the Minister to make. What would be objectionable to them would be in particular the Minister making an order in regard to the proportion that they had to invest in Irish securities.
Speaking on the Committee Stage the Minister was inclined to meet this question by having specified classes which would have regard to their existing insurance investments in Irish securities. That provision should have been sufficient. Looking over the entire scheme of the Bill there is prohibition of advertising in relation to unregistered unit trust schemes. These will be schemes not subject to any of the provisions of the Bill. There is an opinion which I voiced here, more to have it put on record than to have it stated as my opinion, and that is the English view, which is strongly held, that the manager and the trustee should be separated so completely that the Board of Trade would not register a unit trust scheme or allow it to be formed without the manager and trustee being definitely separated.
In this case, one of the reasons given for giving them exemption is that they are to be closely managed together. There is no provision for the application of any of the statutory obligations. None of the orders in relation to unit trust schemes will be applied to them. None of the provisions in regard to the profit of the manager or subsidiaries of the manager or parents of subsidiaries or, taking the Minister's amendment on this in its entirety, of all those persons who will be subject to these controls, will apply. There will be no necessity for audit of a particular kind. There will be no obligation on them to furnish, other than such rights as the Minister has in relation to the insurance element in such schemes under the existing insurance law. There is no provision for investigation into their schemes. Many of the offences and punishments that officers of registered unit trust schemes will be liable to will not be in force.
The Minister could consider if there is any merit in what I say. I agree that we should go a long distance to help these life-backed schemes but not so as to leave them completely free from restrictions to which they cannot object simply because they are life-backed. I take it that the representation the Minister has received is in regard to this and that it particularly relates to the proportion that one has invested in Irish securities or Irish property?
If there are other grounds for these objections I think that it would assist the continued debate if we knew what these grounds were. I am only guessing the one that seems to me to make sense. I cannot see why they should object to making accounts available that would enable investors in these schemes to compare their performance with the performance of any other registered unit trust scheme or be obliged, for example, to buy back units, as they will not be obliged when this Bill is enacted, or be obliged to offer prices that are relevant to the assets underlying the trusts, which is a very significant feature in this Bill.
I should have thought they should be bound to all of these things and that the Minister would deal with them as a specified class. Under the Insurance Act, 1936, licences have been issued and are now held by a fair number of people. I do not think that the class is effectively and finally controlled as the Acts now stand, but it does mean that perhaps the very people whom the Minister does not want to be free to collect money can do so, by making an arrangement with the company which has a licence under the Insurance Act to insure lives. One of the objectives of this Bill would be wholly overcome by that arrangement because by it they would be free from the trammels and control of this Bill and all the funds in Ireland could flow out to them and the Minister would be in no better position than he is today to control that situation. I am merely addressing these remarks so that the Minister may think about the full implications of giving a concession as wide as this to those who made the representation. It is not particularly in my interest to make this contribution but I consider it very relevant to having a proper Bill.
The Senator draws attention to the fact that in tabling these amendments I was influenced by representations made to me by insurance companies. I noted what the Senator said about the effect of these amendments being to release the companies concerned from the terms of the Bill. On the other hand, I do not accept the argument that I have no control over those people.
The Senator stressed one influencing factor, that is that the question of their commitment to investing or reinvesting a particular share of the money would have had an influence on me in relation to their joint ventures. This was not all of it, however. I am satisfied, as it stands, that within the framework of the Insurance Act, 1936, I have the power under section 96 of that Act to amend, by order, the Schedules of the Act which set out the form of returns which insurance companies are required to furnish. From the point of view of protecting the unit trust holder, the Senator is stressing to me that by going through with both those amendments I am foregoing the rights that I have under this Act in relation to any other unit trust schemes that could be established.
I am very conscious of the implications of amendments Nos. 4 and 23, but I do not think they will have the effect the Senator visualises. The Senator draws the conclusion that a saver who wants to buy units would be naturally satisfied that a trust registered under the scheme would, of necessity, be a far more sound investment than one that is not caught under this Bill. This would mean, and this is one of the things the Senator mentioned, that information regarding registration and a lot of other information that is required under the Bill, would be available arising from unit trusts schemes that would be commenced following the enactment of this legislation. I have no reason for doubting our ability to control, by order, under section 96 of the Insurance Act, 1936, the people whom I am proposing to exclude under this Bill.
I am afraid that what the Minister has said does not ease my dissatisfaction with the proposed amendments to these sections. I shall deal with the points as they occur to me.
There are rights given to civilians here in relation to registered unit trust schemes. The purchasers of modules in these life-backed schemes will not have the same rights: there are provisions for investigation, extended in a fairly satisfactory way, which will not apply. The Minister has power to extend the accounts in the form that insurance companies may give him and this is a useful power. I do not know if he has ever exercised it but if I know the operations of the insurance code, these accounts are all put together in one volume. They are not filed and there is no provision here that they should be filed in the register where the registered unit trust schemes are to be found. There is no provision for controlling their management charges; there is no provision for the maintenance of assets to back the yields.
I think I am right in saying that once a licence has been given, provided the terms of the 1936 Insurance Act are complied with, the Minister has no power to cancel that licence. He would have to come to the Dáil and Seanad —or the Seanad and the Dáil as we would like the progression to be—to get an appropriate amendment to do that. I think the Minister's advisers might well have a look at the Insurance Act to see whether it is beyond the wit of man to put the Minister into a position where, no matter how spurious he thought the arrangements which lay behind the company were, he would be obliged in law to give the licence to a newly formed insurance company which technically conformed with the requirements of the Act.
I think he has made a virtue of this separation of the manager from the trustee. I argued at the beginning that there was something to be said for examining the necessity for that on the grounds of the reputations of the institutions who would be involved. The insurance companies that are operative in this field at the moment enjoy enormous reputation and respect for every aspect of their affairs and they are not to be thought of as engaging as parties in any operations that would have repercussions. But I can see the very creation of this Bill giving inventive minds thoughts as to how the Bill could be overcome and how advantages could be found in being able to describe this as an Irish registered unit trust and being able to say things which, if it was a British registered unit trust, could not be said because the Board of Trade would have control of the form of a deed which would, in fact, oblige the trustees and managers to do various things. There would be no authority here, as there is at this moment, to control such things. But the difference is, of course, that everybody has known a Unit Trust Bill was coming and has been awaiting its arrival before they did anything, if they intend to do anything.
If I were involved on the other side I would see means whereby this whole Bill could be quickly overcome and people who wanted to establish a unit trust gaining from the reputation of established registered Irish unit trusts and, in fact, as free as birds in their operations. I do not expect the Minister to do anything about this at this point but perhaps he would consider what I have said before this comes into the Dáil where he obviously could introduce an amendment along the lines I suggest whereby he can take power to exempt these bodies from certain provisions that, according to the representations made to him and which are convincing to him, they should not be subject to.
I can certainly take cognisance of what the Senator said in the manner in which he finally put it. I am quite conscious of the step I am taking in this regard. I think the message that the Senator was spelling out to me was that it could be possible, arising from the introduction of this amendment, that somebody might have the capacity to dig up a spurious life assurance company and be able to opt out from this Bill in that manner, but they would have to get a licence——
Which, subject to certain conditions, the Minister cannot refuse them.
Yes, subject to certain conditions, agreed. It is true that unit holders in the type of unit trust that we are talking about here would not have all of the forms of protection which are being provided for unit holders under this Bill, but they would have the protection provided for the life policy holders under the Insurance Acts. If the protection provided by the Insurance Acts for the public is thought to be lacking in any way in the light of modern practice and modern developments, a Committee on Insurance which is at present sitting, although dealing specifically with motor insurance, will also be dealing with insurance in general. I would expect they would make recommendations for improvements or general tightening up.
I am anticipating that, arising from the report of that Committee on Insurance, I will have to introduce fresh legislation in this regard. On the other hand, mindful of what the Senator has said and mindful of my own slight worries in this regard, I can give the House an assurance that before introducing this finalised Bill into the Dáil I will have a look at the aspects of it the Senator has presented to me.
Amendment agreed to.
Government amendment No. 23:
In page 8, line 10, after "whatsoever,", to insert "but does not include any such arrangement as aforesaid which is administered by the holder of a licence under the Insurance Act, 1936, and participation in which is obtained by effecting a policy of assurance upon human life,".
Amendment agreed to.
Amendments reported and agreed to.
Government amendment No. 5:
In page 3, line 43, after "paid up" to insert "in cash".
This amendment is an improvement arising from recommendations made on Committee Stage.
Amendment agreed to.
Government amendment No. 6:
In page 3, line 46, after "its" to insert "paid up".
Amendment agreed to.
Government amendment No. 7:
In page 3, line 49, after "capital" to insert "and assets".
