Derek McDowell (Labour)

I join others in acknowledging the significant progress and growth that has taken place in the Irish Financial Services Centre over the past 20 years. The centre is based in a part of Dublin that used to be derelict, but now resembles the skyline of a North American city. The number of people employed in the financial services sector has increased from not much more than zero to well over 10,000, half of whom are employed in the funds industry. I have mentioned some of the positive attributes of the sector because I intend to make a few balancing remarks.

I do not think the role of legislators involves acting as cheerleaders. Deputies and Senators should not be content merely to take up the rattle and say it is great that so many jobs have been created. I accept that the financial services sector is important and that billions of euro flow through the IFSC each year. As public representatives, however, we have a broader role than merely seeking to attract and retain jobs and investment in this country.

I would like to mention three aspects of the multifaceted role of legislators. First, we have a role in protecting consumers. I refer to individuals who have invested money for their retirements in pension funds, institutional investors and corporate investors. We need to ensure that regulations are in place to allow everyone to be confident that the system is being fair to us and that our money is being invested properly, legally and well.

Second, public representatives have a role in attracting investment and jobs to this country and retaining them here to the maximum possible extent. There is a limit beyond which we should not go, however. We were informed in the briefing material we were given that non-UCITS common collective funds have been established under legislation in financial centres such as Guernsey, Jersey, the Cayman Islands and Switzerland. It is worth remembering that such locations have gained their reputations as financial centres by doing what Senator Quinn described earlier. They have made it clear, in effect, that they welcome money and do not ask questions. Ireland has to make it clear that it is not interested in such activity. While we welcome the major global financial institutions and stockbroker groups, of course, we should stress that they are welcome here only if they are engaged in legitimate business.

Third, politicians have a role in ensuring that a framework is put in place to prevent abuse. We should not put in place circumstances in which money laundering can or does happen. We should not allow revenue abuses to occur. I refer not only to revenue abuses which are particular to Ireland, but also to the abuse of the revenue codes of other countries.

I would like to speak about consumers. Very few of us had any knowledge of investment companies 20 years ago and for some that is still the case. Many of us now, however, have contact with them because we must take advice from brokers or intermediaries who know or claim to know about investing money. Our money, through savings or through pension funds, ends up in investment funds that use it in most cases to invest for our retirement and it is important that they are regulated from start to finish. In recent years we put in place the Investment Intermediaries Act and we have strengthened the consumer wing of IFSRA; I acknowledge the work that Mary O'Dea and the consumer section of IFSRA did in highlighting only last week insurance premia that are not refunded when loans are repaid early. A few years ago that sort of abuse would probably not have come to light and we should be satisfied that IFSRA is dicharging its responsibility in that regard.

The Minister of State was involved with the Select Committee on Finance and the Public Service when the Investment Intermediaries Act was passed. It would be interesting to see the current state of play with the Act, how many claims for compensation have been made, the number of intermediaries' licences that have been revoked and how the Act is working.

The purely commercial aspect of the IFSC has a downside. It employs 7,500 people in high value jobs who then use their money to purchase goods and services with resultant beneficial effects for the economy. We achieved that, however, by setting the lowest headline rate of tax in Europe and that has undermined our capacity to tax some of the most profitable companies in the world. That downside should be acknowledged. We have secured a certain amount in tax but we have also contributed to an environment where many of these hugely profitable multinational corporations get away with paying very little tax, particularly compared to manufacturing industry that cannot move assets as quickly.

I share Senator Quinn's view that this is a technical Bill. The sections on money laundering, insider trading, share offerings and prospectuses are enabling in an anticipative fashion European directives that we have not seen and that are not set out in the Bill. There is very little we can do to scrutinise those.

I have tried to get my head around the non-UCIT common contractual funds but I am unsure what they are. I appreciate that the regulations dealing with UCIT common contractual funds are set out in European regulations but non-UCIT common contractual funds seem to be defined in the negative, where anything that is not a UCIT common contractual fund is a non-UCIT common contractual fund. The Bill gives powers to IFSRA to regulate non-UCIT common contractual funds in a general fashion in terms of their borrowing requirements, the assets they can deal with and how they can deal with them. It would be preferable to be considered a non-UCIT common contractual fund because the European regulations dealing with UCIT common contractual funds are too restrictive. It follows, therefore, that IFSRA will put less onerous regulation in place. If that is the case, the Minister of State should specify the circumstances where such an instrument will be used. The great advantage of European regulations is that they are shared and set a common standard. Here we are saying that we will walk on the wild side and impose less regulation and more flexibility. I am concerned about where that might go and the circumstances in which the instruments provided for in the Bill will be used.

Likewise, when the Bill deals with segregated liability, I do not have the expertise to comment in any great detail but it struck me when reading the explanatory memoranda that this can also be abused. Our central purpose should be to ensure that people who invest in a fund or sub-fund in good faith are properly compensated and can bring the operators of the fund to account if something goes wrong. The last thing we want is the creation and manipulation of various sub-funds by people who want to avoid their responsibility and liability. If a particular sub-fund deals with particular assets and the investor is investing exclusively in them in the knowledge he is doing that, it is all well and good but it is not hard to imagine that it would be possible through the innovative creation of sub-funds to avoid liability in circumstances where it would otherwise exist. I would like the Minister of State to assure me that he is conscious of that danger and that IFSRA will ensure that will not happen.

The European directive will deal with non-local share offers and its provisions will not apply to share offerings of less than 2.5 million. That will exclude many share offers in this country and, therefore, blunt the effect of the directive and the legislation we are putting in place. Could we lower that limit? There are obvious benefits in setting standards and in giving recourse to law to fix liability on people listed in the Act who have responsibility for misleading or wrong statements in a prospectus. If we accept that general principle, we should not effectively exempt many of the share offerings that take place in this country from the implications of the directive.

Is there legislation that deals with insider trading? I cannot recall any prosecutions being taken in Ireland. The major provision in the Bill is that of stiff fines on indictment.