Dáil Éireann - Volume 445 - 13 October, 1994

Stock Exchange Bill, 1994: Second Stage.

Minister of State at the Department of Finance (Ms E. Fitzgerald): I move: “That the Bill be now read a Second Time.”

The purpose of this Bill is to promote confidence among people investing in Irish companies. The Central Bank will be given a role in monitoring and supervising the operation of the Irish Stock Exchange and any future stock exchanges. The Central Bank will be given powers not only to approve rules, a power which is held already by the Minister for Finance, but power to initiate changes in the rules of stock exchanges. Reports of disciplinary proceedings by the Stock Exchange will be passed to the Minister for Finance and the Minister for Enterprise and Employment and they can be published if they deem it appropriate. The board of the Exchange will be more broadly based with representation on it by Exchange members, users of the Exchange and sufficient independent members to promote the public interest and protection of investors.

The Bill before the House today is the first major legislation relating to the Stock Exchange in almost 200 years. It establishes the Central Bank as the regulatory authority for the Irish Stock Exchange and for any future stock exchanges that may be established here, also for the member firms of exchanges regulated under the Bill. The Bill also meets obligations under the European Union Investment Services and capital adequacy directives in respect of Stock Exchange member firms. It does not deal with futures and options exchanges such as IFOX and FINEX: these are already regulated by the Central Bank under the Central Bank Act, 1989.

[1852] The existing basic legislation on the Stock Exchange, the Stock Exchange (Dublin) Act, was enacted by the old Irish Parliament in 1799; this is being repealed and we all agree it is about time it was done. The present Bill replaces it with an entirely new supervisory system, under which the Central Bank as the supervisory authority will have substantial powers concerning both the initial authorisation of stock exchanges and member firms and their ongoing supervision.

I mentioned that this Bill replaces the Stock Exchange (Dublin) Act, 1799. It would be proper to recall briefly for the House the circumstances of the passing of that Act by the old Irish Parliament. The Act was passed in the year between two landmark events in Irish history, the Rebellion of 1798 and the Act of Union of 1800.

The 1799 Act was introduced in April of that year by the Chancellor of the Irish Exchequer, Isaac Corry, and by John Claudius Beresford, who, though without formal office, organised House of Commons business on behalf of the Government. Beresford was a property developer who laid out large parts of the north side of Dublin and was prominent in attracting James Gandon to Ireland as architect for the Custom House.

Opposition Deputies will no doubt be encouraged to hear that the 1799 Bill was amended on its second reading and reintroduced in late April with Beresford and Sir William Newcomen, the founder of Newcomen's Bank, as sponsors. It received the Royal Assent in June 1799. The newly-established Stock Exchange began to operate in September 1799 and moved to the Commercial Buildings in Dame Street in November 1799. This was an appropriate move in the context of the Bill now before the House, because the site of the Commercial Buildings is now occupied by the Central Bank. Later, of course, the Stock Exchange moved to Anglesea Street, where it has operated for over 100 years.

The old Irish Parliament, no more [1853] than this Parliament, was noted for its characters. Time permits mention only of two: Boyle Roche, who wondered why we should do anything for posterity, since posterity has done nothing for us, and Henry Grattan, a man whose reputation was so high that the Irish Parliament from 1782 to the Union is dignified by his name. It was said of him after his death that he thought only of Ireland and lived for no other object; it seems a pity to have to record that Isaac Corry, the Chancellor of the Exchequer who introduced the 1799 Act, fought a duel with Henry Grattan in 1800 after they had exchanged acrimonious words in Parliament. I trust there will be no such recurrence between myself and Deputy Yates during this debate.

Mr. Yates: The Minister of State cannot be sure of that after the talk about Harry Whelehan last week.

Ms E. Fitzgerald: As a socialist I am in a peculiar position introducing legislation on the Stock Exchange.

Since I mentioned the long interval since the existing stock exchange legislation was passed, I take this opportunity to pay tribute to the various stock exchanges and their member firms which have operated in Ireland, and most particularly to the Dublin Stock Exchange which has survived through the decades, now known as the Irish Stock Exchange. It is no secret that the Minister for Finance, Deputy Ahern, has not always seen eye to eye with the exchange, but its long record of achievement must, nevertheless, be acknowledged. The Stock Exchange has generated capital for industry and helped to meet the funding requirements of Governments down through the years. The Stock Exchange and its members could not have survived through nearly two centuries without a considerable capacity to adapt to changing circumstances while meeting the fundamental requirement of maintaining investor confidence in their operations.

Nevertheless, the passage of time [1854] since 1799, especially in the area of financial markets, means that an entirely new regulatory environment is now necessary for the Stock Exchange and member firms. The 1799 Act is no longer adequate for modern conditions. The scale and complexity of events in 1799 bears no comparison to those of 1994. To take one example, when the Act of Union came into effect in 1801, the funded public debt of Ireland stood at just less than £27 million; it is a little higher than that today.

In the last decade, in particular, the whole financial services sector has been subject to revolutionary change. Deregulation, the removal of exchange controls and rapid technological advance have been to the forefront in this revolution. Technology in particular has had a dramatic impact on the sector and it has facilitated the development of new and complex financial products. Where would RTE be if it could not broadcast pictures of fellows in shirt-sleeves sitting in front of computer screens — a graphic of the modern financial sector? Within the European Union a new single market for financial services is being established. The financial sector now operates on a global basis using instant communications. Financial supervision standards are being intensified. In these circumstances, the need for new legislation to replace an Act nearly 200 years old is abundantly clear.

The new legislation also reflects the passage of two European Union directives. The Investment Services Directive, which must be provided for in national legislation by 1 July 1995 and will apply fully from 31 December 1995, requires member states to ensure a common standard of regulation for investment firms and to take steps in relation to supervision of regulated markets, including stock exchanges. The related Capital Adequacy Directive sets out the levels of capital which investment firms must have in relation to their business. Legislation to implement these directives in respect of other [1855] investment intermediaries is being prepared and it will be introduced in the House in due course. In the meantime, the Bill will meet our obligations in respect of stock exchange member firms arising under these two directives.

The Investment Services Directive is based on EU-wide recognition of authorities granted by the home member state and on the principle of prudential surveillance by the competent authorities in the home member state in accordance with that member state's rules. Investment firms which are authorised in one member state will, by virtue of that authorisation, be able to operate as investment firms in another member state. This has been made possible by the fact that prudential standards will be sufficiently harmonised. The directive incorporates parallel measures to those contained in the first and second Banking Directives, namely conditions for granting authorisation to investment firms, vetting of main shareholders and provision for close collaboration among the supervisory authorities in the member states.

Irish law needs to be updated to meet the requirements of the Investment Services Directive. At present, the Irish Stock Exchange — which is the product of the amalgamation of the Dublin Exchange with certain provincial exchanges which existed in Ireland until comparatively recent times — is supervised as part of the International Stock Exchange of the United Kingdom and the Republic of Ireland Limited. This supervision is carried out under the rules of that exchange and also under local rules which apply to the Irish unit only and are agreed by the Minister for Finance. While the Minister approves rule changes proposed by the Irish Stock Exchange, he has no right to initiate rule changes which he might consider desirable. Otherwise the main requirement of the Stock Exchange (Dublin) Act, 1799, is that individuals selling gilts on commission have a licence to do so; in more modern times the licence requirement is met where a [1856] stockbroking firm employs a person who holds a gilt licence. While I emphasise the high level of supervisory standards here, it is clear that the legislative arrangements I have outlined need substantial revision in order to conform with the Investment Services Directive. So much for the background of the Bill.

