Wednesday, 5 May 1971
Seanad Eireann Debate
Mr. Alexis FitzGerald: I regret that between 6 p.m. and now I was engaged otherwise. I had not a great deal of time to get this as clear as I would have liked. I think it is worth taking a look at paragraph (c) with a view to seeing what we are wishing to do with it. We are wishing to determine the law as to what is to be deemed to be Irish securities for the purposes of determination by the Minister under another paragraph.
At the moment there exists three different classes that the Minister feels he has to deal with in three different ways. As the paragraph stands, the first two are simple. Where the whole of the business of the body corporate is carried on in the State, the whole question of securities arises. There is no problem there if it is read like that. In regard to subparagraph (ii) this is not the position. Then the Minister determines the proportion of the business which is carried on in the country and that proportion is the proportion which determines the proportions of the securities which should be Irish. These two are all deemed to be Irish securities—the first, the whole lot of them and, the second, the proportion determined by the Minister.
Subparagraph (iii), as it is drafted, deals with securities other than these. It states that these would be deemed to be Irish securities if they were issued in the State. It is proposed to get rid of subparagraph (iii) as it stands and to redefine it in new subparagraphs (iii) and (iv).
For the purposes of defining these new subparagraphs, it is necessary to take out of subparagraphs (I) and (II) securities which result from arrangements made “having the effect of providing facilities for the participation by the public in profits or income arising  by acquisition, holding, management, or disposal of securities or any other property whatsoever.” This amendment to subparagraphs (I) and (II) makes sense in the new subparagraphs (iii) and (iv) and deals adequately with the new definition of what is excluded from subparagraphs (I) and (II) because subparagraph (iv) deals with some of subparagraph (iii).
It is here that I want elucidation. We must look at amendment No. 36 and remind ourselves that paragraph (c) ends with the words “shall be deemed, for the purposes of this section, to be Irish securities.” We have got subparagraphs (i) and (ii) out of the way : they are deemed to be Irish securities —those whose business is wholly carried on here and those whose business is partly carried on here. It is not taking into account in relation to those bodies corporate anything which participates in the arrangements made for the purpose of providing facilities for participation in profits or income arising from the acquisition, holding, management or disposal of securities or any other property whatsoever for which there is a special provision in subparagraph (iii), which must be looked at.
At this point in the discussion, this means that, if we have a company which is an Irish body corporate, the whole of whose business is carried on here, and where there is a body corporate which carries on part of its business here, by virtue of the amendment to section 8 you exclude any arrangements made by these bodies corporate which are designed to enable the public to participate in profits or income arising from the acquisition, holding, management or disposal of securities or any other property. Could I ask is that the intention—to exclude? Take the case of a public company which is wholly carrying on a business here and which make an arrangement under which they get money, the object of which is to enable the public to participate in profits or income arising from the acquisition, holding management or disposal of securities. They issue shares, for example, with special rights in so far as profits arise for reinvestment of the money subscribed  to the shares—if it is the business of a body corporate wholly carrying on business here or a body corporate partly carrying on their business here—the element of the business of this body corporate, which is represented by their holding of securities, is excluded under subparagraphs (I) and (II). Is that the defined effect of amendments Nos. 33, 34 and 37 in relation to subparagraphs (I) and (II)?
Mr. Alexis FitzGerald: It takes in any body corporate whether it is an investment one or not? I am quite unable to make a suggestion. I think it would involve an analysis of companies and consideration with merchant bankers whether genuinely in the course of their business companies do not find themselves in the position of having surplus cash which is not yet enough to enable them to go on with the project they have in mind to finance but which they are accumulating and investing. This has reached them perhaps before this Bill was ever introduced. It has been a subscription to the company and the effect of this subscription has led to the creation of the investments, which are then excluded as being non-Irish under subparagraphs (i) and (ii) as redefined, but may yet be proved to be Irish under subparagraphs (iii) or (iv).
I think the long range consequences of this on companies operating in Ireland, irrespective of the unit trust aspect, should be considered. I am not able to help the Minister on this but I think it should be considered. I take it that what he is trying to get at here is a company which is trying to get outside the unit trust legislation by making arrangements which they do not announce to a registrar of the unit trust, because the funds are subscribed to the company and have formed part of the company carrying on business here, wholly or partly, and should not be accounted, because they are that type of arrangements, as Irish securities for the purposes of calculating the proportion which is Irish within the terms of whatever order he makes.
