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Investor Compensation Company Limited

Dáil Éireann Debate, Tuesday - 15 January 2019

Tuesday, 15 January 2019

Ceisteanna (213, 215, 216)

Michael McGrath

Ceist:

213. Deputy Michael McGrath asked the Minister for Finance if the Central Bank makes it compulsory as part of its licensing requirements for investment firms and pension providers to be part of the investor compensation scheme; the number of investment firms or pension providers that are operating here which are not part of the scheme; if they are part of a compensation scheme in other jurisdictions; and if he will make a statement on the matter. [1171/19]

Amharc ar fhreagra

Michael McGrath

Ceist:

215. Deputy Michael McGrath asked the Minister for Finance if auto enrolment were to be implemented under the Strawman proposal, if these pensions would be covered by the investor compensation scheme if one of the operators of the scheme fails; if not, the compensation scheme which will be available for customers in such an instance in which a pension provider fails; and if he will make a statement on the matter. [1173/19]

Amharc ar fhreagra

Michael McGrath

Ceist:

216. Deputy Michael McGrath asked the Minister for Finance the types of pensions covered by the investor compensation scheme; if it is just personal retirement savings accounts and approved retirement funds; the compensation scheme available if a pension provider fails and the pension fund is an occupational pension fund; and if he will make a statement on the matter. [1174/19]

Amharc ar fhreagra

Freagraí scríofa

I propose to take Questions Nos. 213, 215 and 216 together.

The Investor Compensation Company DAC (ICCL) is an independent body set up in accordance with the Investor Compensation Act, 1998 (the Act). The ICCL is Ireland’s statutory ‘fund of last resort’ for customers of authorised investment firms.

I am informed by the Central Bank that membership of the investor compensation scheme is mandatory for the following categories of authorised investment firms as defined in the Act:

- MiFID investment firms;

- Investment business firms authorised in accordance with the Investment Intermediaries Act, 1995;

- Credit Institutions licenced in accordance with section 9 of the Central Bank Act of 1971;

- Insurance intermediaries;

- UCITS Management Company authorised to provide Individual Portfolio Management services;

- AIF Management Company authorised to provide Individual Portfolio Management services.

There are currently 3,410 authorised investment firms that are in scope for the purposes of the Act.

The coverage of the ICCL is set out in the Act. The Act prescribes that the ICCL shall pay compensation to clients of the aforementioned categories of investment firms (“compensation obligation”). The compensation obligation of the ICCL is restricted to “eligible clients”, in essence clients, that are not defined in the Act as excluded investors, such as professional and institutional investors, including among others a pension or retirement fund.

In respect of eligible clients’ investments, the compensation obligation relates to eligible client money held, and, eligible client investment instruments held, administered and managed in connection with the provision of certain investment services, that the failed investment firm is unable to return to the eligible investor in accordance with legal and contractual conditions applicable. The compensation obligation is limited to 90% of the eligible investors’ net loss, subject to a maximum compensatable payment of €20,000 per eligible investor.

The investment instruments that are eligible for compensation under the Act are set out in section 2 of the Investment Intermediaries Act, 1995 (IIA) and Schedule 1 Part 3 of the European Union (Markets in Financial Instruments) Regulations 2017 (MiFID).

It is apparent from the investment instruments referred to in section 2 of the IIA that Personal Retirement Savings Accounts are listed and therefore in-scope, subject to all other elements of the compensation obligation being satisfied in accordance with the Act.

An Approved Retirement Fund is not a defined investment instrument within the scope of the Act and the compensation obligation, if any, would need to be considered, on a case-by-case basis, by an Administrator appointed in accordance with the provisions of the Act to validate claims received from clients of the relevant failed firm.

Occupational pension policy is a matter for the Department of Employment Affairs and Social Protection (DEASP) and is underpinned by the Pensions Act 1990 (PA). I am advised by DEASP that the PA provides certain protections to members of an occupational pension scheme in the event of the insolvency of their employer.

Specifically S48A of the PA provides a liability in law for the Minister for Finance to make payments of certain certified amounts to the trustees of an occupational pension scheme where the resources of the scheme are not sufficient to discharge liabilities in relation to certain benefits. In order to be eligible for such a payment, there must be a double insolvency of both the employer and the pension scheme.

Section 48A operates in the event of the wind up of a pension scheme, where both the employer and the scheme are insolvent at the date of wind up, and the scheme has insufficient funds to meet the liabilities of a scheme in respect of benefits referred to in S48(1AB) paragraphs (b), (c), and (d) of the PA, the Minister for Finance will provide monies from the Exchequer to fund the shortfall. The shortfall being 50% of the benefits, and where the annual amount is €12,000 or less, 100% of the benefits.

Regarding the proposed implementation of an Auto-Enrolment scheme, my colleague the Minister for Employment Affairs and Social Protection has primary responsibility in this area. However, I have been informed that the detailed evidence building and consultation required to deliver an automatic enrolment system is now being undertaken over an initial project planning phase. This will include an investigation of the potential organisational models for delivery and the likely costs involved.

Until this work is complete and a preferred model chosen, it would not be possible to confirm the specific operational structure and design characteristics of automatic enrolment.

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