I wish to refer briefly to the issue of insider trading. Insider dealing is a matter for general company law, not for a Bill about stock exchange regulation, and, as Deputies will be aware, provisions to cover insider dealing are contained in the Companies Act, 1990. I understand that the Company Law Review Group, under the aegis of the Department of Enterprise and Employment, is currently examining certain aspects of company law and that insider dealing is included in that examination.

On the principles on which the Bill is based, I would single out four for particular mention. The first is that the Government decided that the Central Bank should be the new regulatory authority for the Irish Stock Exchange and its member firms. This decision is both logical and practical. The bank already has considerable expertise in the area of regulation. It is the regulatory authority for all Irish licensed banking institutions and its remit has been extended to the building societies in recent years. In addition, the Central Bank Act, 1989 gave the bank supervisory responsibility for exchanges concerned with the selling of futures and options, such as the IFOX and now the FINEX exchanges. The bank also plays an important role in the regulation of financial-service activity conducted from the highly successful International Financial Services Centre.

In introducing the Bill, therefore, I am building on a significant body of national law on the regulation of financial institutions and exchanges. The bank has the expertise, the competence and the track record to supervise stock exchanges and their member firms. In addition, the personnel of the bank have been actively preparing for their new [1857] role and have made a substantial contribution to the preparation of this Bill.

The second principle I want to highlight is that, because this area is of major interest to the public, I am providing a significant role for Ministers. It is appropriate that, where necessary, the Ministers who have responsibility in this area should be able to set parameters within which the bank would operate. The Minister for Finance has a very direct involvement in the financial services sector; the Minister for Enterprise and Employment has responsibility for company law issues and has, of course, a particular interest in the access of Irish firms to capital. Accordingly, section 28 provides that the Central Bank may be given guidelines by the Minister for Finance with the consent of the Minister for Enterprise and Employment, to assist the bank in administering the system of regulation. Such guidelines will only be issued where there is a perceived need to issue them in the public interest, but I am sure the House will agree it is proper that Ministers should have a role in this area. Other sections of the Bill also provide a role for the two Ministers and I will refer to these when I am discussing the details.

I should, however, emphasise that, apart from some relatively minor modification there will be no change in the existing responsibilities of my colleague, the Minister for Enterprise and Employment, in company law matters, on issues relating to corporate governance or in matters delegated to the Irish Stock Exchange concerning listing or other procedures set down in recent Acts or regulations.

The third principle is that the fundamental objective has been to ensure that the Bill provides the necessary measures without being excessive. The new legislation is designed to ensure that the Irish Stock Exchange will be regulated to the highest standards, but like stock exchanges all over the world it must be able to function with maximum efficiency in an increasingly complex environment. Accordingly, the Bill does not supersede the highly [1858] developed supervision system which the Exchange already operates to ensure market surveillance. It, however, gives the Central Bank all the necessary powers to monitor and supervise the Exchange's surveillance of the operations of its member firms and to lay down conditions and requirements which the Exchange and its member firms must meet. Effectively, there is a strong element of self regulation here with the Central Bank overseeing the self regulation.

The fourth principle, connected with the third is that stock exchanges must be more open to the concerns of users and the public than has been the case up to now. Accordingly, the Bill provides that the board of directors of an exchange will have to be broadly based and the composition of the board will have to strike a balance between the interests of the member firms and users of the exchange, and the public interest. Furthermore, the board will have to include enough independent members to promote the protection of investors and the maintenance of proper standards of conduct and practice. It is particularly important, as the Irish Stock Exchange de-couples from the London Stock Exchange that we have that protection available for members of the public and we establish and maintain confidence among people investing in companies in the Irish economy.

On the provisions, I emphasise that I do not propose to comment on each and every section, but rather to highlight for Deputies the main features of each Part of the Bill.

The Bill is divided into seven Parts. The first deals with general matters, while Parts II and III deal respectively with the approval of stock exchanges and the authorisation of member firms. These two Parts naturally contain many similar provisions. Part IV contains detailed regulatory provisions governing stock exchanges and members firms. Part V concerns the duties of auditors, while Part VI deals mainly with large transactions in holdings of stock exchanges and member firms, with [1859] codes of conduct and with requirements relating to client moneys. Part VII covers enforcement, offences and penalties.

Part I contains standard general provisions about such matters as short title, commencement, repeals and expenses. In particular, section 2 empowers the Minister for Finance to appoint a day or days for the enforcement of the Bill or portions of it: this will enable its coming into effect to be synchronised with the separation of the Irish Stock Exchange from the London-based Stock Exchange of which it is now a part. I expect this to happen in spring next year.

Section 3 sets out the definitions in the Bill. The term used for stockbrokers is “member firm” and subsection (4) ensures that that term can include a partnership. The definition of “investment instruments” goes beyond the range of instruments normally traded on the Stock Exchange because the legislation is intended to cover all the investment activities of stockbrokers, who may well deal in unit trusts and other forms of investment. The definition of a stock exchange excludes futures and options exchanges, which are regulated under the Central Bank Act, 1989.

Part II deals with the approval and continuing supervision of stock exchanges. Section 8 makes it an offence to establish or operate a stock exchange which has not been approved by the Central Bank. Section 9 sets out the detailed requirements relating to approval. These include satisfying the bank that the memorandum and articles of association and the rules of the proposed exchange are satisfactory and that the directors, managers and qualifying shareholders are suitable persons.

I would draw attention to a number of aspects of the approval of an exchange. An exchange will be obliged to establish and maintain procedures to investigate complaints against both itself and its member firms. In addition, the board of an exchange will have to be broadly based and be so composed [1860] as to secure a balance between the interests of the different member firms and users of the stock exchange, and the public interest. It will be a matter for the Central Bank to satisfy itself that the board of the exchange has the required balance between members and non-members.

I would also draw attention to the fact that the rules of a stock exchange must require a report to be drawn up on any disciplinary proceedings conducted by the exchange and that report must be sent to the Minister for Finance and the Minister for Enterprise and Employment if the Minister for Finance, with the consent of his colleague, asks to see it. The Minister for Finance will be entitled to lay such a report before both Houses of the Oireachtas if he and the Minister for Enterprise and Employment think it proper to do so having due regard to the exigencies of the common good and the rights of any person referred to in the report. There is general agreement among Deputies on the need for greater transparency in the way stock exchanges are run and in their disciplinary proceedings; the provisions included will ensure transparency, while allowing the Exchange to continue to regulate its affairs on a dayto-day basis under the overall supervision of the bank.