 I understand the Minister to say that I am not wholly wide of the mark in my understanding of that. Now we look at the new subparagraph (iii), which is divided into two, and subparagraph (iv). Except for one phrase, this does not seem to me to create great difficulty. I would like, for understanding, to draw the House's attention to the fact that they are deemed in the case where these arrangements exist, to be Irish securities only if and to the extent that the securities or rights or interests acquired are issued in the State; or are the words “such of them as are issued in the State” wholly part of subparagraph (iv), or do they govern subparagraphs (iii) and (iv) for clarification?
Mr. Alexis FitzGerald: Four only; very good. Then we can look at (iii). It deals with the securities acquired under the arrangements defined in the new paragraph (d). In case any of the securities are rights or interests acquired under an arrangement to which this paragraph applies, such proportion of the rights or interests as is equal to the proportion of the property for the time being is subject to the arrangement. Equal to the propertion of the property for the time being is the subject of the arrangement. That is all right. If they are Irish securities then they are taken in. If the arrangement is not a registered unit trust scheme it would be, but for that fact, deemed for the purpose of this section to be Irish securities. But for what fact? Again, a question of elucidation. Is it the fact that it is not registered? I think that should be said—“but for the fact that it is not registered, deemed for the purpose of this section to be Irish securities”. When you read the entire section, or even the entire subsection, or the entire paragraph, there are so many facts referred to that it would be very difficult to be sure what “that fact” was. Is it that it is not capable of registration or it does not choose to be registered, or what?
Mr. Alexis FitzGerald: It does, but it is defined in language that is so completely different from the definition of a unit trust scheme that it is patently not a unit trust scheme. I have no difficulty about the second leg of that: “other property in the State”. There is need for redrafting so as to make it very explicit as to what is missing for it to be deemed for the purposes of this section to be Irish securities. If it is a registered unit trust scheme then it counts. Presumably it counts to the proportion, although I do think I see this anywhere. Say I have an Irish trust scheme and I am told I have to have 30 per cent of it in Irish securities and I put 50 per cent of it in another Irish unit trust scheme, do I get 50 per cent of their 30 per cent or 40 per cent of whatever it might be chalked up as an Irish investment by me? If I have this kind of cannibalistic operation going on, and I think unit trust schemes do sometimes invest in other unit trust schemes, what propertion of the second unit trust scheme that is Irish, is counted as Irish from the point of view of the first unit trust scheme which makes the investment in the other? Say I put 30 per cent of mine into something that is 50 per cent Irish, do I then get 15 per cent of my investment treated as Irish? If I do, where is that? I know that is what is intended, but where is it?
Mr. Alexis FitzGerald: “...deemed for the purposes of this section to be Irish securities”. That only applies to an unregistered unit trust scheme. It does not apply to a registered unit trust scheme.
Mr. Alexis FitzGerald: Well, I see what you are trying to do but I am not satisfied that you achieve what you are setting out to do. Presumably you are on your way to the Dáil and will have time to think again.
Mr. Alexis FitzGerald: Despite the earlier ruling of the Chair I am delighted to hear it. I cannot say any more than I have said with regard to paragraph (3). Paragraph (4) takes in “other than the rules specified in subparagraph (iii).” What could they be? That would be securities issued in the State. They are deemed to be Irish securities if they are not in paragraph (3). What would they be? Securities that do not fall within subparagraph (iii), that is to say they are not deemed to be Irish securities, and are excluded from (i) and (ii). Is this a catch-all clause to catch any kind of securities?
Mr. Alexis FitzGerald: Yes. I see. “Shares or debentures or rights or interests in any shares or debentures, of a body corporate carrying on a  business. ...” I take it anywhere; such of them as are issued in the State shall be deemed to be Irish securities. Does that mean that Hong Kong Corporation could come over here and give us all a good lunch and settle down and issue securities in the afternoon which they will go home then and call Irish securities?
Mr. Alexis FitzGerald: So if you get a body corporate that was not carrying on business it could come over here and issue shares. I think I have said enough—said too much in trying to say a few things—but it is much too complicated material to be dealing with on Report Stage. I do not know whether this can be done, if the Standing Orders permit, but when we get amendments of this kind we should get a reprint of the whole section so that we can read it all together instead of looking for a scissors that will not cut, which is what I was doing at 6 o'clock, to try to put it all together in one piece. The Minister has been helpful to me in his answers to my questions. This ought to be very carefully examined again to see what are the full consequences of the section.