Amendment agreed to.
Government amendment No. 8:
In page 4, to delete lines 7 and 8, and to substitute "this Act and any orders for the time being in force under section 8 of this Act and applying in relation to the deed and that the deed contains a covenant providing that the scheme will be carried on in compliance with the provisions of this Act and any orders for the time being in force thereunder,".
This amendment makes provision for the inclusion in the trust deed of a covenant providing that the scheme will be operated in accordance with the legislation. It was mentioned on Committee Stage by Senator FitzGerald that the inclusion of such a contract would afford an extra civil remedy to unit holders and I am accepting this on the basis that the unit holder could sue the manager or trustee for breach of covenant if the scheme contravened the law.
I am quite satisfied with that.
Amendment agreed to.
Government amendment No. 9:
In page 4, line 9, to delete "the deed" and to substitute "a copy of the deed"
This again is simply a minor drafting amendment.
Amendment agreed to.
Amendments Nos. 10 and 11 are cognate. Nos. 16, 19 and 20 are related. Therefore amendments Nos. 10, 11, 16, 19, 20 can be taken together, by agreement.
Government amendment No. 10:
In page 4, line 16, to delete "and" and to substitute "or"
Amendment agreed to.
Government amendment No. 11:
In page 4, line 20, to delete "and" and to substitute "or".
Amendments Nos. 10 and 11 are drafting amendments. Amendments Nos. 16, 19 and 20 are acceptable to me.
Amendment agreed to.
Amendments Nos. 12 and 53 are cognate and may be discussed together.
Government amendment No. 12:
In page 4, between lines 27 and 28, to insert the following:
(3) Upon registration of a unit trust scheme in the register, the registrar shall certify under his hand that the scheme is registered in the register and the certificate shall be admissible in evidence in all legal proceedings and shall be conclusive evidence that the scheme is registered in the register.
It was suggested on Committee Stage that I should make provision for a certificate of registration and that is what I am proposing to do in this amendment.
I am quite happy with both of these amendments.
Amendment agreed to.
Amendments Nos. 13, 14 and 15 are related and may be taken together.
I move amendment No. 13:
In page 4 between lines 38 and 39 to insert the following new section:—
(1) On the alteration of the terms of the deed (in due compliance with the provisions thereof) which expresses the unit trust scheme a copy of the deed as altered shall within 21 days of such alteration be deposited with the registrar.
(2) On the change of the name of the unit trust scheme (in due compliance with the terms of the deed which expresses the unit trust scheme) particulars of the change of name shall within 21 days be deposited with the registrar.
If this new section were adopted amendments Nos. 14 and 15 would then be consequential, but if the proposed new section were not adopted, I think Nos. 14 and 15 would fail.
The best way to approach this is to look at the provisions of subsection (1) of section 4. This gives the Minister power to direct the cancellation of a scheme upon a day specified in the direction. He may do this in certain circumstances which are set out in paragraphs (a), (b) and (c). In relation to (b) he would be entitled to direct the cancellation of the registration if paragraph (f) of section 3 (1) were no longer fulfilled. Section 3 (1) (f) reads:
the deed aforesaid is deposited with the registrar,
The scheme will not be a registered unit trust scheme until the registrar gives a certificate. The registrar cannot give a certificate if the deed is not deposited. The deed having been deposited, the Minister could not under this section direct cancellation because the provisions of paragraph (f) were no longer fulfilled. Once the deed was deposited the requirement of that paragraph would have been fulfilled and, once fulfilled, would have been fulfilled forever unless he positively stole it back or it was lost and the loss could be imputed to him, but once he has deposited the deed he has deposited the deed and once he has deposited the deed and the other circumstances are fulfilled then the registrar will certify and the unit trust scheme will come into existence. The Minister could not become satisfied that the requirement to deposit the deed was no longer fulfilled. That relates to paragraph (f). Paragraph (g) provides that the name of the scheme is not, in the opinion of the Minister, undesirable.
The Minister has a right to express himself as having an opinion that the name is undesirable or to say that it is desirable. The registrar, having heard his opinion, would then register and give a certificate that the unit trust scheme existed and the unit trust scheme would exist. It would not be proper, in my view, if the Minister having expressed an opinion that the name of the scheme was desirable could subsequently become not satisfied that the name was not desirable. Therefore to give meaning to the intentions of section 4 as drafted, I propose a new section which would precede section 4 and which would read as set out in amendment No. 13. Subsection (1) of the new section would deal with the position of (f), that is, on the deposit of the deed. But on the alteration of the terms of the deed in due compliance with the provisions thereof—because they could not alter the deed unless the deed provided for its own alteration which expresses the unit trust scheme—a copy of the deed as altered shall within 21 days of such alteration be deposited with the registrar.
If the Minister is faced with an alteration in the deed it would seem to me quite proper that he should be entitled to require that the scheme be cancelled because the original deed is in but there is an alteration in it which could deceive everyone if it is not deposited. It should be deposited, and having been deposited the Minister is entitled to look at it and if he is no longer satisfied with the provisions of the deed as altered he should be entitled to cancel it. I will link that up with the reading of subsection (1) (b) of section 4 to which I have already referred where the Minister is entitled to direct cancellation when
the conditions specified in paragraphs (b), (c) and (f) of section 3 (1) of this Act are no longer fulfilled.
Leaving out (b) and (c), just to take (f), relating to the deposit of a copy of the altered deed, there has been failure to comply with the provisions of the preceding section—that is the section which I have proposed in the amendment of this Bill. Subsection (2) of the proposed new section provides an obligation on the people who are running the unit trust scheme as follows:
On the change of the name of the unit trust scheme (in due compliance with the terms of the deed which expresses the unit trust scheme) particulars of the change of name shall within 21 days be deposited with the registrar.
It seems to me that if they change their name there should be a clear obligation on them to notify the registrar of the change. But in doing so they expose themselves to the possibility that, under section 4 or whatever the number of this section would be, if my proposed new section were accepted, the Minister would be entitled on considering the new name to form an opinion that the changed name was undesirable. He would be prevented from having a whim—if the Minister would ever have a whim—that would have him approve of a name in February and disapprove of it in May; but he would be entitled to form a view that if a name which he orginally approved was changed to a new name the scheme must go, because he does not think the new name is desirable and he would be entitled to direct the registrar to cancel it.
These three amendments amount to an amendment introducing a new section which makes it possible coherently to relate the right of the Minister to cancel registration, but involves consequential amendments such as are proposed in Nos. 14 and 15. The topic is not very exciting but it does not seem to me to make sense at all to talk about the Minister saying that the conditions specified in (f) are no longer fulfilled; the deed as deposited fulfils the requirement of (f). That is the end of that. The Minister therefore could only be entitled to cancel it if a new deed, or an alteration has been made in that deed, for which there is no provision requiring him to register, has been made and is not registered. Then it is right that at that point he could say: "I do not like these new sections, new paragraphs, new clauses and I am no longer satisfied that the requirements of the preceding subsections are satisfied and I want to cancel them."
Neither does it seem to make sense to say "Right, the Minister should be entitled to form a view, to change a view he has formed about the desirability of a name and then say that a name that he had once thought was desirable is now no longer desirable". It does seem to be right that a unit trust scheme which changes its name should be obliged to notify the registrar of the change; and it then seems to be right that if the changed name is one that the Minister still thinks is not desirable he should be empowered to cancel it.
These amendments are designed to give power and meaning to section 4. They cannot in any way weaken it; they are intended to strengthen it. It is right that the Minister should be in a position to approve of all alterations in deeds. I do not see him having this power anywhere else. It seems to be right that if he does not like the new name he should be entitled to disapprove of it in the most effective way open to him, by cancelling the scheme. However, it does not seem to be right that he should be entitled to cancel a scheme the name of which he originally approved and of which he now disapproves, although no change has been made. I do not think a court would give a great deal of strength to the interpretation of section 4 (1) as drafted.
I have studied amendment No. 13 and the consequential amendments Nos. 14 and 15. The Senator is endeavouring to ensure here that an alteration of the terms of the deed be notified to the registrar within a given period, in relation to this amendment within 21 days. With the exception of the covering of "within 21 days", my amendment No. 50, with regard to notification as such, covers this aspect of the amendment moved by Senator FitzGerald. Amendment No. 50, in subsection (d) covers the points made by Senator FitzGerald, the only difference being that I am substituting each quarter of a financial year or such other period as the Minister may determine. The object of the exercise, from the Senator's point of view, is being met, although it is under a different heading. My amendment does bring in the provision that any change in ownership, or any change in the deed, must be notified to me. Because of that I feel that the object of the Senator's amendment is achieved by my amendment No. 50. I do not need to accept amendment No. 13. There is nothing to stop me, of course, from specifying the 21 days under amendment No. 50, but we will get around to discussing that particular amendment. One of the reasons for introducing that amendment was that on Committee Stage it was said that asking the manager to send in quarterly returns could prove a rather difficult operation and this is why in the amendment there is provision for such other period as the Minister might determine.
