Written answers

Wednesday, 6 December 2006

Department of Finance

Financial Services Regulation

9:00 pm

Photo of Jim O'KeeffeJim O'Keeffe (Cork South West, Fine Gael)
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Question 197: To ask the Minister for Finance if he is satisfied that present arrangements in relation to investor compensation are adequate to cover the collapse of brokers holding client funds or other property; the arrangements in place; and his proposals in this regard to more adequately protect the position of investors. [41848/06]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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Firstly, I might explain that the present arrangements for investor compensation were introduced in 1998 on foot of an EU Directive. The Directive was transposed into Irish law by the Investor Compensation Act 1998, which established the Investor Compensation Company Ltd (ICCL) to ensure that clients of a failed investment firm receive compensation within the parameters set down in the Act. The amount of compensation payable to each eligible investor is limited to 90% of the amount lost, subject to a maximum payment of €20,000.

Following the W&R Morrogh Stockbrokers failure, a Working Group, representative of all stakeholders, was established by the Minister for Finance on 30 March 2004 to see what lessons could be learned from the failure and what steps needed to be taken to address issues that arose. On 1 November last, following an extensive review, the Final Report of the Morrogh Working Group was published and it is available on my Department's website. The Report makes a number of recommendations with regard to legislative and regulatory issues and investor compensation funding in the event of a failure of an investment firm.

Responsibility for the implementation of the Report's recommendations rests primarily with my Department, the Financial Regulator and the Investor Compensation Company Ltd. It is intended that a review of the implementation of the recommendations will take place during 2007. I am satisfied that the implementation of the Group's recommendations will strengthen the framework for investor compensation in Ireland. Clearly, any policy initiatives pursued in Ireland must remain consistent with the framework for investor compensation at EU level.

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