The Bill provides that the Irish Stock Exchange will be deemed to be approved and will continue to operate, under the supervision of the Central Bank, during the interim period while it is seeking approval from the bank under this Bill. Any changes to the memorandum and articles of association of an exchange or to its rules will have to be approved by the Central Bank and the bank will be able to require such changes. Where the bank refuses to approve a stock exchange or to approve changes to its rules or memorandum and articles of association, the exchange will be entitled to appeal that decision to the Minister for Finance, who, with the consent of the Minister for Enterprise and Employment, may grant the appeal.

[1861] The Central Bank may make its approval of exchanges subject to conditions either at the time of approval or afterwards. Such conditions must not contravene guidelines which may be issued by the Minister for Finance with the agreement of the Minister for Enterprise and Employment. The exchange concerned will have the right to appeal a requirement or condition to the High Court.

Section 14 sets out the circumstances in which the bank may revoke the approval of a stock exchange. This will normally involve an application to the High Court for an order revoking approval.

Section 15 obliges an approved stock exchange to maintain such books and records for such length of time as the bank may specify: failure to comply with this obligation will be an offence.

Part III of the Bill opens with section 16. This makes the Central Bank the competent authority in this State in respect of member firms for the purposes of the Investment Services and Capital Adequacy Directives. The bank will be responsible for supervising all the investment activities of member firms, not just their stock exchange activities.

The rest of Part III deals with the authorisation and regulation of member firms. Section 17 makes it an offence to be a member firm of an approved stock exchange unless authorised by the Central Bank or by a competent authority in another member state. Firms wishing to become authorised must apply to the bank. The existing member firms of the Irish Stock Exchange will be able to continue to operate but will of course have to apply for authorisation to the Central Bank; they will stand approved, and be subject to Central Bank regulation, while the authorisation process is going on. Like stock exchange approval, this process will include satisfying the bank as to the probity and competence of each of the managers and directors and the suitability of the larger shareholders.

Any changes to the memorandum [1862] and articles of association of a member firm will have to be approved by the Central Bank and the bank itself will be able to require such changes. Where the bank refuses to authorise a member firm or to approve a change a member firm wishes to make in its memorandum or articles of association, the member firm will have the right to appeal the bank's decision to the High Court.

Section 22 enables the bank to make its authorisation of a member firm subject to conditions, either at the time of approval or afterwards. Such conditions must not contravene guidelines issued by the Minister for Finance with the agreement of the Minister for Enterprise and Employment. A member firm will have the right to appeal to the court against the imposition of any condition. Section 24 sets out the circumstances in which the authorisation of a member firm can be revoked; as with exchanges, this will normally involve an application to the court for an order revoking the authorisation.

Other provisions of Part III empower the bank to set out requirements as to the composition of a member firm's assets and liabilities so as to ensure the firm can meet its liabilities, and to require an authorised member firm wishing to establish a branch in another EU member state to give details of the proposed branch to the bank. The bank may permit or prevent establishment of the branch; if the latter, the member firm concerned may appeal the bank's decision to the High Court. Finally, section 27 obliges a member firm to keep books and records: failure to do so will be an offence.

Part IV of the Bill deals with regulation and supervision. Section 28 lays a general obligation on the bank to administer the system of regulation of approved stock exchanges and authorised member firms in accordance with the Bill in order to promote the proper and orderly regulation of such exchanges and member firms and the protection of investors. As I mentioned earlier, the bank must carry out this function subject to any guidelines which [1863] may be issued to it by the Minister for Finance with the consent of the Minister for Enterprise and Employment.

Section 29 empowers the bank to give directions to stock exchanges and member firms, both generally in the interests of proper regulation or investor protection and more specifically where it becomes apparent that a member firm is getting into difficulties. The bank will be entitled to apply to the High Court for an order confirming a direction where it believes that the direction is not being complied with. Detailed provisions relating to directions are included in the First Schedule to the Bill.

Sections 31 and 32 relate to advertising by stock exchange and member firms and give the bank power to impose conditions and requirements relating to advertisements. An agreement made as a result of an advertisement which contravenes conditions or requirements will be unenforceable unless the advertisement did not have a bearing on the agreement. Both the bank and the Minister for Finance may require a stock exchange or member firm to display specified information on their premises.

Part V of the Bill places significant obligations on the auditors of stock exchanges and member firms. Auditors are particularly well placed to assess what is going on in a firm and the Bill requires auditors to inform the bank of any material irregularity which emerges in the course of their auditing work, including anything which would give reason to believe that a member firm has breached stock exchange rules, that it has contravened any condition or requirement imposed by the bank or that it has bogus hauliers on its books. An auditor who intends to resign or not to seek re-election as auditor must report that fact to the bank. It will be an offence to mislead, deceive or refuse to co-operate with an auditor.

Part VI of the Bill opens with a provision which also deals with auditors. Section 36 enables the bank to appoint [1864] a second auditor where it has a substantial concern about the audited accounts of an approved stock exchange or member firm. This will allow the bank to carry out further investigation of matters which arise in the course of the first audit.

Section 37 contains provisions relating to disqualification from employment. Where, on application by the bank, the High Court finds that a person is not suitable on grounds of probity to be an officer or employee of a stock exchange or member firm, it may direct the employer to dismiss that person. Where the court finds that a person is incompetent, it may direct that the person concerned be removed from a particular position, suspended or dismissed. A person who is the subject of such a direction may not be employed by a stock exchange or member firm, or by any other entity supervised by the bank, without the bank's consent. A person who accepts employment in contravention of a direction will be guilty of an offence.

These are substantial powers but it is important to ensure that persons who are entrusted with the safekeeping and prudent management of the funds of others are above reproach. Deputies will also observe that a direction in respect of any such person will be for the courts to decide, and that the person concerned may apply to the courts at any time for the direction to be revoked and may appeal to the court against any refusal by the bank to consent to their re-employment.

Section 38 sets out the broad parameters for the codes of conduct which will govern how member firms do business with their clients. This will normally be a matter for the rules of an exchange, but there is provision for the bank to draw up a code of conduct if an exchange does not draw up and maintain its own rules of conduct. Stock exchange rules of conduct must of course meet the parameters laid down in the section as regards fair and honest dealing, acting with due care and diligence and making adequate disclosure [1865] of relevant information to clients. The bank will be responsible for supervising compliance with rules of conduct by member firms operating here which have been authorised in another member state.

Sections 39 to 49 deal with acquiring transactions, that is to say major changes in the ownership or control of exchanges and their member firms. The purpose of these provisions is to enable the bank to prevent undue or excessive influence being gained over a stock exchange or member firm unless the bank is satisfied that that influence will not be harmful. Section 51 provides that a member firm must inform a client of the details of any investor compensation scheme. The Irish Stock Exchange already operates a compensation scheme but I am not making specific provision in this Bill for compensation because the Investor Compensation Directive is still being discussed at EU level. Assuming the directive will have been finalised in time, however, I would propose to include whatever measures it requires, in relation both to stock exchange member firms and to other investment intermediaries, in investment intermediary legislation which is being prepared under the aegis of my Department at present.

Section 52 sets out rules for the segregation of client funds and investment instruments. It will be an offence not to comply with the provisions of this section.

