NEW proposals on the regulation of investment intermediaries are to be put to Government by the Minister for Commerce, Science and Technology, Mr Rabbitte, over the next couple of months. In depth talks are now taking place with the industry on the monitoring of these companies and the establishment of a proper compensation scheme. The Central Bank may be asked to take a central role in the new regulatory structure.
Mr Rabbitte, who is due to be questioned by the Oireachtas committee on enterprise and economic strategy on the Taylor affair tomorrow, said that he wants to "give the industry an opportunity to make proposals on the reform of self regulation" before concluding his recommendations for Cabinet. Before he completes his recommendations he will have received the report of Mr Martin Cosgrove, the authorised officer looking into the collapse of the Taylor Group.
Industry representatives are believed to be arguing for the retention of a broadly self regulatory system, while accepting that new safeguards are needed. However, Mr Rabbitte's plan, while possibly retaining some element of self regulation, is thought likely to involve the Central Bank taking on the main regulatory role for all investment intermediaries.
The bank already has this responsibility for intermediaries who handle clients cash and has extensive contacts and expertise in the financial sector. But it is not yet clear whether the Department of Finance would support the Central Bank taking on this role.
One aspect of the new proposals is likely to be a substantial industry funded compensation fund. However, the key political question for the Government will be how to reform the regulation of the sector without endangering the future of the independent sector by onerous new rules.
In particular Government sources see difficulties in implementing section 28(4) of the Investment Intermediaries Act 1995. This section has not been brought into force. It would mean that once an investor paid money over to an intermediary, the financial institution in whose products the client was investing would be deemed to have received the money.
With the Investment Intermediaries Act passed by the Oireachtas, Mr Rabbitte is understood to favour developing a full set of proposals rather than trying to push through rapid changes in the legislation which may themselves turn out to be flawed.
. Meanwhile, yesterday the High Court appointed Mr Patrick McSwiney official liquidator of two Taylor Group companies, Rolyat Ltd and Taylor Investment Planning Services Ltd.
Mr McSwiney had already been appointed provisional liquidator of both companies which, the court was told, used a number of bank accounts in Dublin and Cork apparently only for the channelling of funds in and out of the Taylor group.