Mr. Lalor: I am sorry, Sir, if I in my efforts to answer the questions raised during the course of the discussion generated by Senator Alexis FitzGerald I cut across your ruling, but let me say that during the tea break the Senator did get a pretty full picture of the operation of that paragraph. Paragraph (c) (i) deals with the corporate bodies which are wholly Irish; paragraph (c) (ii) with corporate bodies who do some of their business here and some of their business overseas; and then the new paragraph (c) (iii), which is covered under amendment No. 36, covers such things as arrangements involving other unit trust companies, or other investment or collective  agencies. In fact paragraph (c) (iv), which is the one the Senator finished up on, is what I described to him as a dragnet clause. It visualises covering any type of arrangement.
The Senator questioned the type of people we were excluding. He was wondering if it included some firm from Hong Kong coming over here and collecting shares and getting investments over here. I needed to point out what it was excluding and then the type of company I visualised. What I am endeavouring to visualise in this regard is any type of arrangement. It is a dragnet heading to cover any other types of securities at all. Amendment No. 37 is covering the arrangement exclusions that took place in both paragraphs (c) (i) and (c) (ii) as was covered in amendments Nos. 33 and 34. The Senator fully appreciated the reasons behind amendments Nos. 33 and 34, insofar as they excluded and needed to exclude the type of investment company which can be totally Irish but can have investments overseas. It was necessary to cover them by the arrangement that is introduced under subsection (3) (d), as covered in amendment No. 37.
In regard to the manner in which the parliamentary draftsmen have drafted subsection (3), (c) (1), this is something that the Senator suggested I might look at in relation to the overall presentation for the Dáil. I agree that in an effort to try to iron out its meaning it is quite possible that a better arrangement of words might be presented in order to get across what he now understands is the meaning in this regard. This is something that I would be only too happy to do.
Mr. Alexis FitzGerald: I am very happy with the Minister's reaction to what I found, I must confess, a very difficult series of amendments to grasp. I think it is pertinent to my observations on this to refer to its workability and to the difficulties that the Minister may have to face in this matter of determining how much of a company's business is to be regarded as Irish. Senator Ryan will understand this very well, particularly when we are dealing with it on a quarterly basis. Who has  got the right to go to an Irish public company every quarter and ask them to inform what proportion of their business is being carried on in Ireland and what proportion is being carried on elsewhere, when the people to whom the questions are being put will not know the answer, or may not know the answer, and when, above all, they do not want their competitors to know the answer to it, where it may be damaging to them to have to give the answer to it? Generally, I think the difficulty involved is this matter of determining the proportions. While I was not capable of proposing any amendment that would solve this problem I thought, seeing the various amendments that the Minister had put down in response to some remarks I made, it might entitle me to draw attention to that aspect of it. There are public companies which would be precluded from giving information to the Minister without giving information to the Stock Exchange and to their shareholders and which might be embarrassed by the additional cost involved in taking accounts for the purpose and might be damaged by the consequences of having to disclose this information to the public. Could I just leave that with the Minister?
(iii) in case any of the securities are rights or interests (described whether as units or otherwise) acquired under an arrangement to which this paragraph applies, such proportion of the rights or interests as is equal to the proportion of the property for the time being the subject of the arrangement that—
(d) In paragraph (c) of this subsection “arrangement to which this paragraph applies” means any arrangement made for the purpose, or having the effect, of providing facilities for the participation by the public in profits or income arising from the acquisition, holding, management or disposal of securities or any other property whatsoever.
Mr. Lalor: The effect of this amendment is to confine liability for contravention of an order under section 8 to the manager of a unit trust scheme. It meets a point made by Senator FitzGerald on Committe Stage that newspaper companies and advertising agencies should not be expected to know whether documents they publish on behalf of clients are in compliance with technical requirements under the Bill. During discussions I  had with the parliamentary draftsman it was agreed that virtually all of the matters specified in section 8 (2), which I might regulate by order, came within the manager's sphere. It is felt that it is undesirable to provide that the trustee as well as the manager would be guilty of an offence if the provisions of an order were contravened. The amendment, therefore, removes from section 8 (5) the references to the trustee, the person who publishes a document which contravenes an order, and also the person who procures such publishing. Under section 7 a newspaper is responsible for ensuring that the unit trust advertisement is from a registered unit trust. We went into that point earlier. It is not responsible for the details of the advertisement.