Section 53 provides a warranty against liability for the Central Bank and the Stock Exchange in the exercise of their functions under this Bill. The last section in Part VI relates to failed stock exchanges and member firms which did not comply with the obligations in the Bill to maintain proper books and records and safeguard clients' funds. Where the High Court considers that such non-compliance contributed to the failure, it may declare an officer of the stock exchange or member firm personally liable for all or part of the failed entity's debts. Similar provisions exist in company law and in [1866] the Building Societies Act, 1989, and I am sure Deputies will agree they are appropriate here, too.

Part VII of the Bill sets out the powers of authorised officers of the Central Bank, bank-appointed inspectors and inspectors appointed by the High Court. Authorised officers of the Central Bank will be empowered to enter premises to inspect documents and require explanations of such documents. If a person refuses to comply with a request from an authorised officer, the court can be asked to make an order as to the information to be provided. Similar provisions are included in the Insurance Act, 1989, in relation to officers authorised by the Minister for Enterprise and Employment; an authorised officer under this Bill will in addition be entitled to request a report on aspects of the business of an exchange or member firm.

Sections 57 to 63 provide for the High Court, on the application of the bank, to appoint an inspector to investigate the affairs of a stock exchange or member firm. In addition to having powers similar to those of an authorised officer, an inspector appointed by the court will be able to examine people on oath. The High Court may publish, with or without omissions, the report of an inspector appointed by it. A court inspector's report will be sent in full to the Ministers for Finance and Enterprise and Employment, who may decide to lay it before the Houses of the Oireachtas.

Section 64 provides for the appointment of an inspector by the bank to investigate particular matters relating to an exchange or member firm, including their compliance with any requirements of this or any other Act or with stock exchange rules or codes of conduct. The bank may publish, in whole or in part, the report of an inspector appointed by it, and must forward any such report in full to the Ministers for Finance and Enterprise and Employment, who again may decide to lay it before the Oireachtas.

Section 65 enables the bank to set up a committee to determine whether [1867] there has been a breach by a stock exchange or member firm of bank conditions or requirements. Such a committee will have three members, drawn from a panel of seven to be nominated by the Minister for Finance with the consent of the Minister for Enterprise and Employment. If it finds there has been a breach, the committee may issue a reprimand or require payment of up to £500,000 by the exchange or member firm concerned to the bank. It should be noted that this mechanism will only apply where the exchange or member firm agrees, and an exchange or member firm may appeal the determination of a committee to the court. Where an exchange or member firm does not want the matter settled by a committee, the bank may apply to the court to make a determination, and the court may issue a reprimand or require payment of up to £500,000 to the bank by the exchange or member firm concerned. Detailed provisions relating to committees appointed under section 65 are contained in the Second Schedule. Such committees offer a mechanism whereby breaches of bank conditions and requirements can be speedily determined without the expense — on either side — of a High Court hearing.

Sections 66 and 67 provide for an application for a search and seizure warrant by an authorised officer and for the admissibility of an inspector's report as evidence in civil proceedings, while sections 68 and 69 provide for legal professional privilege and for confidentiality of documents. Section 70 sets out the penalties for offences committed under the Act. The maximum penalty will be £1 million or ten years' imprisonment or both.

Before concluding, I would like to say a few words about future developments in the Irish Stock Exchange. As I have mentioned earlier and is already well known, the Irish Stock Exchange will be separating next year from the International Stock Exchange of the United Kingdom and the Republic of Ireland Limited of which it is at present a part.

[1868] However, it is of course not intended that the benefits of the close collaboration that has existed between the two parts of the London-based exchange will be discontinued. Close co-operation existed before the 1973 merger and will continue after separation. A primary objective in the discussions between Dublin and London about separation was to maintain the closest possible links in future for the mutual benefit of both. An agreement has been reached with the UK Securities and Futures Authority — SFA — the self-regulatory organisation responsible for regulating stockbrokers in the UK, to provide continuing advice and technical support to the Irish Stock Exchange in the initial period of separation. In addition, the Irish Stock Exchange, in conjunction with users of the exchange, has commissioned a study of the future needs of the Irish equities market, including the question of whether linking with the planned CREST transaction settlements system which is being proposed in the UK is appropriate. I understand that a final; decision is expected in the next couple of months.

The Irish Stock Exchange will remain the competent authority for stock exchange listing in Ireland and will continue with its responsibilities under the Companies Acts, including those relating to insider trading. The Minister for Enterprise and Employment is considering what arrangements will be necessary to replace the functions at present carried out by the UK Panel on Takeovers and Mergers when the Irish and London exchanges separate.

Finally, I should mention that my Department has of course consulted the Irish Stock Exchange in the preparation of this Bill. I acknowledge the constructive contribution made by the Stock Exchange throughout this process.

This Bill marks a radical departure for the regulation of stock exchanges and their member firms in Ireland. It replaces legislation two centuries old with a modern regulatory framework. It establishes the Central Bank as the regulatory authority, so bringing to bear [1869] the bank's wide experience of regulating banks, building societies and futures and options exchanges. It provides a significant role for the two Ministers closely involved with the Stock Exchange, so ensuring that the legitimate concerns of the Oireachtas can find expression in the regulatory process as the need arises and as the public interest requires. It enables the Stock Exchange to continue market surveillance, but under the overall supervision of the Central Bank, which will be equipped with all the necessary powers for carrying out its functions. It meets obligations in respect of stock exchange member firms arising from the European Union Investment Services and Capital Adequacy directives. It ensures that the Stock Exchange will be more open and transparent in the conduct of its business than has been the case up to now and that its board of directors will be representative of the users of the exchange and the public interest as well as of its members.

The Bill will enable the Exchange to continue to carry out its business in the most efficient way possible in an increasingly complex environment, while at the same time providing investors with the fullest confidence that the exchange is regulated to the highest standards. This combination of freedom to transact business efficiently with high regulatory standards is vital to the survival and development of the Stock Exchange and its member firms. I believe the Bill provides this combination and I am sure it will enable the Stock Exchange and its members to face the future with greatly increased confidence.

There has been much criticism of the areas of investment and capital availability for Irish companies. It is said that people have relied to too great an extent on debt financing and that there has not been a sufficiently active market in equity financing for those companies. I hope that with our independent Stock Exchange, operating under the highest standards of regulation, we will see an expansion in risk and equity investment [1870] in Irish business and enterprise and that this Bill will prove a springboard for the creation and growth of Irish business and jobs.

I commend the Bill to the House and look forward to hearing the contributions of Members.

Mr. Yates: This is important legislation which deals with law nearly 200 years old. It is a lengthy and complex Bill comprising 70 sections dealing mainly with technical enabling powers for the establishment of the new Stock Exchange and its regulation by the Central Bank.

Fine Gael accepts the obligation to break the link between the Dublin and London Stock Exchanges as a result of European financial directives. We broadly support the provisions of this Bill and we will not oppose it on Second Stage. However, we believe improvements could be made to it. Our objective in dealing with this Bill is to ensure that the new structures and Stock Exchange must facilitate the maximum development of the Irish Stock Exchange as a vehicle for providing capital to indigenous industry. The best means of doing so is to ensure that we have the highest and most transparent standards of stockbroking activity that will give the maximum level of information and protection to ordinary investors.

