Joan Burton (Dublin West, Labour)

The Labour Party welcomes the Investment Funds, Companies and Miscellaneous Provisions Bill, which has been promised by this Government for a long time. However, for reasons best known to itself, it seems to need ten years in which to do anything.

A number of questions arise. The IFSC is now a significant employer in Ireland and the financial services sector has the capacity to continue as such, particularly in respect of highly qualified Irish graduates and also of people who come to work in Ireland from around the world and have specialist skills. It was therefore appropriate that the Minister of State at the Department of Foreign Affairs, Deputy Conor Lenihan, saw fit to apologise to the House for the comments he made here this morning. Workers from around the world, regardless of their diet, make an important contribution to Irish economic life and many of them are very highly qualified and have been head-hunted by Irish institutions. The allusion made to Turkish people and their diet was unfortunate and unworthy of the general standard of Members of the House. This is the national Parliament and not a derelict shopping centre where corner boys throw out abuse in the evening as people pass by. I am glad the Minister of State apologised.

The financial services sector employs more than 50,000 people and 17,000 work in the IFSC. It is important that the sector be seen to be regulated. The Minister has said we are in competition with countries around the globe for this type of business and we want to be involved in financial services in a positive manner. There are centres in terms of internationally traded financial services in different parts of the globe that are regarded as homes for hot money, laundering and tax evasion and avoidance on a very wide scale. Most Irish people would not want our financial services sector to be associated with that.

Inquiries made by the New York attorney general relating to Cologne Re, AIG and other companies, as well as inquiries made in Australia, led to the financial services sector. I have discussed the issue with IFSRA, which is a very young organisation and is very well funded and endowed. However, reputation is crucially important in the financial services sector in terms of confidence, not only on the part of banking organisations including the Central and European Bank, but on the part of consumers.

This is particularly true with regard to pension holders who must put their money into vehicles over which they inevitably have no real control or about which they have no intimate knowledge. People make contributions, which the pension fund in their job then passes on to investment fund managers. These contributions end up in the type of funds to which the Bill refers. There are two schools of thought, namely, regulation with a light hand and detailed line by line regulation. It would be good if regulation in Ireland could be as light as is consistent with being effective. That is the balance that IFSRA must strike and its director general has said that, where possible, he would like to be able to regulate with a light hand. However, financial services around the world have suffered scandal after scandal over the past 40 years. Some of them are very well known. Many people in the UK lost all of their pension entitlements as a result of the activities of rogue financiers such as Robert Maxwell. It is inevitable that one learns by mistake in business and therefore one provides regulation to try to eliminate the errors of the past. The series of scandals that hit the city of London and the UK between the early 1970s and the late 1980s highlighted the need for regulation. Since the US crash of 1929 and its dreadful consequences for the economy there has been a great deal of regulation. However, the Enron scandal still occurred in spite of this and workers who had invested in pension related products were largely left walking the streets once the company had collapsed.

I hope we will never have a similar disaster in Ireland. However, it is important to strike a balance between the golden objective of regulating with a light hand versus very detailed regulation and we must bear in mind that the reason we need to regulate is based on the sad experience of bad financial scandals. Unfortunately, in such scandals the white-collar perpetrators often walk free. They often go to countries like Monaco, northern Cyprus or other jurisdictions where they are free to live out of reach of the regulators. It is important to remind ourselves of that background.

It might be interesting if the Minister told the Dáil the up-to-date position on the inquiries that have been made. Incidentally, Ireland was featured in The Wall Street Journal and in a number of American newspapers in regard to the inquiries by the New York Attorney General. In regard to Cologne Re, I became aware the other day that someone was suspended for working in or having an association with the financial services centre. It would be useful, in terms of upholding the integrity of the Financial Services Centre, if the Minister identified the way in which the regulations are appropriate because it was regulators from Australia and New York who tracked a problem that appeared to have implications for a company or companies in the Financial Services Centre.

The Minister may be aware of a speech made recently by Mr. David Went, the head of Irish Life, in his usually robust style to the Institute of Chartered Accountants in which he warned that too much regulation was not acceptable to bankers like him. This is the same man who had the cheek to say, when the Revenue Commissioners commenced their recent inquiry into single premium insurance policies, that they could take a hike as regards that particular company, which was once a State-owned company. It wrote to Irish investors about responsibilities they may have. I thought the company had a cheek and I will give the reason.