After “offence” to add “provided that if the proportion specified by the Minister under subsection 3 (a) is exceeded during any quarter of any financial year is reduced to the specified proportion within the quarter succeeding such quarter no offence shall be deemed to have been committed.
An Cathaoirleach: There may be a separate debate on this in which Senators will be limited to the amendment to the amendment. Alternatively, the Minister's amendment and the Senator's amendment could be discussed together. It is a matter on which Senators might come to some agreement. Perhaps it would be better to discuss it separately.
Mr. Alexis FitzGerald: I think it would be. I am satisfied save for subsection (3) (a) that the Minister's amendment has got rid of everything that is offensive in the section. Therefore—and I think Senator Russell will agree with me—we can happily direct  ourselves simply to this particular proposed amendment to the amendment. Practically speaking, it is simply that we are going to get quarterly accounts from the registered unit trust schemes. I do not think it ought to be an offence if, at the end of the quarter, the value of some Canadian or Australian mine has jumped up and the value of some Irish mine has fallen and as a result the proportions have gone wrong; or, if through some inadvertence, perhaps not a circumstance wholly outside the manager's control— let us allow for fraility in this and omissions of people employed to do the job—the turnout at the end of the quarter surprises the managers themselves by being fractionally out; with the day-to-day oscillation of the market, and perhaps the effect on the portfolio of a property that was practically valueless because it was a half-built site at the opening of the quarter, and has become a wholly built building at the end, the proportions have gone wrong.
Also we should have regard to another fact which is important. It is in the interest of the unit trust holders that the managers are not compelled to make sudden decisions to sell, say, British securities, at a time when in their judgment it may be very bad for them to sell, when in two months' time they can take advantage of the market. They are given at least three months to put it right. That is not an unusual type of provision in legislation dealing with this sort of thing. They are given time to put it right. You may cut it down to provide that this shall not happen more than three times over five years or something of that sort. I am assuming in the ordinary situation where the proportion has gone wrong at the end of the quarter they will find themselves right. They have got a quarter to put it right and keep it right. That is the object of that amendment.
Mr. Russell: I should like to support Senator FitzGerald in that remark. It strikes me that if an offence has been apparently committed on a certain date by the time the Minister moves in to take action against the offence the ordinary play of the market prices  may have rectified the offence. There is a sound case for leaving a period of, say, three months or such other period as the Minister may regard as reasonable to put the matter right.
Mrs. Robinson: I, too, would like to support the amendment. However, I should just like to point out that the wording does not tie in too well. I think it probably requires an “if” to be introduced. As it reads at the moment “provided that if the proportion specified by the Minister under subsection 3 (a) is exceeded during any quarter of any financial year is reduced to the specified proportion within the quarter succeeding such quarter no offence shall be deemed to have been committed”. The amendment is a reasonable one and it is a realistic one for the reasons given by the Senator.
Mr. Lalor: When I saw Senator Mrs. Robinson getting up I thought it might be to draw attention to the fact again that from the wording of the amendment she might find it necessary to oppose it. In my reading of the amendment the effect of it is to provide that the manager would not be guilty of an offence in a case where the proportion specified by the Minister is exceeded. Under section 8 (iii) I may specify a minimum proportion and therefore it would not be an offence to exceed the minimum figure.
Mr. Lalor: On the other hand, if the Senators intend the amendment to relate to a case where the figure drops below the prescribed minimum—that is what the Senators who proposed the amendment are aiming at—then the answer must surely be the defence provided in section 8 (6) in so far as I have gone in that regard. You will recall on Committee Stage I introduced this amendment in order to cover that type of situation. It may be contended  that it leaves a loophole if, due to some change in the value of shares, an accidental situation should arise whereby the trust falls below the prescribed minimum. In view of the fact that this is taken care of, by way of a defence under section 8 (6), it would be rather irrational for the Minister to move in and take any positive action, knowing that any genuine defence of that nature must be acceptable.