I was concerned about the delays in introducing this legislation. The Minister should give a specific date for when it is anticipated that this legislation will come into effect and when the new Dublin Stock Exchange will be established. My reservations about the Bill relate to its omissions and the Minister alluded to some of them. We believe that everything necessary to provide the highest standards of protection to ordinary investors should have been included in this Bill and should be the responsibility of one Minister and one Department. Often when, on a wing and a prayer, it is promised that other legislation will follow it can be many years before it sees the light of day.

[1871] The first serious omission from this Bill is insider dealing — it is ignored. It is accepted that the Companies Act, 1990, is inadequate and defective for dealing with insider trading. I can give an example of such trading. It relates to events outside this jurisdiction but which are in the public domain. They have been the subject of a Department of Trade and Industry investigation in the UK, they are celebrated and give people an idea of the problem involved. This example is what is known as the Archer affair involving Lord Archer. I offer it as an example of what people perceive to be insider dealing.

On 13 and 14 January this year Lord Archer brought 25,000 shares each day in Anglia Television where his wife, Mary, is an non-executive director. Curiously, five days after he bought the shares the multinational group MAI, the media corporation, bought Anglia Television. The corporation paid much more than the price of the quoted stock when Lord Archer bought his 50,000 shares. Lord Archer bought the shares for Stg. £1.80 and he sold them five days later for Stg. £6.64.

Are we to believe there has never been insider dealing in this country? I am not simply saying there has been no conviction — there has been no attempted prosecution. This is a notoriously difficult area. Deputy McDowell and Deputy Kemmy, for example, waltz up to the Horseshoe Bar in the Shelbourne Hotel and somebody flicks a beer-mat across to them——

Mr. M. McDowell: I do not think we will waltz together.

Mr. Yates: ——on which is written “Buy Murphy oil at 29 pence”. They take that advice and three days later——

Ms E. Fitzgerald: Not a socialist like Deputy Kemmy.

Mr. Yates: ——a massive oil field in Venezuela is discovered and the 29 [1872] pence looks like exceptional value. Who can ever say that it was insider dealing? Who can prove that the purchaser of the shares was the subject of inside information? There has been notorious difficulty in obtaining hard evidence against people who have access to sensitive and important financial information relating to a company before it becomes public information.

We cannot be complacent that insider dealing has not or does not occur in this country. In fact, the Irish Stock Exchange — without any reference to the integrity of the individuals involved — must be noted for its difference in scale and size. Fewer people are involved because this is a smaller country in which everybody knows everybody. In this country all the principal brokers are owned by banks. Davys is owned by Bank of Ireland, Goodbodys is owned by Allied Irish Banks and it is rumoured that NCB is in the process of being bought by Ulster Bank. The list goes on. In this small financial community there is enormous potential for such Chinese walls to be broken and penetrated. It would not, for example, be unusual for corporate bankers to know the exact details of takeovers, share issues and bad financial news such as the imminent publication of horrendous figures which will greatly affect the accounts. The time to sell and the time to buy can be greatly influenced by the possession of such information.

It is unrealistic and extremely naive of the Minister and the Department of Finance to say this matter has nothing to do with the regulatory authority and nature of this Bill but is rather a matter for the Department of Enterprise and Employment. I have some detailed comments to make about this later. The law is inadequate and should have been strengthened here.

The second serious omission is the lack of provision to compensate investors who experience unacceptable losses. What defines an unacceptable loss? One area would be where fraudulent, incomplete or inaccurate information was given to investors on the [1873] basis of which they invested money in a publicly quoted listed company. The voluntary code which gives a maximum compensation of £16,000 to an investor is unacceptable.

There are celebrated cases in the UK where people from outside the jurisdiction and Europe — Middle Eastern people with expensive passports — come in, set up companies and then mysteriously disappear to north Cyprus or other countries where they cannot be reached by laws covering either extradition or sanction. We must be realistic. There have been some recent spectacular failures on the Irish Stock Exchange including Classic Thoroughbreds, Xtra-Vision, Cambridge, Atlantic Resources. This was all hyped and involved ordinary investors.

I would define a small ordinary investor as somebody investing £20,000 to £25,000 which could be a large sum of money to them. This sum could represent their life time's reward in the form of a pension, retirement or redundancy payment. These people would have a genuine case for compensation yet there is no provision for compensation. We are told it will be covered in some financial intermediaries legislation that will deal with Uncle Tom's cobbley and all. A proper code of conduct with statutory effect should be included to provide for an acceptable level of compensation to be awarded by the courts under some fair and independent criteria. I make no bones about it. One serious scandal, should it occur, would be enough to rock the Dublin Stock Exchange's credibility and leave it with no future viability.

There is another omission. Just as the UK Stock Exchange has supervised all aspects of our current Stock Exchange dealings in Dublin, the United Kingdom panel also has responsibility for the legislation covering monopolies, mergers and takeovers. My understanding is just as the British jurisdiction will not extend any further in the Stock Exchange it will not extend to the takeover panel. We therefore do not have a new statutory panel to legally replace it.

[1874] If the start up date is spring of 1995, now is the time to bring forward such legislation. It should be incorporated into this Bill. We live in an era of multinational consolidation and takeovers can often be predatory. Many Irish publicly quoted companies have been the subject of takeovers including Carrolls which is now owned by the Rothmans group, Jacobs which is now French owned and Irish Distilleries which is owned by Pernod. There are many others and it is vital that this new panel is put in place immediately.

The main thrust of this legislation is to give the Central Bank the role of regulator. This follows the allocation of a series of new powers and responsibilities to the Central Bank. Initially, it was just responsible for banking here and the capital adequacy ratios of banks. In 1989 this power was extended and it was given full remit and responsibility for building societies. This was followed by the Central Bank Act which greatly widened its powers and we now have this legislation.

I have no doubt that the Central Bank is impartial and of the highest integrity and independence. However, where is there any evidence to suggest that it has experience or knowledge of stock broking? I submit that it has no such knowledge, expertise or track record. It is also quite clear that the Department of Finance does not have that expertise.

One of the lessons from the Greencore débâcle was that the Department could not see the basic need to have different parties fulfilling the roles of adviser and broker when it came to selling the Greencore stock. The quite extraordinary reality was that the people who advised the Government sold and bought the stock. The Department of Finance was shown to have limitations in its knowledge of the market because it took everything Davys said at face value.

I have been critical of the Central Bank for failing to communicate adequately. I accused it of being deaf and dumb in some respects. There was [1875] one area where I was very dissatisfied with the Central Bank in its supervision of building societies. It relates to the celebrated wrangle between our largest building society, the Irish Permanent Building Society, and its managing director, Mr. Farrell. This is a mutual organisation with one person, one vote and one owner. The media alleged that the boss, with the agreement of the board of the IPBS, effectively bought a house with building society funds which he then sold to the society. The society spent a fortune renovating it and sold it back to Mr. Farrell at a cheap price. It was alleged that he made a substantial profit from all of these transactions. There were other allegations about a large salary payment which, I understand, is the subject of litigation.