I had not failed to note the provisions in amendment No. 50. It would seem to me to be appropriate to interpose at this point, in relation to the cancellation of the scheme, before the section dealing with the cancellation of the scheme, a provision spelling out the requirement of deposits within a specified period of time, which would mean that, in relation to the terms of the deed and the Minister's power to cancel it, it would come quickly before him and not depend upon quarterly accounts and that in relation to the change of name of this scheme it would come quickly before him, within 21 days, and that he would be entitled to cancel it if it did not come quickly before him. In addition, he would specifically have the right to cancel if the new name was undesirable.
There is no provision anywhere in this Bill, even as amended, which would seem to me to entitle the Minister to disapprove of a changed name unless he is going to take the position, which seems to me to be very wrong, that he is entitled to change his mind about the original name which would be the logic of his having to take up the position that he could disapprove of a new name. It also means that the references in section 4 to paragraphs (f) and (g) of subsection (1) of section 3 are wrong in so far as they do not incorporate the effect of the amendment of section 15. Because as drafted it is the terms of the original deed which must be complied with and if that is complied with and it is deposited with the registrar, whatever about any alteration to it, then it is only in that case that he is entitled to cancel the scheme. It seems to me that he should be entitled to cancel the scheme if it is altered. He has no power under this section to cancel the scheme if it is altered. Even though it is deposited under amendment No. 50 he has no power to cancel a scheme because the name is no longer desirable unless he takes up the highly undesirable and unsatisfactory and bad position that a Minister who approves of a name as being desirable —this is a very serious operation by a Minister—is entitled to change his mind with regard to the earlier name. The Minister should have the power to cancel the scheme—either under my proposed new section or under the amendment arising from section 15— because he does not like the new name of the scheme. There is no reference to the section which is amended by amendment No. 50 in the section dealing with the Minister's power of cancellation, which is section 4. The Minister could be in the position that, notwithstanding his amendment No. 50, he would have no power without being forced in the court to argue— and this might be a fight—that the meaning of paragraph (f) includes that you have to write into paragraph (f) "the deed aforesaid", which is after all the original deed, "includes all alterations of the deed which he becomes aware of after the end of the quarter in which the change is made" or—and this is a matter on which I do not think he would be given a great deal of attention—to argue that he was entitled at all times to change his mind with regard to the scheme originally named. If he is not entitled to change his mind with regard to the original name then he has no power to invoke subsection (1) of section 4 because amendment No. 50 is not incorporated in any way as an amendment of paragraphs (f) or (g) of section 3. There is work to be done on that.
Is the amendment being pressed?
I have spoken on the amendment. Is it necessary to have a division if I wish to press the amendment? I would prefer if the Minister would consider this and come back with an amendment because it is an absolutely necessary amendment.
Is the amendment withdrawn?
I have noted it.
Can the Minister consider this for the Dáil? It is a tidying-up operation, not in the language I used but perhaps by elaborating some reference to amendment No. 50.
May I speak?
Very briefly.
The difficulty is that I do not accept the Senator's contention in this regard. He says that in section 4, with which we are dealing, I have not got the power to cancel registration because there is no reference in amendment No. 50 to paragraph (f) in section 3 (1). It says in section (4) (1) (b) that:
the conditions specified in paragraphs (b), (c) and (f) of section 3 (1) of this Act are no longer fulfilled,
If paragraph (f) of section 3 (1) is no longer fulfilled I would have the power and this also covers section 15.
But it is fulfilled once the deed is deposited. It is not any longer now. It is one of these once-and-for-all operations.
If the deed is changed——
If the deed is deposited that is the end of the Minister's power to do anything about it.
No, if the deed is changed——
There is nothing about that. If the Minister puts that in I would be delighted.
That is covered.
Yes, but it does not give the Minister power of cancellation.
Amendment, by leave, withdrawn.
I move amendment No. 14:
In page 4, line 44 after "fulfilled" to insert "because in the case of paragraph (f) there has been failure to comply with the provisions of the preceding section".
Amendment No. 14 has already been discussed.
Amendment, by leave, withdrawn.
I move Amendment No. 15:
In page 4, line 47 after "section 3 (1)" to insert "because in the case of paragraph (g) the Minister, on consideration of the particulars of change of name deposited pursuant to the provisions of the preceding section, is of opinion that the changed name of the unit trust scheme is undesirable".
Amendment, by leave, withdrawn.
I move amendment No. 16:
In page 5, line 3 to delete "and" and substitute "or".
Amendment No. 16 has already been discussed with amendment No. 10.
Amendment agreed to.
Amendments Nos. 17 and 21 are cognate and the Chair suggests they be taken together.
I move amendment No. 17:
In page 5, line 18 to delete "and" and substitute "or".
I have to deal with amendments Nos. 17 and 21. Amendment No. 17 relates to section 4 (3). I make this point for the third time—I have already made it on Second Reading and on Committee Stage—it is conceivable that it would be in the public interest to cancel registered unit trust schemes and not in the interests of the members. I could conceive a situation in which somebody would go into the market and buy up all the units, get control of the registered trust scheme and get all the advantages of being a registered trust scheme, and do all sorts of things that the person who then got possession of these assets wanted to do with those assets which would be liquefiable. He could use them for all sorts of projects that would be of more interest to himself—and perhaps of great interest to himself—but because he had effectively excluded everyone but himself it might not be in the public interest that the public's invested money should have been used in this way. I cannot see what the Minister loses by giving himself the power in the alternative. It limits him to becoming satisfied that it is in the public interest and in the interests of holders of units. I am sorry I am not able to give a good example of this but it is conceivable that the public interest might not be suited where the interests of holders of units would be suited.
This seems to be an opinion which the Minister is going to form subjectively. There is no provision here, for example, for a majority or a minority of the members of the unit trust scheme soliciting him to do this. That would be a case where you would have minority rights being preserved by the Minister being requested, and an amendment of that kind would wholly overcome my difficulty with regard to that. However, in anticipation of what the Minister may have to say about it, I do not wish to press it but I would ask him to consider it again before this Bill becomes law.
I now wish to move on to amendment No. 21. It is consequential on amendment No. 17 and I would like to make the same point with regard to it.
As the Senator said, he has spoken about this particular aspect on Second Stage and on Committee Stage and we had a discussion about it. I have been looking at this and I was waiting for the Senator to move his amendment to see if it would be possible for him to instance a case where he could see a conflict of interests. He did mention the case of a minority of unit holders feeling that their interests were not being properly attended to. In that case the Minister could give a direction, which would be met under the original here, and it would be both in the interests of the public and of holders. Subsection (3) does not say in the interests of the majority of holders of units. I think it is flexible enough, if the Minister is satisfied that it is in the public interests and in the interests of holders. I find it impossible to visualise a situation where something could, on the one hand, be in the public interest and, on the other hand, not in keeping with the interests of unit holders.
The Senator visualised the situation whereby one person would be buying up the majority of units. Even in such a case, the interests of the remaining holders, if it were felt that it was also in the public interest, could be covered in this section. Having considered this I am quite satisfied that if a certain section of unit holders interests are affected and if the Minister also feels it is in the public interest to give a direction, then this section enables him to do so.
From what the Minister has said I understand he does not envisage any conflict of interest between the public good or the good of the holders of the unit trust. Possibly, it might be difficult to visualise such a situation arising just now. We must, however, get back to one of the basic points which the Minister made on the early Stages of this Bill. That is, it is to a large extent going to be an Irish unit trust, in that the Minister will prescribe a minimum proportion of shareholdings of Irish-owned or controlled companies. It may be fanciful to imagine it but it is possible that foreign interests, in order to get control of a company in which there is a large proportion of Irish shareholdings, or Irish companies, may purchase the shares or large blocs of the shares. This would immediately affect the price of the units to the benefit of the holders, but not necessarily in the national interest. The Minister might allow himself some leeway there by substituting, as the amendment suggests, the word "or" or, if he prefers, "and/or", so that, in the event of such a situation arising as I have indicated the Minister could take action. It can happen and I am sure the Minister knows of instances where the public good does, in fact, conflict with the good of owners or holders in companies. An obvious example is that of an outside interest whose buying of the units might not be relished by the Government. It would certainly benefit the shareholders because the price would rise, but it might not be in the best national interest.
On reflection I am rather glad the Minister is resisting this amendment. The amendment would give the Minister a great deal more power. If "or" is inserted then the Minister has only to declare that, in his opinion, it is in the public Interest that he should issue a direction.