On the other hand, a further quarter from the Minister's point of view, would almost automatically need to be given in order to clear himself of the defence that could be offered under section 8 (6). This, in its own way, prompts the necessity for extending that period further, and this opens the door to a manager doing some sort of a re-shuffle by extending that extra quarter, if it were built into the Bill. It provides a type of time factor loophole to balance things again. This may be what is intended and what has prompted the amendment. The two things are running together. The likelihood of prosecution or of Ministerial action following such an eventuality as envisaged by Senators would be extremely unlikely. This is why I feel it is not necessary to press this amendment, even further amended, to clear up this question of exceeding. I do not think it is necessary in view of section 8 (6).
Mr. Alexis FitzGerald: I can hardly continue to press an amendment which would seem to achieve the opposite to what I intended. I am grateful to the Minister for drawing my attention to what my real thoughts on the matter were and which I failed to express, and to Senator Mary Robinson for making grammatical whatever I intended.
The fact of the matter is, however, that a lot of people do not like to be in the position of being prosecuted. In the world of finance your reputation is worth everything. If you are prosecuted and found not guilty, it is still no use; your reputation is gone and nobody bothers to read about why you got off. We may have an all prudent Minister and wise advisers all the time but you can get difficult and recalcitrant people.  The man in charge of the trust may himself be difficult and recalcitrant and may have annoyed and irritated the Minister and his advisers, may have made public criticisms of the Unit Trusts Bill and there may be people lying in wait for him. I am not saying this will happen, it is just possible. I cannot see what difficulty there is for the Minister in giving the right to the person who finds himself in this situation so to act that he will not have to convince the High Court. They may not be guided with all that wisdom that inspired the judge, who was cited here earlier today, in the decision he would come to as to what is reasonable in circumstances he probably will not understand at all.
I would urge the Minister to look to somebody competent to convert into competent language my amendment, or some alteration of it which would put decent people in the position that their reputations will not be put in jeopardy by being prosecuted without their being given any time. A quite short term is all I propose. Three months is a very short term during which to get your portfolio right and it would be unfair to the unit holders if the accounts are being taken and suddenly they discover, as could happen, that securities have doubled, trebled and quadrupled in a matter of weeks. They could find themselves out of line and it might be very unfair to the unit holders to sell these securities because they have not yet completed their increase if they had to sell them. But if they had three months to get things right, they then know the code they have to apply. Again I am on the overall question of not having a code here which puts people off and which makes them afraid. People are very afraid of prosections and will do anything to avoid them in order to keep their reputations because they know the consequences even if they win.
Mrs. Robinson: I know I am out of order in speaking again. On a point of information, the Minister, in referring to section 8, subsection (6) said that this provision, which I welcome, only relates to subsection (4), to revoke  an amended order by the Minister. If this provision could be extended to any of the subsections under the section, it might meet the point.
An Leas-Chathaoirleach: When that amendment is withdrawn the debate reverts to the discussion of the question that amendment No. 38 be agreed to. Any Senator who has not already spoken on that question may now speak. Does the Minister wish to say anything in conclusion on amendment No. 38?
Mr. Lalor: Yes. I referred to section 8 (6) and Senator Mrs. Robinson drew my attention to the fact that that only covers subsection (4). It is some thing we should have seen at the drafting end and it will have to be changed.
9.—(1) The assets which are subject to any trusts created under a registered unit trust scheme shall initially be constituted out of the proceeds of an offer of units at a price per unit of an amount to be determined by the manager after deducting any preliminary charge authorised to be made by the deed expressing the unit trust scheme.
As I read and re-read section 9 I could not see that it added up to the answer to the question that was bothering the Minister. I tried to redraft what I thought was intended. That was what, under statute, ought to be the method of determining the price at which units would be sold and the relationship of that price to the assets. In doing this I would also hope to have written into the Bill one provision which would expressly give a right to a manager to make a remuneration under this trust deed. Having only failed to get from the Minister—from whom I must confess I have got a lot —the full details of these orders and I am sure he has a sheaf of them behind him—there is much that is spelled out in this statute that would nearly be better not spelled out, and may limit the Minister's power to make the right kind of order when he comes to make it. The Bill says:
The assets which at any particular time are subject to any trusts created under a registered unit trust scheme shall be of a value that is not less than the value of the units of the scheme for the time being standing issued thereunder calculated by reference to the price at which the manager under the scheme buys the units at that time.