The supervisory authority responsible for dealing with all aspects of the management expenses of building societies and ensuring transparency and public scrutiny of valid matters of public interest, steadfastly refused to issue any statement. It was prepared to talk to the Minister for Finance and send memoranda to the Department of Finance but refused to go public. It is also true that previous governors of the Central Bank refused to appear before committees of this House. I am glad the new incumbent has let in the light to some extent and is due to appear before the Select Committee on Finance and General Affairs.

Another area of vital public policy and national interest for which the Central Bank had almost exclusive responsibility is the management of our exchange rate policy. We had a devaluation crisis some 22 months ago. It transpired that the bank tried to maintain that it could sustain the Irish punt against sterling and other currencies while the markets took the view that this could not be done. It put £300 million of reserves against that view and the market washed it away. We had to enter into a humiliating devaluation of over 8 per cent. The Central Bank was never accountable for its actions in this [1876] regard. At least Government Ministers come into the House and have to answer questions on these matters.

If we are giving all these powers to the Central Bank, it is not unreasonable that there should be some proper reporting procedure to this House so that it could let us know how its supervision of the Stock Exchange or building societies has gone. It produces quarterly bulletins but these tend to be macro-economic and dense in detail, albeit valuable, independent and proper. I usually agree with much of what these reports say about monetary policy but the bank has not proved itself to be an effective watchdog for the public interest.

I would like to know specifically what new resources, staff or unit will be put in place to give it expertise. Will it second people from London and take on brokers and poachers turned game-keepers? Will it deal with this area? It does not have the expertise to deal with it because it has no market experience or knowledge. In Britain the Bank of England has not been given the task of supervising the Stock Exchange there. This is done by the British Securities and Futures Authority because it has specialist knowledge. The fact that we have not opted for a specialist authority requires justification and a broadening of the capacity of the Central Bank as it stands.

There was a number of provisions in relation to the role of the Central Bank in which the word “may” is used. The Bill provides that the bank “may” make regulations. The matters are of such serious concern in some areas that “may” should be changed to the more obligatory word “shall”. Investment managers have spoken to me about this and said that the matters are of such gravity that the Bill is too loose at present and should be tighter. They were referring particularly to annual audits and automatic procedures as opposed to the disciplinary investigations and inquiries that may be conducted.

It seems that on a day to day basis the [1877] Stock Exchange board, not the Central Bank, will have the primary responsibility for policing this area. The Minister did not set out — I may have missed it in her speech — the detailed composition of the board or give any indication of who is likely to be appointed. This is a vital issue. My understanding is that it will have eleven members, of whom seven will be brokers. There will be an election process whereby broking firms will nominate those seven and no firm may have more than one person on the board. The biggest criticism being made about the Stock Exchange — critics are not always right — is that it is a private self-regulated club. The market floor of the Stock Exchange is a little like the wigs and gowns worn in courts. I see no reason for its existence in the future because of technology and what is likely to happen in Britain. The Stock Exchange is a little paradise of its own. This needs to be looked at if seven of the eleven members of the board will be brokers because it will be difficult to convince outside people that self-regulation does not still exist. It is important that the interests of small investors be represented on the board. There must be a balance between brokers and non-brokers.

I would like to hear the Minister's response as to how the balance of seven brokers and four other members was arrived at, if this is correct; if not, what the balance is intended to be; whether there will be an independent chairperson or whether that person will be a broker; and what will be done to secure a proper balance between the interests of brokers and other interests. The Bill should state that membership of the board should include representatives of investment institutions, listed companies, bankers and, possibly, academics with a specialist knowledge. I can think of many outstanding industrialists, some semi-retired, who would have a great deal to contribute to the credibility of such a board. They would be seen to be from the corporate sector and outside of the Stock Exchange and would give [1878] authority to the board. Successive Governments have sought to pioneer the concept of employee shareholding. Perhaps a representative of the Irish Congress of Trade Unions on the board would be appropriate in the context of persevering with the notion of expanding employee shareholding and furthering the democratisation of share ownership. I would like the Minister to shed some light on the role of the board and its composition and chairmanship. I would not like to see the Bill's provisions merely give the perception of respectability without essentially changing the situation from one of self-regulation. This is the critical balance which is required in this legislation.

We should look at this in a wider context. The Irish Stock Exchange is tiny and dwarfed by the London Stock Exchange. There are 79 listed companies operating on the Dublin exchange whereas the London one has 2,500 companies. My fear is that unless we deal with the issues of credibility, the protection of investors and raising capital successfully on the Irish market, big companies like Irish Life, CRH and the main banks could switch their domicile from Ireland to the UK if they felt this would strengthen their credibility. Before this Bill was published, reservations were expressed by senior executives of Irish multinationals that this might happen. The future development of the Exchange is vital. We have seen very few successes of new companies brought to the market in this country. We do not have a major retail chain. Dunnes Stores may——

Ms E. Fitzgerald: Will it dilute its ownership?

Mr. Yates: One never knows what way circumstances will develop in an individual company. Many Irish pension funds and assurance companies have been criticised for not investing enough in Ireland. The first thing they ask me in this regard is where are the investment opportunities in Ireland. They say they [1879] cannot spend all future pensioners' contributions on high risk ventures. They are not in the risk capital business but in the business of providing a safe and secure home so that people will be guaranteed their pensions and returns on their investments. People want their investment to be absolutely secure and these companies are looking for stocks to invest in. Apart from Greencore, Irish Life and a few co-operatives, the companies being brought to the Irish market and successfully capitalised are few and far between. The controversy relating to the sale of Greencore shares proved very unsatisfactory last year from a number of aspects. The £150,000 fine on Davy Stockbrokers was not accompanied by any reason for its findings and details of the London committee's investigation were not given.

Provision is made in this Bill for reports to be published at the Minister's discretion but they should be published as a matter of course. Some key questions were asked at that time, such as whether the market was misled, why the shares were not sold to the underwriters, S & G Warburg, and so on, but there was a total lack of information.

Questions have been raised about the constitutionality of certain aspects of this Bill, given the fact that the Stock Exchange board will be a private limited company, whereas the existing organisation is in nature a club. Perhaps the Minister of State at the Department of Finance, Deputy Fitzgerald, could clarify the point on the assurances from the Attorney General.

Equities are small in that they average approximately £10 million to £12 million a day, but Government gilts are large because they trade between £50 million and £400 million a day and £250 billion annually. Controversy has arisen about market making, the new system for the sale of Government gilts put forward by the National Treasury Management Agency. The Minister did not refer to it in her speech. Perhaps the Minister could tell us why dual capacity [1880] cannot be allowed under the present agency system, which has 30 per cent overseas participation in the Government gilt market and which has been a success.

It has been suggested to me that the Exchequer's way of raising finance will not necessarily be cheaper through what is proposed. Will the National Treasury Management Agency be represented on the board? Who will make the regulations on the sale of Government gilts? Will the Government or the National Treasury Management Agency be responsible for it, or should this be covered in the Bill? The person who issues the stock at the National Treasury Management Agency may not be the appropriate person to make the regulations.

It has also been suggested to me that the Minister should look at section 31 in regard to the ban on advertising. The wording is such that non-EU stockbrokers may be able to advertise here, while Irish stockbrokers may not have any reciprocal opportunity to advertise on their stock exchanges. Will the Minister look at section 31 (1) (b) under which non-EU stockbrokers do not seem to be prohibited from advertising here.