We want his hand to be strengthened.
Now, by leaving "and" surely if a majority of the unit holders decided that the Minister was wrong, they can stop the direction being given, because it must be contrary to the interests of the unit holders. The Minister cannot issue a direction without consulting the unit holders, because in his opinion, the public interest is affected, whereas in the present draft the unit holders must have some say in the matter.
Unless he is satisfied. The section does not say "unless he is of the opinion".
Ministerially, I doubt if there is any difference.
An Leas-Chathaoirleach
This conversation would be across the borderline of order in Committee Stage. It is very difficult to tolerate it on Report Stage.
I do not have very much to say. I think the advantage to the community lies with the proposals which are in these two amendments. I challenge the quality of my own imagination in not being able to give illustrations of the uses which I think could be made of this. Senator Russell has given one. There could be a reverse sort of operation in which some people could come in to operate under the disguise of an Irish unit trust. They would become the interested persons. You might be in the position of not being able to say it was to their disadvantage that the scheme should be cancelled. It might be very much to their disadvantage if you cancelled the scheme and yet you could not cancel the scheme unless it was not merely in the public interest but also not in their interests to have the scheme cancelled. To carry that burden, with all the, I will not say chicanery, but the legal agility there can be with regard to designing devices within Acts, I would have thought the Minister would have been able to use the one or the other and that was the reason for my amendment.
If our unit trust movement is designed by this Bill to be so operated as to get reputation in the financial world, it might be useful for people to get hold of one. I am against the proportion being high, as the Minister knows from the amendment which I have put down but if you really want to overcome the proportion, I am bound to tell the Minister that there are various fairly recognised legal devices whereby things can become Irish securities without being Irish in the sense in which the Minister intends them to be. The purchaser of a unit trust scheme could easily comply with the Minister's directions with regard to the proportion and have all the advantages of the reputation of an Irish unit trust and be free to invest, in reality, a much higher proportion outside the State. The Minister may like to think a little further about this matter.
Amendment, by leave, withdrawn.
An Leas-Chathaoirleach
Amendments Nos. 18 and 22 are cognate and might be discussed together.
I move amendment No. 18:
In page 5, line 45, after "scheme" to insert "other" than advertisements offering to buy units of the scheme".
Subsection (5), section 4, where the Minister proposes to cancel the registration of the unit trusts schemes, empowers him to require the manager to refrain from selling units and from publishing or procuring the publication of advertisements in relation to the scheme. I can see why if he is unhappy about the unit trust scheme, he should prevent them selling units. However, it is not fair to investors in the scheme that during this time the ordinary procedures might not be adopted by the unit trusts scheme. For example, if they believed that, on appeal, the cancellation was going to be proved bad, they would not be in a position to be reminded of the unit trusts schemes preparedness to buy. They ought to know this, but how many people read the small print in documents that come from companies, and who can understand them anyhow? An advertisement is expressed in language which they are expected to understand. I think the Minister should not be in a position to prevent them from advertising to buy units when there is a proposal to cancel. Precisely the same observations relate to amendment No. 22.
I am opposed to these amendments. In practice, the manager of a scheme who has been forbidden to advertise the sale of units would hardly publish an advertisement stating that he was willing to buy back units from the holders. The Minister's power here to prohibit advertisements is permissive and he need not exercise it. On the other hand, if I were to accept the amendment I would then be in the position that I would not have the power to prevent the manager from doing something which could in fact be wrong. There are two sides to this. For that reason the amendment is not one that appeals to me.
Not merely do I withdraw these amendments, but I am convinced by what the Minister has said with regard to them.
Amendment, by leave, withdrawn.
I move ment No. 19:
In page 6, line 35, to delete "and" and substitute "or".
Amendment agreed to.
I move amendment No. 20:
In page 6, line 38, to delete "and" and substitute "or".
Amendment agreed to.
Amendment No. 21 not moved.
Amendment No. 22 not moved.
An Leas-Chathaoirleach
Amendment No. 23 has already been dealt with.
I move amendment No. 24:
In page 8, line 40, after “Iris Oifigiúil” to insert “as soon as may be”.
I am not wedded to the words here but it seems to me to be very desirable that the public and the newspapers should know when these exemptions are granted or when the section is being operated to their disadvantage. The words "as soon as may be" may not be the right words or words that are necessarily to be construed as meaning that registration is to take place all that quickly. I know of a case where it took 153 days for a notice to be published in Iris Oifigiúil of a statutory obligation that should be published as soon as may be. I do not know if “as soon as may be” are necessarily the right words. The Minister may have a formula that would be more precise than the words I have suggested. However, it should be open to the Minister to exempt papers and not to publish in any of the Irish newspapers, but not to publish within any specified time in Iris Oifigiúil does seem to me to be wrong, in a matter affecting the public and the newspapers. At the moment as the section stands he could effectively provide a statutory obligation.
I have not the experience of this that the Senator has. However, in relation to statutory notices it is the standard practice to publish those statutory notices at the earliest possible date. I do not see any practical value in the proposed amendment. From my experience, the words in the amendment: "as soon as may be" may not be the best form of words.
I have in mind a situation where an Order was made on a given date and the statutory notice appeared in Iris Oifigiúil about eight days later. A copy of Iris Oifigiúil appeared in the meantime and it was suggested that it could be contended that that notice would not have complied with what we have here “as soon as may be” on the basis that it should have appeared on the previous Friday rather than on the Monday or Tuesday afterwards because the Tuesday afterwards was not “as soon as may be” after the Order was made. Certainly from my experience in that regard, and mindful of what the standard practice is, where normally I would look upon the suggested amendment as being a reasonable one, even with amended wording, I think that by writing this in we are leaving a loophole whereby somebody could come along afterwards and say that the order should have appeared a week before. I can appreciate the Senator's views when he mentioned 13 months or 13 weeks or something like that——
It was 153 days.
That is very much the exception. Certainly the, statutory notices normally appear quickly after an order is made. In relation to this piece of legislation one can assume that the standard practice will be followed and we have it spelled out in the section here that:
Whenever the Minister excercises a power under this subsection, notice of such exercise and its nature and the name of the newspaper or magazine to which it relates shall be published in Iris Oifigiúil.
I am opposed to making this addition to the section, for the reasons outlined.
I am worried about this. I was not happy with the words I put down, which just came easily to me. I think we have had quite a number of Bills here where there were provisions actually specifying days within which publications were to be made. In most of the cases of these publications, the publication is required for formal reasons, reasons of proof, and to see that the Minister's statutory duty is compiled with. Interested parties get to know about them. I made the point on Committee Stage that there should be a requirement here on the Minister to publish in the four national newspapers the fact that he was exercising this power of exemption. I said that Iris Oifigiúil was not a bestseller and that people did not rush down early in the morning to buy copies of it. But the Minister told me that one would be surprised at how early in the morning editors of newspapers look at it, or words to that effect. For that reason I did not press because I felt they would pretty quickly see whether an exemption was granted and to what extent they were being deprived of revenue that was being allowed flow into the foreign newspapers who were being given the benefit of the exemption.
It seems to me that in this case where it profoundly affects the interests of Irish newspapers there ought to be a direct obligation on the Minister, if he is exempting foreign newspapers from an obligation which is being imposed on Irish newspapers, they should be notified of it either by publication in their own advertising column or that he should do this within a specified time in Iris Oifigiúil. It is not a very difficult thing. It is not as if such an exemption order will have in it elements or difficulties we are aware certain other kinds of orders can have with regard to the matters that have to be considered before they are made up and where even the very form of the order may be of the greatest importance. In this particular case it seems to me that there will be an order in a very simple form exempting such-and-such a newspaper, presumably for such-and-such a period. If you put in that notice of the order had to appear in Iris Oifigiúil within seven issues after the date of the making of the order, or something of that kind, then it would be very easy to set up a practical administrative operation whereby that would be complied with. It is not as if the exemption order is going to present any difficulties in its terms. Presumably each exemption order will be in the same form. It will exempt a particular newspaper. I do not know that the Minister will even be called upon to specify his reasons for giving an exemption. My own expectations is that he will exempt the lot of them when he finds how he has to operate this section.
Amendment, by leave, withdrawn.
Government amendment No. 25:
In page 8, lines 42 and 43, to delete "the manager under the unit trust scheme to which the advertisement: relates,".
Might I ask a question here? The next amendment is, I think, an amendment to this amendment.
No.
An Leas-Chathaoirleach
That is on the Order Paper.
I see.
