Paul Murphy (Dublin South West, RISE)
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265. To ask the Minister for Finance if his attention has been drawn to the recent collapse of an unregulated trust (details supplied); if his attention has been further drawn to the fact that brokers involved with an organisation sold investment policies in the trust to domestic savers in Ireland in September 2019, despite the BBC having reported in May 2019 that the trust was a scam and without advising those savers that the trust was unregulated; his views on whether more regulations are required in this area to prevent brokers for knowingly or negligently mis-selling in return for high commission such unregulated and high-risk investment policies in such a trust to Irish domestic savers who lost their savings when the trust collapsed; if he will introduce any necessary amendments to the relevant legislation to render any brokers who engage in activity as described as liable either on grounds of deception, negligence or failure to conduct due diligence; and if he will make a statement on the matter. [37265/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am aware of this issue and am conscious of the distress that has occurred in relation to this matter. In the first instance, the Central Bank is the independent regulator for financial services and as such it determines what measures or actions need to be taken in relation to any potential or actual wrongdoing by regulated financial service providers.  The Central Bank has stated that it will continue to engage with domestic and European counterparts to determine if further action is needed to ensure additional clarity for investors on the implications of investing in unregulated products of this nature.

On the specific matter of the sale of unregulated investment products in this jurisdiction, European and Irish legislation requires the regulation of financial services firms providing investment services in relation to investment products. The law is prescriptive and lists the various type of investment services and investment products falling to be regulated.  Regulated firms may also sell investment products which are not specifically mentioned in the law (i.e. unregulated products). Consequently regulated firms are not prohibited from providing services in relation to unregulated products. Where they do so, certain investor protections, which apply to regulated activities, are not applicable to unregulated products.

However, regulated firms subject to the Central Bank’s Consumer Protection Code (CPC) that provide financial services to consumers in relation to unregulated financial products, must comply with provisions 4.8 and 4.9 of the Central Bank’s CPC. These provisions state the following: 

4.8 A regulated entity may only use the regulatory disclosure statement in communications with a consumer where such communications relate solely to a regulated activity.

4.9 A regulated entity must have separate sections on any website it operates, for regulated activities and any other activities which it carries out.

In addition to the above, the Pensions Authority is currently investigating if there are any pension scheme trustee duty issues of concern related to this case. The Pensions Authority has a mandate to investigate the behaviour and activities of Pension Scheme Trustees, and it has been noted that the relevant pension vehicles which are involved in this case are one member arrangement schemes, known as small self-administered schemes (SSAPs) and non-standard Personal Retirement Savings Accounts (PRSA). You will appreciate that it will be for the Pensions Authority to take whatever actions it deems appropriate under its mandate. 

Consumers may have recourse to the Financial Services and Pensions Ombudsman (FSPO) in relation to financial services provided to them by regulated firms. The FSPO is the statutory body tasked with the investigation, mediation and adjudication of complaints about the conduct of financial or pension service providers. It is worth noting that the FSPO is empowered to investigate complaints of mis-selling by regulated financial service providers and has carried out investigations in this area in the past. If a consumer wishes to pursue a complaint in relation to a regulated financial service provider, they must firstly make a complaint to the provider. If the complaint is not resolved, they can then make a complaint to the FSPO.  

The FSPO has the power to direct a financial service provider to pay compensation of up to €500,000 to a complainant. The FSPO can also direct that a financial service provider rectify the conduct that is the subject of the complaint. There is no limit to the value of rectification he can direct.

I trust that this helps to clarify the position.