The Central Bank of Ireland has closed down three unauthorised investment firms since August, using new powers granted under the Investment Intermediaries Act. Addressing delegates at the annual conference of the Corporate and Public Solicitors Association in Limerick at the weekend, the Bank's financial regulator at its securities and exchange supervisions department, Ms Sonja Foley, said it has been extremely active in policing the sector.
Ms Foley said the Bank became aware of three unauthorised firms - a Spanish-based investment company, a firm established in the Caribbean and operated from Belgium, and a US registered company - in recent months. The firms had administrative offices in Dublin and were subsequently closed down.
"In the case of the US firm, we raided the offices when we became aware that the promoters were trying to immediately move $1 million (£666,000) in clients' money from an Irish bank to a foreign-based institution. We issued two directions which froze this bank account and ordered the firm to cease trading for a specific period so that we could establish the exact position and how best to deal with the matter."
Subsequently, Ms Foley explained, the Central Bank became aware that notwithstanding the direction to stop trading, the firm had continued to trade abroad and clients' cheques received by the Dublin office were being redirected back to a foreign branch. "In order to protect the clients' funds, the Central Bank directed that they be lodged to a special account and frozen."
She said that the Central Bank then applied to the High Court and obtained an order confirming these orders, and the firm was put into liquidation.
Ms Foley detailed how the Central Bank has been using its powers under the Investment Intermediaries Act. It has extensive powers and can make an order in relation to any aspect of an investment firm's activities.
"We have used this for both authorised and unauthorised business," she said. "The most common method we use is to stop trading for a specific period. We would do that to freeze the situation so that it can be remedied and to protect the clients' funds."
She said that the Bank also had specific powers in relation to a firm's bank account, which are akin to a power of injunction. "We can freeze the account by letter of Direction, in the case of authorised or unauthorised firms, to see how we could remedy the situation."
Ms Foley also outlined the powers now given to authorised officers appointed by the Governor of the Central Bank, usually in one of three circumstances.
These include routine inspections of authorised firms given two to three days' notice and inspection of authorised firms with little or no notice where the Bank has received a complaint or where it is concerned about a firm. Without notice, the officers can inspect an unauthorised firm if the Bank believes it is operating in Ireland. Bank officers, she said, can enter any premises at a reasonable time; secure all or part of the premises for future inspection; inspect and take copies of documentation and, under the new powers, communicate with a client of the firm.
She said officers have extensive powers to obtain information from any person who carries on investment activity or from an employee, who must provide information in relation to books and records examined during the inspection. The duty to provide information also extends to individuals based outside Ireland.