On single premium insurance policies, I understand the deadline for complying with the Revenue requirements is next week, 25 May, and because of the refusal of Irish Life as the biggest player in that market, Revenue has undertaken fairly widespread advertising to try to advise people. The real problem, however, is that these products were sold on a vast scale here from the 1980s onwards and the vast majority of them were fine, not just from a legal but from a taxation point of view. The vast majority of investors in those products have no problems. The Revenue Commissioners, in their preliminary overview, identified approximately 6% of the businesses as having tax issues. As an accountant, although, unlike the Minister, I no longer practise, it has always been my experience that the people who get most nervous about the Revenue Commissioners knocking on their door are those who have no problem but the people who are not compliant could not care less if they signed 20 declarations which were at odds with each other.

That is the reason I believe the managing director of Irish Life has been remiss in not co-operating for the sake of all the compliant customers of Irish Life and their families, in the case of people who have died and whose family members may have inherited from them. There is no issue if it involved a lump sum arising from retirement and the person's local friendly Irish Life office at the time suggested parking that lump sum in a particular product. They were told they would do well out of it. Whether they did is another matter, but those people have no tax issues. In an ideal world regulation would be light but in the real world we have to deal with regulation.

The Labour Party welcomes the Bill. On the ongoing development of IFSRA, we are anxious that in respect of financial services products, be they international products, as in the case of what we are talking about here, or domestic products, IFSRA and the regulatory framework should pay attention to value for money for consumers and the associated charges and fees, particularly with investment fund products because with many products the first year's contributions can take a very large slice of the investment funds, but many investors, particularly smaller investors, are not aware of that. When the products change, and complicated rules apply about Chinese walls and separating products into different divisions, investment fund managers and banking institutions can make fortunes. We cannot protect consumers from every risk but we can ensure that they are made as aware as possible of the financial charges associated with products in which they invest. It is then up to them to make a decision on whether that is suitable for them.

In that context, I draw to the Minister's attention that there is much soft advertising, particularly emanating from the United Kingdom, on television in the afternoon aimed at people who are either early retirees or retired. It is soft focus advertising normally fronted by well-known showbusiness personalities and it appears to offer an answer to everything. Because much of that advertising emanates from the United Kingdom, however, I am unclear how much of it is regulated in this country. It may need some broader EU type regulation but there is no doubt that it is very attractive to people. They get seduced by these products which are often very expensive and in some cases it can be so costly as to be very damaging to the customers who end up buying the products.

Will the Minister indicate when the Government will sign up to the UN Convention Against Corruption, which is about strengthening mutual legal assistance mechanisms for the avoidance of corruption? It must be remembered that money laundering and tax evasion fall into this corruption network. I said earlier that we want the IFSC to prosper but we want it to be the home of good and ethical investment products. I do not understand the reason this country has not signed the UN Convention Against Corruption and I would be grateful if the Minister explained that because it is essential. Post-11 September 2001, we are all aware that terrorist networks can use money-laundering devices and havens and we must be up there with the best in terms of trying to deter corruption.

The other area IFSRA still has to come back to is the question of fitness and probity in respect of people who work as directors of companies in financial services. Many of the directors of the companies in the IFSC are not Irish nationals. I am aware work is being done on a passport for people who work at very senior levels in financial services in terms of fitness and probity when they come to a country like Ireland so that they do not necessarily have to go through the whole process again. That is a good idea because I am conscious of the fact that people who are compliant are often anxious to ensure that all their obligations are fulfilled, but if somebody can show they were compliant in a country like Australia, Germany or the United States, where there is a great deal of regulation, that should make the job of our regulators in the IFSC much easier and save on a great deal of paperwork should they become directors in the IFSC.

I welcome the change of heart announced on provisions governing director's compliance pointed out by Deputy Hogan. The Minister of State is aware that many voluntary and NGO bodies in Ireland are in company format. The new type of regulation coming in was so onerous in many cases that voluntary directors of local community based companies found it quite intimidating. I welcome the fact that it will be re-examined and that the Minister is referring it for legal review. The director of a bank whether executive or non-executive, is in an entirely different situation to a director of a local voluntary organisation or community partnership.

I am glad the Minister has addressed the question of segregated liability and the facilitation of cross-investment. I hope the regulations on insider trading are successful but that is an extremely technical area and the serious crimes office in the UK has spent far more money than many of our tribunals and has not got it far. It is good that it is in the Bill but only time will tell if it is successful. I wish the Minister well with the rest of the Bill. The Labour Party broadlywelcomes it but I would like replies to my questions.

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