This amendment meets Senator Alexis FitzGerald's previous point that a manager should not automatically be guilty of an offence in relation to publication of a prohibited advertisement because it is conceivable that publication could be made without his authority or knowledge. The amendment will not provide a let out for a manager who knowingly publishes a prohibited advertisement. He would be caught by the phrase "any person who procures such publishing" in section 7, subsection (3). Arising from the views expressed by the Senator on the Committee Stage, I put in this amendment.
Yes, I accept this amendment.
Amendment agreed to.
I move amendment No. 26:
In page 8, lines 43 and 44, to delete "the person who publishes the advertisement and".
As subsection (3) is amended now, where an advertisement is published in contravention of subsection (1), which prohibits the publication of advertisements in relation to or referring to a unit trust scheme that is not a registered unit trust, the person who publishes the advertisement and any person who procures such publishing shall each be guilty of an offence. I am going to take for the purposes of construing the classes of the persons who are affected here the person who publishes the advertisement as being the publisher of the newspaper in question and any person who procures such publishing as being some unauthorised agent of the manager who for his own good business puts in the advertisement. By this amendment proposed by Senator Russell and myself it is proposed to delete from the offence the person who publishes the advertisement and leave the only person guilty the person who without authorisation put in the advertisement.
It seems to me to cast an appalling obligation on the busy men who manage the editorial work involved in preparing newspapers, that they should be obliged to know what is and what is not a registered unit trust scheme and to keep themselves up to date with this information without having daily inspection of Iris Oifigiúil. Not even telling them that an exemption has been made under subsection (2) and their not being aware that a registered unit trust scheme has been cancelled by the Minister under section 4, which provides for the cancellation of the registered unit trust scheme, involves them in further obligations to be sure that they comply with this section.
I do not know how the Minister visualises this will operate. If the deed is deposited, if the Minister regards the name as desirable, if the Minister is satisfied that this scheme is such as to secure that every trust created in pursuance of the scheme is expressed in a deed which complies with certain provisions and if he is satisfied with the probity of the manager or the trustee, I do not know at what point of time and in what fashion the public are going to be informed of the actual registration. It seems to me that there is no obligation on anyone to announce to the public that a new scheme has been registered. To ensure that they were not committing an offence under section 7, the newspapers would have to have a posse of persons operative daily to check on the registration and the registrar would be required the moment he registers a scheme to say it is all right and enter all about it in a book which is open to the public. There is no obligation on him not to do that at midnight, if he wants to, and the newspapers are coming out the following day.
The exposure to liability here of the newspapers is too considerable and there should be some words written in. If my proposal is not acceptable, there should be some reservation of liability to those cases of which he had notification that, in fact, the unit trust scheme was not, a registered unit trust scheme so that it would be the registrar's duty to see that the notice was conveyed, or else that it should not be the duty of the newspaper to be liable or so to act so as to ensure that they would not be liable in all circumstances.
I should like to support Senator Alexis FitzGerald and to point out that there may be practical difficulties in establishing who the person is who publishes, having regard to the complex organisation which the modern newspaper is. It seems to me, too, that the person who is guilty and should be punished under this section is the person who procures such publishing. That is quite clear and specific. It would be very difficult, and possibly very wrong, to try and establish somebody who, if it is an individual, published in good faith or, as is most likely, a number of individuals who are concerned with the publishing. From the Minister's point of view it would certainly clarify this section and make it far more easy to implement if the words suggested in the amendment were deleted.
Listening to Senator Alexis FitzGerald a few moments ago on this question of the difficulty the publisher would have in dealing with this—shoals of advertisements coming in at midnight—I get the impression that unit trusts are being visualised as something like the opening of bingo halls. We can logically assume that we are not going to have a surfeit of unit trust schemes the very minute this legislation is through.
We have a surfeit of mergers——
On the other hand, I imagine that, if the Minister had occasion to cancel the registration of a unit trust, it would be front page news. There is no doubt about that.
Anything the Minister would do.
I know that. It is reaching the stage now that I am afraid to sneeze. The reason why Senator Alexis FitzGerald is suggesting that we exclude the person who publishes the advertisement is because he feels it is unfair to impose a regulation here which makes that person an offender in the event of his taking an advertisement and publishing it in all good faith. In fact, all the newspaper publisher is required to do under section 7 is to check a simple fact, as to whether or not a unit trust scheme is registered. I do not accept that it is as complicated or as difficult as the Senator says. He pointed out that under the Bill the registrar has to keep a list. I cannot visualise that being a very extensive or very exhaustive list and I do not think there is a problem in this regard.
On the other hand, Senator Russell raised the question of establishing who is the person who publishes the advertisement, and he asked me to be a little more explicit about that. That may be difficult. But there must be an onus on all publishers. Publication of an advertisement can be through various media—from TV down to the simple poster with the printer's name at the end. It is necessary for me in this Bill to place joint responsibility on the person who procures the publication and also the person who publishes. As evident from the debate in the Dáil last week, there is no trouble in identifying the publisher of a publication regarding illegal organisations but there is a great problem trying to identify the person who procures the publication.
I am not lightly opposing any amendment moved by Senators FitzGerald and Russell. I am opposing them having taken a balanced view of the situation and having weighed up all of the factors involved. There are some I have accepted, others I propose to accept, and others that I am opposing. I think I am fully justified, having weighed the pros and cons, in opposing this amendment and insisting that both the procurer of the publication and the person who publishes should be responsible.
As I understand it, the essence of the case made by Senator FitzGerald is to protect the innocent publisher: the person who, inadvertently, not knowing that the trust was registered, accepts an advertisement. It seems to me that the Minister, by looking at this again, might meet Senator FitzGerald's point and at the same time uphold the strength of the section by putting it on the basis of where an advertisement is knowingly published in contravention of the section. That would meet the point made by Senator FitzGerald and, at the same time, I think it would leave the penalties and the control in the Bill.
"Knowingly" is a bit——
"Knowingly" in contravention of the section. There is no need to have any mercy on him but the person who does it innocently and through no fault of his own should have some protection.
Establishing "knowingly" is the problem.
An Leas-Chathaoirleach
The only person who is in order now is Senator Mrs. Robinson who has not yet spoken.
I think that I can see the Minister's problem in that there might be a danger, in having no sanction at all for the publisher of the advertisement, that the person procuring publication might well feel that it was worth running the risk of prosecution, and the possibility on reconviction under section 19 of a maximum penalty of £100, to have the unit trust advertised here. If the newspaper was aware that no liability could result to them for publishing it they might be more willing to accept it, even knowing that the trust was not registered here. There would be danger in not having any sanction, though I would agree with Senator O'Higgins that it might be possible to insert a provision that it be knowingly.
I am not pressing my amendment in the light of what has been said. If Senator O'Higgins's suggestion is adopted, the words "in knowing contravention" or something of that kind would appear. I know that this casts the burden of proof on the Minister, but I do not think it a heavy burden if he adopted the practice of formally addressing a letter to the manager or editor of the papers that would be likely to take these advertisements, keeping them up to date as to the unit trusts that were entitled to advertise and the unit trusts that were not entitled to advertise. I suppose we would have to make an exception in the case of those not affected as a result of the amendments which have been made earlier today with regard to the arrangements with the insurance companies, because that will confuse editors too in due course. I think the section could be improved and these are my last words on it. I will now, with your permission, withdraw my amendment.
Amendment, by leave, withdrawn.
I move amendment No. 27:
In page 9, line 48 after "order" to insert "and different charges may be specified in the order in relation to different schemes according to the nature, distinctive features and the policy to be applied in relation to different schemes".
I must confess that I am not happy that this matter of charges should appear in the Bill at all. I think it would be better if it were a matter to be worked out between the manager and the trustee. A reputable trustee will always see that the manager's charges are right anyhow. If it has to be in the Bill I think the Minister should recognise expressly that the charges to be allowed differ enormously according to the nature of the trust which is being operated. If one has £10,000 units the cost of administering that trust and the rate of charges that are proper to be made would be quite different to units of £5 where the overhead cost would be much more considerable and the charges any manager would be entitled to make should be much greater. This is one of the advantages for people who have money to be able to put their large units into large unit trusts, because the fact of having only a small register compared to a vast one means the management costs are very much less. Maybe the Minister is satisfied that he has this power already but, as I read this, he seems to be in a position where he will make an order for a scale of charges which will be applicable to all unit trusts. I believe that the charges vary enormously in practice in the UK, which is the only place which we really know, where the Board of Trade requirements are applied but not in a statutory way. If he has any doubt about his ability to specify different charges for different trusts he ought to take that power.
As regards clarification, are the words proposed to be added inside or outside the bracket that occurs in the paragraph?
An Leas-Chathaoirleach
I take it the question is addressed to the proposer of the amendment rather than to the Chair?
It is difficult to follow the amendment without knowing.
I take it that the Chair will permit me to answer the question. I think that the amendment lacks a bracket after "schemes".