It seems to me that, whatever the meaning of the section, it is clearly designed to determine what the price per unit should be in relation to the assets. My amendment does that and applies what is in fact a constantly used  formula in relation to this. First, we have the case that when you start a trust “the assets which are subject to any trusts created under a registered unit trust scheme shall initially be constituted out of the proceeds in an offer of units at a price per unit of an amount to be determined by the manager, after deducting any preliminary charge authorised to be made by the deed expressing the unit trust scheme”. It seems to me that section 9, unamended, does not appear to deal with that at all, because the price is determined before there are any assets to refer to. Subsection (1) of my amendment deals with the case where you have a unit trust voted at a price which statutorily is to be determined by the manager. The assets resulting from this subscription are subject to a deduction of a charge in favour of the manager as remuneration for his services.
If you are going to have section 9 in the form it is in, as an alternative to my own, I would leave it to be subject to an order under section 8. I do not think that the meaning of section 9 is at all clear. It is not clear to me at any  rate. If there has to be a statutory provision in regard to it, that statutory provision should make it clear that the manager is going to get out of it initially what his preliminary charge in regard to the preliminary issue is. In relation to subsequent issues he is going to get out of it his preliminary charge to the extent that that charge is authorised by the deed, which I would have thought, in the working out of this, the Minister would have seen before even it is deposited with him, as a matter of practice. But the figures will not work. Unless you deliberately get together some figures that will produce the quotient, it is very hard to get a number of figures that will in fact divide so as to produce an equal quotient. You have to deal with the unequal quotient in some form. If he is issuing units the general practice is, if the resultant total upwards requires an adjustment to get some things equal, that it could be by as much as 1.24p per unit, or one per cent, whichever is the less, and it keeps control of what the manager is getting out of it. He only gets this if he does not get an even quotient from his division.
Mr. Lalor: The purpose of section 9 is to ensure that all units issued by a unit trust will be covered by assets made up of securities or other property vested in the trustees. It is considered by the parliamentary draftsman that the section, as drafted, achieves this purpose. The amendment sets out variout details as to how the price of units should be ascertained and the Senator has gone down through the amendment, point by point, justifying his opinions in this regard. In his introductory remarks the Senator said that in this piece of legislation there are perhaps a great number of extras that might have been omitted, that I might find myself constrained or restricted in making orders by certain parts that are already written into the Bill. It is sufficient for me to have the basic requirement in this section and to provide for the details such as are outlined by the Senator in his amendment, in orders to be made under section 8.
In this regard, the Senator mentioned that I must have a great pile of  orders building up at present. When this legislation has gone through it is quite possible that there will be very few orders required. But certainly, by way of developing section 9, which is simply and solely designed to prevent assets from being removed from the fund, this can preferably be done by order rather than having it spelled out in the manner suggested in the amendment. I would like to assure the Senator that my information on this is that the section, as drafted, will achieve its purpose, that is of preventing assets from being removed from the fund.
Mr. Sheldon: I am inclined to agree with the Minister that it is probably better done by order. However, there is one point of Senator FitzGerald's which he did not answer and that is what happens at the start of a new unit trust which is offered for subscription? The manager has not got any money until he gets the money in from the new venture. He will not have any assets to cover those and Senator FitzGerald did cover that point in the first part of his amendment. The Minister has not referred to that and yet the Minister did say that he wanted to secure that there were always assets to cover any units issued. If you are starting off de novo and you are selling units, at that stage I presume that you have not got any assets. The Minister did not make any reference to that part of Senator Alexis FitzGerald's amendment.
Mr. Russell: Is it factual to relate the value of the assets only to the price at which the units are purchased? That could cut both ways. The actual value of the units might be substantially less than the price at which they were purchased. That would affect the asset-backing of the trust, or, conversely, they could be substantially higher. There should be some provision made to value the assets at, say, the market value and/or the purchase price to get a realistic value of the backing of the trust.
 In relation to Senator Sheldon's question, the theory of unit trusts as such is that somebody comes in to buy units and it is the allocation of the money which the investor brings in that creates the assets in its own way.
An Leas-Chathaoirleach: I take it that allowing the Minister to speak was an implicit recommital. If the Senator has a few brief words to say again the House might permit this. We want to be careful on these points on Report Stage. It is appreciated that it is extremely difficult on a complex amendment such as this to have a Report Stage debate. If the House wishes to go into this in detail we can at this stage recommit this amendment. The House does not wish to recommit? Does Senator Sheldon wish to intervene briefly?