The Central Bank's audit of the effectiveness of that supervision, which is only enabling in this legislation, should be obligatory. Perhaps the Minister could also clarify if brokers and partnerships will be allowed under the Bill.

There are serious omissions from this Bill. Building on the Companies Act, provisions on insider dealing should have been included. There should be proper cover for compensation for investors so that we are seen to have the highest standards of practice and a Stock Exchange which can be developed and enhanced as a real vehicle for raising capital for indigenous industries which is badly needed.

Mr. M. McDowell: I echo many of the sentiments expressed by Deputy Yates about this Bill. However, I do not agree with some of his remarks. For example, [1881] as regards compensation, I am sceptical about the scope of the State, through the medium of the Stock Exchange, to provide adequate compensation for investors along the lines hinted at by Deputy Yates. My view is that there is something questionable about putting in place a statutory scheme of compensation for people who make such losses on the Stock Exchange as those sustained in the cases cited by Deputy Yates, including Xtra-Vision, the Cambridge Group and Classic Thoroughbreds.

Mr. Yates: That was not my point.

Mr. M. McDowell: I hope it was not the Deputy's point. I cannot understand why anyone should put their hands in their pockets to compensate such people.

Mr. Yates: Or the Blue Arrow situation.

Mr. M. McDowell: If one is dealing with investment companies, such as Blue Arrow and others, is the Stock Exchange the correct medium through which to offer such compensation? It seems there is something to be said for not putting in place compensation for speculative investment. If oil shares treble or quadruple in price, although I know there is capital gains tax, I do not see why people should be asked to pay a vast levy on their gains or why they should be sustained by the market from making speculative decisions in high risk investments. Deputy Yates spoke about people putting their entire life savings into individual investments. I would prefer to see a general culture where it was appreciated that decisions to put one's life savings into one investment carried a risk which should be avoided, rather than a risk which should be compensated if the risk materialised to one's detriment. I echo what Deputy Yates said about the Central Bank. It is fine for the Central Bank to be independent. On the last occasion when I was Finance spokesperson for my party, I remember being considerably frustrated [1882] by efforts to achieve a degree of accountability in respect of the staff and costs of running the Central Bank. When I tabled questions in this House I was told that the Minister for Finance had no function in determining staff and wages levels, costs of running the Central Bank or whether it made sense to mint our own money. I note what Deputy Yates said about the new Governor taking a more open approach to the bank's affairs, but this is said with no disrespect to the previous Governor. It seems there is something questionable about putting a non-accountable agency in place to supervise what are, in effect, functions which require accountability. I query if it is a good idea to put the Central Bank in charge of policing the Stock Exchange in circumstances where if, in the last analysis, there are failures in the policing function, this House could be left empty-handed in terms of accountability and answers to the questions which ought to be asked.

The Minister indicated that legislation will be introduced in relation to investment intermediaries. I welcome this and I am glad to know that, like everything else, the European Union is forcing a degree of discipline on us in this area. Until such time as the European Union obliged us to do otherwise, I could not understand how any responsible society tolerated a situation where a person could open an office anywhere in the country, take in people's savings and purport to apply them to various things, charge commissions and give advice. I cannot believe we live in a democracy where there is no effective regime to work out if it is correct for people with criminal convictions for fraud to operate such companies.

Mr. Yates: They can operate in Moore Street.

Mr. M. McDowell: I do not mind people operating in Moore Street. However, it is extraordinary that someone with a conviction for fraud could open an office in a suburb in Dublin, [1883] pass himself or herself off as an investment analyst and broker, take the savings of Deputy Yates' little old ladies, tell them they will do various things with it, but then pocket the money, yet there is no person wearing a harp on his hat or in her lapel to ensure that situation does not occur. How does a serious democracy allow such a situation to exist? Why do we only say it is right to protect people from crooks in the investment business when Europe introduces a mandatory system?

There has been a number of instances of investment brokerages and advisers taking people's money and running off with it, leaving investors empty-handed. It seems extraordinary that they operate in a regime, in which there is currently no effective policing mechanism. Nobody has responsibility for ensuring that the money is still where they claim, that they have not misled their customers and that they do not propose to pocket it and do a bunk. On all the occasions where people have been left high and dry — I came across them while canvassing in the last election — one couple lost everything because of the collapse of one such house and there was nobody to whom they could turn for compensation or assistance. They dealt in good faith with that firm and found that their money was simply stolen from under their eyes. It is remarkable that it takes a European directive to force this State to face up to that kind of fraud.

I believe the Minister will comply with the European directive and put in place some scheme of regulation to cover investment intermediaries and those who take people's life savings and purport to invest them for reward for them. It is strange that insurance brokers are currently subject to all sorts of regulatory mechanisms in respect of their premia, but investment brokers are not.

Even if that happens, and this is my second point, this State suffers from quadriplegic paralysis in enforcing current financial laws. With the greatest [1884] respect of the decent and honourable members who compose the Fraud Squad, they are not in a position to prosecute complex fraud. We simply do not have the capacity. Indeed, the Director of Public Prosecutions said recently that existing mechanisms are simply not adequate to chase sophisticated thieves.

Any financial criminal sanctions in our company criminal law rely on people to get the evidence together, go to a District Court and seek a warrant for the arrest of somebody, put that person in the dock and present the evidence in court to convict them. The sad fact is that this society is waiting to be seriously plundered and Deputy Yates pointed out the danger of a major scandal in the whole Irish Stock Exchange edifice. This society has its neck exposed to thieves and has no protective mechanisms or response to what probably will occur at some stage in the future.

There have been countless occasions on which liquidators and the courts, in the course of winding up companies, have found massive fraud by directors. However, I ask Members to consider, from their own experience, how many company directors have ever been the subject of criminal sanctions for corporate fraud in this country. Offhand, I cannot remember any and it would stick in my mind if it had happened in the 20 years I have been a practising barrister. I have never seen a company director criminally sanctioned for fraud or the company law provisions relating to fraud effectively put into operation in respect of a collapse of a company. Many times a liquidator and the courts have sent papers to the Director of Public Prosecutions and the Fraud Squad for the matter to be investigated, but on every single such occasion, the impetus to prosecute and make people liable for their criminal behaviour has dwindled under the weight of bureaucracy and the inadequate state of our laws.

The Law Reform Commission came forward with interesting proposals to [1885] reform the law in relation to commercial dishonesty. I played a part in making some submissions to try to elevate our laws of evidence to a stage where people who are involved in serious crimes would have to engage in the process and would find that the laws of evidence made presumptions against them if they decided not to participate in the legal process. As matters stand — people refer to the right to silence in the context of murder and armed robbery — those engaged in serious corporate fraud can send a polite letter through a solicitor to the Fraud Squad saying that their client does not particularly want to speak to it about this matter. That is the end of most investigations; they stop at that point. There is no point in putting together safeguards against fraud if, at the same time, this country is not serious about doing something to punish the fraudsters when they are caught.