An Leas-Chathaoirleach
My opinion would be that the word would be inside the bracket.
Thank you.
My advice on this is that the flexibility envisaged in this amendment is already available under section 8 (2) (h) as it stands. I gather from the Senator that he visualised that but still, felt it might be necessary to make the addition.
That entirely satisfies me. I was only seeking clarification on that. It seemed to be so necessary that this flexibility should be there; and if the Minister is satisfied he has it then that satisfies me.
Amendment, by leave, withdrawn.
An Leas-Chathaoirleach
Amendments Nos. 28 and 29 appear to be cognate and I suggest that they might be taken together.
I move amendment No. 28:
In page 9, line 56, after "thereof" to insert "or any specified scheme whether constituting a class or not".
This is to give the Minister power to provide for a different proportion for any specified scheme. I would strongly urge him to take this power. He may be presented with very attractive schemes of a highly individual character but they may not fall within any specified class. The net effect of his registering them and giving them a different proportion for investment in Ireland might be to gain that proportion for investment in Ireland which it would not otherwise have got because it would not otherwise fall within the range of specified class in question. It also might be, and here I speak with some awareness, that existing unit trusts that have already substantial Irish investors might be able to present to the Minister a case for a different proportion to be applied to them for foreign investment, having regard to the fact that they would be bringing home the capital which is being invested by Irish residents in the foreign trust into an Irish unit trust, bringing service advantages here.
There are all sorts of services industries that represent great wealth-earning concerns. This was recognised in an amendment during the last year or so to the arrangements with regard to Shannon where certain service-rendering engineering companies were allowed get the benefits of the tax-free provisions at Shannon. I do not like to specify a proportion, but I do not think I am wrong in saying that the majority of the work done in New York city is service-rendering, and I would say that is one of the richest parts of the globe. The Minister ought not to exclude from consideration the actual creation of unit trusts here, the transfer of their administration, and the transfer of their skilled financiers to reside here and pay taxes here and who would, with their interests, tend to look around them to see what prospects there are for stimulating activities here when they get themselves past the stage of being deluded by the charm of our people to the point of considering investing in projects here.
Even if the net capital gain was not immediately obvious, if you have a unit trust scheme which specifies a proportion in relation to it—it need not be for an indefinite period of time— the Minister could have a look at the performance of the trust after a few years and measure out what advantages or disadvantages it has brought to the economy. If he ties himself to the position that he can only make an order which is different if it relates to particular classes he may deny himself the opportunity of registering unit trusts which are of an entirely individual character, which could not be put together into a class and which should, for the benefits that the economy would get, have the rights of registration under this Bill when enacted. What I have said on that amendment covers also the next amendment.
I find myself once again opposing this amendment. I think it is going very far in giving the Minister power to allow him to particularise in any specific scheme. Although Senator FitzGerald is looking at it from the point of view of a scheme wishing to have special consideration, it would empower the Minister to require that a particular scheme would have to have a certain proportion of Irish securities or other property in the State. Therefore, the Minister would be empowered to discriminate against a particular scheme and this type of discrimination might be held by the courts subsequently when challenged to be unconstitutional. In the Supreme Court decision on the East Donegal Co-op. Livestock case the provision allowing the Minister to exempt any particular business was held to be unconstitutional. In that case Mr. Justice Walsh, in the Supreme Court, said:
The constitutional right of the Oireachtas in its legislation to take account of difference of social function, difference in capacity, physical and moral, does not extend to delegating that power to members of the Executive, to the exclusion of the Oireachtas, to decide as between individuals, all of whom are by the terms of the Act bound by it, which ones shall be exempted from its application unless such exemption were necessary to avoid the infringement of a constitutional right in such individuals which, because of circumstances peculiar to them, would necessarily be imposed upon them by the application of the statutory provision without such exemption. In the view of this Court the provision purporting to grant power to the Minister to exempt "any particular business" is invalid having regard to the provisions of the Constitution. The same considerations do not apply with regard to the power to exempt businesses of a particular class or kind because this primarily does not involve the making of a distinction between citizens but rather permits the making of a distinction which would benefit or otherwise affect all businesses of the particular class or kind involved.
I think this is directly analogous to that. Whereas the Minister may decide that certain unit trusts of a particular class or kind must invest in a certain proportion of Irish securities, to allow the Minister to particularise a specified scheme would, on the basis of the reasoning of the Supreme Court, be failing to treat citizens—and here the Minister would have locus standi with legal persons—equally by allowing the Minister, within the terms of the Act, to discriminate against a particular scheme. For that reason I find myself opposing this amendment.
Senator Mrs. Robinson has outlined the particular objection I have to this amendment. While it is justifiable in the public interest to differentiate between classes of schemes, it is doubtful if it would be constitutional to use the power under section 8 (3) in favour of or against an individual scheme.
In that case I will withdraw it.
Amendment, by leave, withdrawn.
Amendment No. 29 not moved.
I move amendment No. 30:
In page 9, line 63, after "State" to insert "provided that the proportion so specified of any such property shall not exceed in value 30 per centum of such property".
This amendment is only to give the Minister an opportunity of disclosing his mind, as it is at the moment, with regard to this proportion. I believe it would be far better for the country if we had successful unit trusts with the hope that we could stop capital flowing out. It is going to flow out anyway until you have exchange control with all the disadvantages of exchange control. If we have some limitation placed on the percentage that may be specified in the statute this would be an encouraging gesture to people who see great opportunities for building up this new type of financial institution with its headquarters in Ireland and bringing to Ireland people with financial know-how who, being here, would benefit by their presence the whole of the economy and the whole community. Perhaps the Minister would say whether he is delighted with the proportion specified or what reason he has for finding it too limiting. Some limitation ought to be imposed.
I should like to support Senator FitzGerald. I was one of a number of Senators who spoke on this particular point, not with any desire to be un-national in this regard but having some business experience of what might constitute a successful unit trust in this country. I think it was the feeling of a number of Senators, including myself that, certainly at the early stages, a reasonable figure should be applied to the proportion of Irish property or Irish securities to be included in the unit trust scheme. I do not know whether the Minister has been influenced by these arguments which came from both sides of the House, but I certainly would ask him to be realistic in his proportion. I agree with Senator FitzGerald that it would be helpful to the unit trust scheme to indicate at the outset a realistic figure for the proportion of Irish property and securities to be included in the scheme. Rather than doing a disservice to the scheme it would be giving it an impetus which a scheme of this nature will require in its early days.
In moving this amendment Senator FitzGerald said it was specifically to give me an opportunity of expressing my views. It is understandable that I would not want the amount—here it says "not exceeding in value 30 per cent of such property"—written into the Bill as such. I do not think this approach with no provision for amendments or alterations, would be the proper one.
As I said during the Second Stage debate, I fully appreciate the need for a unit trust to invest a certain amount outside the country. It is because of this that I provided in the Bill for the determining by the Minister at any given time of the amount which must be invested in the country.
Senator Russell said people from both sides of the House here expressed views which suggested that I should set a reasonably low level in order to encourage this type of small saving as much as possible. Other people in the House suggested a figure of almost 100 per cent. I do not think this is the time to spell out the amount I have in mind, even if I had positively made up my mind as to the amount which should be indicated. My ideas are flexible and this piece of legislation will have to be taken through the Dáil. The amendment, as proposed here, would have to be opposed by me because it would be specifying this 30 per cent as being a fixed proportion. It would not be proper for me to accept that amendment.
Am I to understand that it is proposed merely to introduce a ceiling on the amount that the Minister could require? It could be argued that the amount invested in Irish securities would be fundamental to the whole Bill and it might be proper to introduce a ceiling that would be known within which the Minister would have flexibility in weighing up other considerations. It might be of value if this was written into the Bill rather than unknown and, therefore, subject only to the Minister's power by order to vary it from anything from 0-100 per cent.
My only objection to the amendment is that it is restricted to property. The market in Irish securities is such a limited one that it would be extremely doubtful if any trust could embark in Ireland in a satisfactory way. If a unit trust comes in looking for 200,000 to 300,000 shares in Irish equities, the market would be in a state of chaos before the week was out. Property seemed to be a wise thing to bring in. If you limit the investment in property to 30 per cent you will discourage anyone from starting at all. If it had been 30 per cent of the equities or any company's equities, it might be a different matter. I would be unwise to limit in the Bill the value of property to 30 per cent.
I must immediately confess to seeing a piece of very bad drafting there. Senator Sheldon has drawn my attention to it. I had intended that amendment to take in all the funds in the unit trust scheme and to include Irish securities. "The property concerned" seemed to take in everything in the unit trust. I meant of course Irish securities and property. I must confess to that blunder.