Mr. Lalor: As the Chair has pointed out, with so many amendments on Report Stage, it is very difficult to deal with it in the normal way. We have had amendments on Committee Stage and I have already indicated on the discussions on the amendments for Report Stage that we wish to finish up with a good Bill. I intend examining other points made by Senators before I bring the Bill to the Dáil. The fact that I am opposing this amendment at this stage does not specifically mean that I might not be using it, or a section of it, when I come before the Dáil.
Mr. Alexis FitzGerald: I appreciate  the Minister's attitude to this, which is similar to his attitude throughout the debate. I have just one final point to make in relation to the amendment, and that is that the section relates to the price at which the manager buys the units and does not seem to prevent the assets being more than what would result from a calculation by reference to the price. If the assets are more, then it would mean that the person who is selling his units to the unit trust is not getting his full share of the assets. Could I ask the Minister about this?
A final point on which I was not very clear was as to how assets would be excluded from the trust without crime being involved in some fashion. I would have thought that we did not need any section to deal with that. I am glad that the Minister will look at the suggestions that have been made to him.
In page 10, lines 57 to 59, to delete “specifying the sale price of units under the scheme and the yield therefrom and other benefits likely to be received by holders thereof” and to substitute “containing such information in relation to the scheme as the manager could reasonably be required to furnish”.
Mr. Lalor: The kind of document which was envisaged when section 10 was drafted was a form of prospectus giving general information about a scheme to prospective purchasers of units. It was not intended to require that the document must include information which would need to be updated at unduly frequent intervals. However, on Committee Stage Senator Alexis FitzGerald expressed the view that the section, as drafted, could require a document which could change daily and the purpose of the amendment is simply and solely to ensure that this will not be the case.
(3) (a) Subject to the provisions of this subsection, the manager under a unit trust scheme shall be liable to pay compensation to a person who buys units of the scheme on the faith of a document of the kind referred to in subsection (1) of this section for the loss or damage he may have suffered by reason of any untrue statement included therein.
(i) as regards every untrue statement not purporting to be made on the authority of an expert (which expression has the same meaning in this subsection as in section 46 of the Companies Act, 1963) or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the purchase of the units concerned believe, that the statement was true; and
(ii) as regards every untrue statement purporting to be a statement by an expert or contained in what purports to be a copy of or extract from a report or valuation of an expert it fairly represented the statement, or was a correct and fair copy of or extract from the report or valuation, and he had reasonable ground to believe and did up to the time of the issue of the document believe that the person making the statement was competent to make it and that person had given his written consent to the issue of the document with the statement included in the form and context in which it is included and had not withdrawn that consent before the purchase aforesaid; and
(iii) as regards every untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document, it was  a correct and fair representation of the statement or copy of or extract from the document.
(i) a statement purporting to be a statement by an expert or contained in what purports to be a copy of or extract from a report or valuation of an expert is contained in a document of the kind referred to in subsection (1) of this section, and
the manager under the unit trust scheme concerned shall be liable to indemnify the expert against all damages, costs and expenses to which he may be made liable by reason of the inclusion in the document of a statement purporting to have been made by him as an expert or in defending himself against any action or legal proceeding brought against him in respect thereof.
Mr. Lalor: This amendment is intended to meet Senator Alexis FitzGerald's recommendation that the Bill should provide for civil liability of a manager who misleads the public by making an untrue statement in a document. The proposed subsection is based on section 49 of the Companies Act, as suggested by the Senator at the time. It is felt that these elaborate provisions from the Companies Act are designed to meet rather remote contingencies. However, I have had them included because of the fact that Senator Alexis FitzGerald attached considerable importance to them.
Mrs. Robinson: In speaking to this amendment, perhaps I am off the point, but in view of the fact that the provisions introduced impose civil liability on the manager only, does the Minister intend to modify at all the portion of section 19, where if there is contravention of section 9 or 10 of this Bill the manager and the trustee under the scheme shall each be guilty of an offence? Yet only the manager would  incur civil liability. Would the Minister consider dropping the trustee from section 19 where, in relation to civil liability, it is only the manager who appears to be likely to incur civil liability, whereas in relation to criminal offences under sections 9 and 10 both the manager and the trustee would incur criminal liability?