When it comes to policing this Act, doubtless the Central Bank will operate through its regulatory powers given in respect of individual Stock Exchange members. I guarantee that there will be no improvement in the capacity of this State to deal with proven fraud in the Stock Exchange or anywhere else unless there is a revolution in our thinking in respect of the way in which we prosecute people and operate our criminal law to make them accountable.

My third point relates to the notion of capital formation and the taking of risk in Ireland. I do not own a share and never have done. That is not because I did not have the money to put into them but because there is no culture or tradition here of putting money into shares, although there has been the odd craze for oil company shares and the like. It is generally true, and I am reasonably typical of most people of my experience and standing in society, that most people avoid equity investments in this country. The reason for this is that there is not a tradition of capital formation based on equity risk participation in enterprise and that worries me considerably. Why is it that Ireland, in particular among the northern European [1886] democracies, is one in which the idea of buying and owning shares and investing some of one's money in enterprise is so restricted and stunted as an attitude in our society?

We need to transform our attitudes. I am not holding out a kind of instant, Thatcherite conversion of Ireland to a share-owning democracy where everybody will suddenly take their money out of the post office, run down to these unregulated people in their suburban offices and hazard all their savings on unwise investments. However, there is a role for the Government in creating a risk taking culture by savers and investors. In a sense, we have to break our cultural dependence on risk aversion. Most bourgeois people of means think of the most risk averse investment they can possibly make with their money and demand of the State that matters like investment in land, houses and such matters be treated in a tax regime which is entirely different from investment in something which might create employment for others.

One place where we could start — and doubtless we will start when this Government has run its course, which I hope is soon — is in the area of privatisation. I was recently visited by an American academic who asked me about the process of privatisation in Ireland. He made the point that Greencore was not the only model available, but that it is possible to adopt different models in relation to privatisation. One is to vest shares in a company widely among the people, say, two or three years in advance of its full commercialisation and flotation, and allow everybody to participate in the upswing or downswing that company would experience thereafter. To take an example, if it were determined by a future Government, as I hope it will be, that our airports need not be owned and run by the State and it was decided to vest them in a company which was to be eventually sold off, they would not have to be sold to the highest bidder like the British Airports Authority or some group of that kind. It would be possible [1887] to adopt a radically different approach to such bodies and to make shares in them available to everyone as of right, much like the Irish Permanent Building Society flotation of recent times.

Things like that represent the future, creating a society in which people are willing to risk some of their savings in employment-creating activities. It has been said, of course, that there are intermediate steps between outright private ownership of shares and no investment at all. One of them is venture capital funds where risk-taking is, so to speak, mediated by the interposition of advisers and experts working on behalf of people. The same applies to unit trust funds and the like. I accept that that is true but I feel that if we are talking about genuine employment creation in Ireland there must be mechanisms for attracting investment into small-scale enterprise. In a small economy such as ours, greater emphasis should be put on unlisted securities and informal small-size investment opportunities than has been done in the past.

Whereas it is obviously desirable that Irish people should have access to internationally recognised investments, if we are talking about creating employment opportunities and capital for people to create jobs for others, it will not be done via the medium of the Stock Exchange except, perhaps, in the context of companies set up to act as specialists in the area. If we are serious about persuading people to invest some of their savings in employment-creating enterprise in Ireland, it will not be achieved through the medium of the Stock Exchange alone, taking into account the good work that has been done by venture capital companies to try to span that gap as things stand.

My view on this Bill is that it had to come into effect on foot of a European directive; it is setting up an unaccountable and independent body — the Central Bank — as the regulatory body; that whereas there is a clear case to be made for the independence of the Central Bank in relation to maintaining the [1888] integrity of our currency, there is no such case to be made for the independence of the Central Bank as a policing authority in respect of Stock Exchange discipline and the like. Whoever polices the Stock Exchange must be publicly accountable, and, if things do go wrong, must explain why the regulatory and protective mechanisms failed.

I welcome the statement in the Minister's speech that this is only one leg of the State's proposals to deal with the whole question of investment intermediaries. I strongly deprecate the fact that it has taken until this point for any protective mechanism to come into place for people, many of whom have suffered as a result of the failure of the Irish State to police the whole investment area. I am not just talking about the brokerage firms that have collapsed, two of them in my own constituency. I am also talking in terms of people around the country — some of them clerics, I notice — who run informal investment funds, some of which have ended up in grief in at least two parts of the country. I am thinking of the right and duty of people to invest and the duty of others to protect them from fraud.

Corporate crime in Ireland is, in my view, something which this State is simply not equipped to deal with. I do not know why that should be. I do not know why we, among all the countries of northern Europe, have a police system, prosecution system and a set of laws of evidence more worthy of the 18th century than the 21st century. I do not know why it is that this little corner of Europe cannot prosecute anybody for stealing other people's money if the theft is reasonably sophisticated.

Before I finish I have to say one thing about the whole issue of accountability. I noted today that the Taoiseach was again quoted on radio as saying he only earned £3 an hour.

Mr. Yates: Yes, buy him a calculator.

Mr. M. McDowell: I was fascinated by this because I did a few calculations.

[1889] Ms E. Fitzgerald: Come back to the Stock Exchange.

Mr. M. McDowell: On my calculations his salary of £95,920 yields an hourly rate of £21.95——

An Cheann Comhairle: I wonder if this is relevant to the Bill before us.

Mr. M. McDowell: ——if he worked 12 hours a day.

Minister for Education (Ms Bhreathnach): He works 24 hours a day.

Mr. M. McDowell: But curiously enough if he sleeps for only six hours a day——

Ms Bhreathnach: He only sleeps for four hours.

Mr. Kemmy: Is this after taxation?

Mr. M. McDowell: ——and if he is paid £3 an hour for his waking hours, I discovered that he is paid £32 an hour for every hour he spends asleep.

An Ceann Comhairle: The remarks of the Deputy are quite irrelevant.

Mr. M. McDowell: No. He might be an investor in the Stock Exchange if he is paid £32 for every hour he is asleep. The difference between his conscious and unconscious pay rate of £3 and £32 is a matter of some significance.

An Ceann Comhairle: I fail to see how the Taoiseach's rate comes into this matter, Deputy.

Mr. M. McDowell: There are two other observations. If we are going to have in this country a genuine share-owning democracy I presume that we will have a £4 per hour minimum wage, as the British Labour Party has suggested, in which case the Taoiseach is in for another £31,733 next year.

[1890] An Ceann Comhairle: Let us get back to the Bill, Deputy, please.

Mr. M. McDowell: Since we are dealing with accountability, I want this Government to demand a return of the £6 — two hour's waiting time — for the Taoiseach which he spent at Shannon Airport waiting for President Yeltsin. I want to end on——

An Ceann Comhairle: I trust it will be relevant.

Mr. M. McDowell: ——the suggestion that the Taoiseach has no residence and that that, therefore, explains all this, is wrong. The Taoiseach has a residence with two jet engines attached; it is the most expensive residence for which the taxpayer has had to pay.

I am glad this Bill has been introduced and that in these Alice in Wonderland economic days when the Taoiseach is in receipt of less than the British minimum wage we are tackling the question of the Stock Exchange. I will not detain the House further.

Debate adjourned.