With regard to percentage, I am not very anxious, except that to keep this figure undetermined by the Minister and not known to the legislators is not good for the legislation. We should know what the policy of the administration is in regard to this. There lies behind this Bill a class of attitudes. There are some people who are interested in establishing a unit trust movement which would be successful and want to encourage it, and who have studied how these unit trusts work and have so provided for them. Then there is the negative thinking that, short of exchange control, we will try and hold back as much of the savings of our people that flow out elsewhere and that we will do all we can to prevent such outflow. I am convinced that, short of exchange control, this will not happen. The Irish investors will find out quickly where they will get the best return for their money and that is where they will go. Attempting to fix too high a proportion will prevent investment in Irish trust movements unless they are nonregistered, insurance backed, where they will have the advantage of the confidence of the particular institutions they support by their investments.
There are many financial people who are quite interested in establishing unit trusts here, whose presence here would be helpful to the economy. I am not talking in terms of one or two. There are many more. They regard this Bill as not having a specified proportion; and it is making it impossible for them to establish themselves here, if it goes through without their knowing where they stand with regard to the proportion of investment in Irish securities. This is not because of any lack of confidence. The fact that they want to establish unit trusts here means that they have confidence in the future of the country. Generally, on the question of how you conduct a portfolio investment for a large number of people, you spread it and they have regard to the actual size and the thinness of the Irish stock market. They are not enamoured of fixed interest securities which would be the only thing that they could be sure of realising quickly. If the habits of the Government broker are examined it will be found that this will be done on sale generally at a loss. There is a marking down process which takes place when you actually start selling back to the Government stock that they have issued. This is not very attractive for a unit trust manager who wants to make money, because it is only on the successful performance of his unit trust that he will attract further funds. However, as I have faith in the future of the country and believe in the usefulness of these financial institutions, and more of them, I should like to see a Bill enacted which would be attractive and not putting off. The Minister said —and I understand him—that he does not know what his mind is at the moment as to the proportion that he ought to specify. He ought to try to make it up as soon as possible and let people then decide if it is worth while pursuing their various schemes.
Amendment, by leave, withdrawn.
Could amendment No. 31 be taken with amendment No. 32? Would there be any objection to that course? What I am here proposing in amendment No. 32 is, in effect, to substitute for the estimate by the Minister a different basis for valuation.
An Leas-Chathaoirleach
It is a matter for the House to decide and I think that in that regard the House would like to know the Minister's attitude to the suggestion.
I have no objection.
An Leas-Chathaoirleach
It is agreed to take amendments Nos. 31 and 32 together.
I move amendment No. 31:
In page 10, line 3, to delete ", estimated by the Minister,".
Perhaps the Minister would be able to tell me that under some other section or some other subsection of this section he may make an order which will express the mechanics of this thing and how it will work. He will have unit trusts obliged to invest in Irish securities and Irish property up to a certain percentage—whatever that may be ordered to be. In relation to the property, other than Irish securities, the value is to be determined by the Minister. The accounts are to be made every quarter. What is the procedure whereby the Minister is to be informed of the property to be held at the end of the quarter, so that he can estimate the value of it in time for the unit trust to make its report as to the value at the end of the quarter? What length of time does he require to do that? Does this involve an addition to the Minister's staff who will be asked to do work which could be done by people of reputation in the private sphere who are competent to do this and who are skilled in this matter of valuing? What is the point in having additional civil servants doing what under unit trust schemes operative all over the world is done by people with professional qualification? With a section such as this, clients will be endangering themselves in the most appalling way if they inflate values.
It is to be presumed that there will be changes in the portfolio holdings of property, if not from quarter to quarter, from year to year. It will not be a case of a once-and-for-all value because the valuations will change with inflation, will change with changing tax laws, will change perhaps by different lettings being made, because a lease has passed into its seventh year and the rent has now gone up by £2,000, £5,000 a year, or by whatever it might be, and a different value ought to be made in relation to it. The Minister should tell me where he will spell all this out, how, as a matter of machinery, he will get it done, how, as a matter of machinery, the information will be provided to the unit trusts scheme, so that the unit trusts scheme can comply with that other section whereby every quarter they are required to return the values of the units.
Further, how will the Minister's valuation be made available to deal with the bid and offer price of the units which must constantly be quoted by the unit trusts scheme? Does this mean that not merely in relation to the position at the end of the quarter, but in relation to any valuation of the property which forms part of the unit trust, the Minister has to be consulted, with cost and difficulty for the unit trust, as well as for the Department? In effect this would involve them in the management of all the registered Irish unit trust schemes.
Consequential on the deletion of the words "estimated by the Minister", I put down as an amendment "a method" because it would be easier to see how you value quoted securities. Your broker will tell you that they issue a piece of paper every day telling you what the offered prices were for the different securities and presumably that would be our guide in relation to Irish securities. You get similar information in relation to British securities and most other markets that are recognised. I was not quite satisfied about tying ourselves to the Federation of Stock Exchanges of Great Britain and Ireland, but in so far as the Dublin Stock Exchange forms part of that federation I thought it sensible to do so. That was why I put down amendment No. 32, and at this stage perhaps I should read it because it is intended to take in not merely the quoted securities, but other property, even those cases where the investment is not necessarily a quoted one at all. Very often unit trust managers go into situations ahead of quotations because of the fact they are informed that there will be quotations, and they take shares in unquoted companies. There will be the job of valuing the unquoted security where there is no quotation for that security to be found on any stock exchange.
I should now like to read to the House amendment No. 32, and to see if Senator Sheldon will be able to point out if there are drafting errors in it. It reads as follows:
"value" with reference to an investment at any given time means the value thereof calculated by reference to either the lowest available market dealing offered price or the highest available market dealing bid price (according to the context) at that time quoted on any recognised Stock Exchange being a member of the Federation of Stock Exchanges of Great Britain and Ireland or if not so quoted in the case of securities as quoted or in the case of property other than securities as determined by a competent person firm or corporation in any part of the world for such amount of the investment in question as the managers may consider in the circumstances to provide a fair criterion or if no such price is available such price as may be certified by an approved broker.
That is to save the Minister from having to introduce an increased estimate next year for the number of new people he will have to take into his Department to operate the Unit Trusts Bill. It is well precedented, and if there are defects in the language they are not mine.
I was hoping for a moment that Senator Sheldon would take it up. It must be appreciated that there could be and possibly would be a conflict of opinion on the value of property for the purposes of calculating the proportion to be invested in the State. This is referring to amendment No. 31. The value of securities can usually be ascertained by reference to the prices quoted on the Stock Exchange, and this was instanced by the Senator, but there can be a wide divergence of opinion on the value of a building. The amendment seeks to take from the Minister the right to estimate the value of the property concerned and this is considered unacceptable. The Minister must determine value in a realistic way and must not act in an arbitrary way or capriciously in any shape or form. Having said that, I think the Senator's second amendment attempts to define something which is extremely difficult to define. In fact, it illustrates the difficulty involved.
In my speech on the Second Stage I emphasised that it was not possible in legislation of this kind, where it was necessary to make due allowance for flexibility, to put all the requirements into the Bill. As I saw it, the whole approach to this legislation was that the Bill should provide a framework which would include the essential basic provisions but would leave the details to be settled in the light of experience and, if necessary, by orders made after consultation with the interests concerned. In the normal course, as far as value is concerned, the Minister would be inclined to accept the manager's view on value provided it was reasonable but would have to reserve the right to reject anything unreasonable. On the other hand, the Senator wanted to know how the Minister could determine the reasonable value. I think the flexibility which is here is essential where so many matters of detail are involved. I feel that the question of defining "value" should not be considered at this stage. I would go further and say that, if and when the need arises, the term can be defined in an order under section 8. I do not think that it is wise at the present time to follow the elaborate definition the Senator sets out here. He read out his amendment No. 32, which ends by saying: "if no such price is available such price as may be certified by an approved broker." Here we have the problem of the Minister having to select a broker. He could run into great difficulty.
The reputable manager——
I know what the Senator means but there is a lot of difference between the ordinary term of "approved broker" and the type of broker the Minister would appoint, because if he approved him nobody else might approve him at the same time.
You would not register trusts unless the manager and trustee were bona fide.
That is the point.
Therefore they are selecting proper brokers and valuers. I am told a very good investment at the moment, if any of you have any money to spare, is to buy a plot of land in Johannesburg, towards the centre of it if you can wait there for a sufficient length of time. Will the Minister be sending members of his Department out to Johannesburg to find out what is the value of that plot if an Irish trust invests some money in it?
Peculiarly enough this is where the temptation is to get around to the 100 per cent Irish investment.
It is only an illustration.
I can appreciate that. Here we are endeavouring to try to tie it all, regulate it all in this Bill, but I think the degree of flexibility that would enable me as Minister for Industry and Commerce to make an order specifying what is required in this regard is far better and easier.
