Tuesday, 7 February 2006
The legislative and regulatory regime that applied to the DCC-Fyffes case was Part V of the Companies Act 1990. Part V has been largely repealed with the introduction of a new more robust and more wide-ranging regime which came into effect on 6 July 2005. This new regime consists of the Market Abuse (Directive 2003/6/EC) Regulations 2005 and Part 4 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005, which together transposed the EU market abuse directive. This directive provides for a common EU legal framework for preventing, detecting, investigating and sanctioning both insider dealing and market manipulation, that is, where someone seeks to distort the price of financial instruments or disseminates information in a manner that gives false or misleading signals about financial instruments. It also provides for a common approach on disclosure of price sensitive information to the market to limit scope for insider dealing.
While the Irish Stock Exchange was the competent authority for purposes of the old Part V regime, member states are no longer permitted to designate market operators-stock exchanges as competent authorities under the new market abuse regime. The directive specifically requires that the competent authority must be an administrative authority "completely independent from all market participants". The Irish Financial Services Regulatory Authority — the Financial Regulator — has been designated as the competent authority for policing and enforcing compliance under the new legislation. The new regime applies to any financial instrument admitted to trading on a regulated market or where a request for admission to trading on such a market has been made. Essentially this covers the vast majority of listed companies in Ireland.
It does not, however, apply to dealings-transactions in financial instruments of companies listed in the new Irish Stock Exchange junior market, known as IEX, which was launched last year. While markets such as IEX are outside the scope of the directive, it is planned to bring them in from a national policy viewpoint. The Financial Regulator asked that we should defer doing this until the new legislation had been bedded down and it is planned to make the necessary changes later this year.
Additional information not given on the floor of the House.
In the meantime IEX companies continue to be subject to the Part V regime by virtue of provisions in the Investment Funds, Companies and Miscellaneous Provisions Act 2005.
While acknowledging in her judgment in the DCC-Fyffes case on 21 December 2005 that Part V of the 1990 Act has been largely repealed by the new legislation, Ms Justice Laffoy nevertheless expressed the view that it would be prudent if section 109(1)(b) of Part V, in so far as it is still of relevance, were reviewed by the Legislature with a view to eliminating the uncertainty she perceives it creates. Section 109(1)(b) deals with civil liability and the judge saw some scope for argument as to the precise person to whom the provision refers. The issue is being examined by the Department in consultation with the company law review group with a view to seeing what legislative and-or drafting changes are necessary to address the issue raised by the judge.
Does the Minister agree the role played by the Stock Exchange in its initial response to the allegations of insider dealing in Fyffes raises concerns about a cosy club operating between those involved in big business and the supposed regulator of the sector at the time? Has he raised his concerns about this issue with the Director of Corporate Enforcement? What measures does he intend to take to ensure customers, as investors or through their involvement in pension funds, are protected against sharp practices involving publicly quoted shares?
Fundamentally, a new regulatory regime is operational to cover all these areas and it will be overseen by a new competent authority, the Financial Regulator. I am aware of the commentary on the DCC-Fyffes case, including that of Ms Justice Laffoy in her judgment, and we are examining the issues raised. I have referred a number of them to the company law review group with a view to ascertaining what additional legislative amendments may be necessary to deal with them. However, the legislative and regulatory regime that pertains is quite different from that which applied in the context of the case mentioned by the Deputy.
The Minister will agree that customers and pension fund investors are potentially the big losers if anything goes wrong in the regulation of the Stock Exchange. Is there a role for the National Consumer Agency in examining this matter given that we must be certain that pension funds are invested legally and transparently and that they are accountable? Reservations expressed by Ms Justice Laffoy in her judgment raise doubts about that. We want to clear up this matter once and for all. Will the Minister agree not only to refer the matter to the company law review group, with which I agree, but also to the Director of Corporate Enforcement and the National Consumer Agency, the chairperson of which might have expertise in this area?
No, I do not agree with the Deputy. I have referred the case to the company law review group to seek advice on specific points raised in the judgment. Over recent years, EU legislation has been adopted in all the areas mentioned, a number of which were originally covered by my Department. One of the features of the radically new and robust legislation is that member states are no longer permitted to designate market operators or stock exchanges as competent authorities and, therefore, the competent authority must be an administrative authority independent of all market participants.
The following is the current position on new EU legislation. The prospectus directive was transposed into Irish law on 1 July 2005; the new market abuse directive was transposed on 6 July 2005, with a number of provisions coming into effect on 1 October 2005; and a new ongoing disclosure obligation under the transparency directive is due for transposition by January 2007. IFSRA has been designated as the competent authority for the purposes of the new prospectus and market abuse directives and it will also be designated as the competent authority in respect of the transparency directive.
Overall political responsibility for the Stock Exchange rests with the Minister for Finance under the Stock Exchange Act 1995 which provides for the regulation of stock exchanges and their members. The Act provides the Financial Regulator with substantial powers in the initial authorisation of Stock Exchange members and their ongoing supervision.