Except the Minister is not proposing to do it because he is tying his hand to this paragraph by reference to the value estimated by the Minister. I would withdraw very happily these two amendments if the words "estimated by the Minister" were deleted and the matter were determined by order. When he gets down to the details of this he will find that he will have to take the reputable broker's value of an unquoted company, the reputable valuer's value of property which may be situated anywhere in the world. As this Bill has been designed, it is not likely that non-Irish property will be bought, but some of it could be bought. Then it could be very far away. The obviously sensible thing would be that the Minister would know or cause an inquiry to be made as to who is reputable in Jamaica, the Bahamas or wherever else property is accelerating in value, the south of Spain and so on. May I say that this is really the duty of the trustee to see that the manager gets his property valued and the unquoted securities valued properly by reputable and respectable people and the Minister should take that from them until the day he finds they are no longer reputable and respectable and then cancel the registered unit trust scheme they are operating.
I do not want to wander into a discussion about the civil servants and power and the politicians and very often their lack of power and the public. The general assumption is that everything that is done right is done by the bureaucracy and that nothing can be done right unless the bureaucracy checks it to see that it is right. I think this is a completely wrong philosophy, a completely wrong approach, and adds unnecessarily to the staffs in the Departments of State. If we had a separate motion on that I would go through it with a long list of personnel, not knowing the persons' names, but people who are holding down jobs that are quite unnecessary and costing a lot of money to the country, too, by holding them.
Take the Board of Trade. Does the Board of Trade go in for this nonsense? Of course, it does not. There is no question of the Board of Trade intervening in estimating values of unquoted securities for example. There seems to be some distinction. I may have been incorrect when I said at an earlier stage that the Board of Trade do not approve of any scheme with investments in property. I saw over the weekend, schemes advertising property trusts but they seem to be all life insurance linked property trusts, which meant that they were assured of the liquidity of the insurance company to guarantee the risks involved in owning the property. You will find that the President of the Board of Trade does not seek to take to himself this power which involves an interference that is unnecessary with the operations of these schemes. I do not know how the Minister is going to be in a position constantly to estimate. Say this is a success and you have 20 unit trusts. You will certainly have to have 50 to 100 people employed looking after daily queries as to how their property is to be valued and you will have to have lawyers examining the titles before any valuers will revalue them. As I said, I did not draft my amendment. It was taken firmly out of a leading unit trust, and I found the same repeated in many other unit trust documents. I would accept the alternative quite happily: the Minister taking power to specify by order how this valuation is to be done. I am sure when he gets down to the details of it he will see that running it economically from the State's point of view will be an essential feature of success for the unit trust movement and the operation of the schemes.
The order will have to incorporate independent valuation.
The Minister is limiting himself here. He is putting himself into a statutory position that he should not be in.
Amendment, by leave, withdrawn.
Amendment No. 32 not moved.
Amendments Nos. 33, 34, 35 and 37 are all consequential on amendment No. 36. Therefore, Nos. 33 to 37, inclusive, may be taken together.
Did you say that they may be taken together or that they must be taken together?
They must be.
This will tax my intelligence very considerably.
Government amendment No. 33:
In page 10, line 10, before "carrying" to insert "(other than an arrangement to which this paragraph applies)".
These amendments are all drafting changes designed to tighten up the working of subsection (8) (3) (c) by enabling me to determine what proportion of investment in the unit trust should be deemed to be investment in the State. As it stood the shares of a foreign company could be deemed to be Irish securities if issued in the State. This was a point raised by Senator FitzGerald on Committee Stage.
I am obliged to the Minister but I would like if he did not sit down. Paragraph (c) says:
Where securities are held under any trust created under a registered trust scheme—
(i) in case any of the securities are shares or debentures ... of a body corporate carrying on a business the whole of which is, in the opinion of the Minister, carried on in the State, the whole of those securities,
Now you say in this amendment:
other than an arrangement to which this paragraph applies.
Where is the arrangement to which this paragraph applies which excepts such a case?
It is in amendment No. 37.
An arrangement is defined for the purposes of this paragraph as:
any arrangement made for the purpose, or having the effect, of providing facilities for the participation by the public in profits or income arising from the acquisition, holding, management or disposal of securities or any other property whatsoever.
It is proposed to write in these words to exclude any arrangement whereby people would subscribe for money to acquire, hold, manage or dispose of securities or other property. Any such arrangement would be excluded as being not Irish under the proposed amendment in line 10.
Where there is an investment by a unit trust in another unit trust, to determine what proportion of it is Irish.
If you had a company carrying on business which the Minister thought was wholly being carried on in the State, the whole of these securities would be taken as Irish other than investments which resulted from special arrangements made by the company in question whereby money was subscirbed by the public to be invested in other unit trust schemes that might not be subject to this Bill. If a company doing such business as buying or selling leather want to expand their powers to engage in managing and holding securities or investing in property, provided they can get a requisite number of their members to agree to the proposition and there is no objection which is supported by the court, they can do that. If they issue securities to the public in response to this, telling the public what this money is to be used for, and they then proceed to invest the moneys in buying securities, investing in investment trust companies or investing in unit trusts, are all such investments then excluded even if some of them are Irish? Surely this would not be right? There are mixed companies which, as we know, do not issue to the public. One knows of private companies that are vastly liquid and have large amounts of money which they invest in securities as well as the money which they use in their businesses. A situation can be seen in which a progressive company would say: "We would like to diversify and engage in a marriage with the merchant bank and have an investment trust operation." Would the Minister's exclusion not have the effect that he could not count as Irish investments that were made in Irish unit trusts to the extent that he could form the view that they were to a proportion Irish, represented by the underlying assets, and that it would exclude also investments in investment trust companies or in any investment, some of which might be Irish?
I will accept as consequential amendments Nos. 33 and 34 if amendment No. 37 effectively achieves what it is designed to achieve and then should be supported. I do not know if a section of the Bill can be recommitted at this Stage. It is very hard to debate this series of amendments on the basis of one speech by one person and then a reply, because I am simply trying to ascertain the meaning. I think that the effect of this exclusion of arrangement where it is provided does not meet the point which I made at all. I will, in a cold-blooded way, make the point to the Minister that I think Irish securities could be securities which are issued here but not necessarily issued by an Irish body corporate.
Further, according to our law, bearer securities issued by companies in Vietnam, Spain or Liechtenstein, Luxembourg or any of these companies that are used for tax saving purposes could be brought to Dublin and put in the vaults of a bank and by their location in Dublin be classed as Irish securities for the purposes of this section. I do not think the exclusion from the determination of what is the proportion of securities which are shares in a business wholly or partly carried on under paragraph (c) (i) and (ii) are helped, that either of these means are stopped. The effect of the proposed amendment No. 37 is to stop things that cannot be undesirable because they would have the effect of a wholly owned Irish company raising funds for the purposes of investment in other wholly-owned Irish companies, for example, or partial in such to bring them in under paragraph (c) (ii).
With regard to what the Minister is trying to do in amendment No. 36, I am afraid that I will have to crave the indulgence of the House to re-read it in the context of the analysis I have made following on what the Minister said. I must confess that, although I tried to do so, I could not make an analysis that satisfied myself in regard to these until I heard the Minister speak. Lines 22 and 24 go, that is the present subparagraph (iii). Now, we have another category which will be deemed to be Irish securities. That category will consist of securities or interests, described whether as units or otherwise, acquired under an arrangement to which this paragraph applies. Which paragraph applies? There is no exclusion from the arrangement. This amendment states what happens to what is excluded by the proposed amendments Nos. 33 and 34. Subparagraph (iii) states:
(iii) in case any of the securities are rights or interests (described whether as units or otherwise) acquired under an arrangement to which this paragraph applies, such proportion of the rights or interests as is equal to the proportion of the property for the time being the subject of the arrangement that—
(I) is, or if the arrangement is not a registered unit trust scheme, would be, but for that fact, deemed, for the purposes of this section, to be, Irish securities, or
(II) is other property in the State;
The arrangement is not for investing in a unit trust scheme but is one which would be deemed to be Irish securities but for that fact. What does that mean? I am in the dark. I do not know what is meant by "other property in the State;". If it is not a unit trust scheme, that is to say, the money is got under an arrangement which is not a registered unit trust scheme, but is got under an issue of shares or something of that kind it is then an Irish security; or other properties paid for and taken in under this arrangement and subject to the provisions of the arrangement. We should take an afternoon off to think about this.
The general intention seems to be to take in, as Irish securities, money which is put in pursuant to this arrangement under some deeming that the arrangement, although not a registered unit trust scheme, represents Irish securities.
Debate adjourned.