Mr. Alexis FitzGerald: I would very much welcome this amendment. I know it is a little complex but I think the complexity was necessary in order to save innocent people and to give them opportunities of getting out of such a liability. I am a great believer in civil liability and I think people will be much more likely to enforce their own rights than State authorities will be organised to prosecute people. Everybody, I imagine, is slow to engage in prosecutions which can have adverse effects on people's reputations. The best thing is to give the citizen the remedy. This amendment is an excellent one. It puts the small man, who on the whole will be the investor in the unit trust, in the same position as the larger man. I welcome it very much.
With regard to the point made by Senator Mrs. Robinson, I think that the amendment to section 10 proposed by the Minister and which has been accepted seems to me to shift the responsibility firmly, certainly on civil side, to the manager, who will be the person preparing this document. If I may direct through you, Sir, the Senator's attention to amendment No. 54, she will find that I have there proposed to make the following amendment:
In page 14, line 3, after “offence” to insert “save that the trustee shall not be guilty of an offence under section 10 if either the document has been issued by the manager without submitting it to the trustee or the trustee has disapproved of it or a copy thereof has been issued without the signature of a director or secretary of the trustee.”
Mr. Lalor: In this sort of civil liability it is the question of the manager, as such, specifically misleading the public and it is not necessary in this particular section to include the trustee. It is not specifically comparable. Senator Mrs. Robinson asked me if, consequentially, I would not include the trustee under section 19. I would not propose to exclude the trustee under section 19.
(i) No such request to purchaser shall be valid unless the holder shall have delivered to the managers or their authorised agent the certificate or certificates representing the units to be purchased with the endorsement or endorsements thereon duly completed by the holder or in the case of joint holders by both or all of them and any such duly completed endorsement shall for all purposes of this deed be deemed to be a transfer in favour of the managers;
(ii) A holder shall not be entitled to require the managers to purchase his units otherwise than in such multiples as may from time to time be prescribed pursuant to the deed giving expression to the unit trust scheme or to purchase part only of his units if as a result of such purchase he would remain a holder of less than such number of units as may be prescribed from time to time in the deed giving expression to the unit trust scheme:
(iii) The managers may at their option dispense with the delivery as aforesaid of any certificate which shall have become lost, stolen or destroyed upon compliance by the holder with the like requirements to those arising in the case of an application by him for the replacement thereof:
 (iv) The price shall not be payable to the holder until the expiration of seven days after the termination of the customary period for the realisation of investments on the Stock Exchange, Dublin.
I do not think my amendment can be really understood without looking at the section itself. An important point with regard to the section is that it casts a statutory duty, a statutory obligation in favour of the holder of units of a registered unit trust scheme, or indeed of a unit trust scheme the registration of which stands cancelled. It puts a statutory duty, in favour of those persons, on the manager, to buy from the holder such number of those units as the holder may specify at the price for the time being at which the manager buys units of the scheme. Now, anyone who has to engage in almost any kind of professional business knows the sort of intolerable brute who will walk into you at 10 o'clock and demands his title deeds which he last handed in 13½ years ago. Such a man will sit there until he gets the deeds and cause great inconvenience. He has no right whatever to do this to you and he can be told to go to blazes out of your office, and that in fact, you must be given a reasonable time to arrange matters. Similarly, a dentist could tell such a man to go away and keep his abscess for the next month because he could not fit him in any day. Doctors, likewise, as we know. The Leas-Chathaoirleach could tell us about engineers and their methods of saving themselves. Under this section a man would be able to sit downstairs with a request in writing until he gets his units bought from him as a result of having read in the paper that the Minister cancelled the scheme. I think that he should be required, before he has this statutory right, first of all, to have his certificates there, representing the units to be purchased; if they are held by somebody other than the person who is looking for repayment he should be required to have certificates duly completed by the person who holds them or by joint holders in the case of joint holders. If it is such a scheme that provides that they are  only taking units of a particular multiple, he cannot withdraw such an amount of money as would reduce his investment to something smaller than the unit which the managers, under the unit trust deed, are prepared to take into the unit trust scheme.
I do not know how unit trust schemes run, but I do not imagine that they have bullion on the premises to hand out to people who come without appointment to demand and exercise their statutory rights to get repaid. Generally, they will carry some cash but that may be at this particular time fully invested. There may be a time when they cannot borrow for even short term breaks. These kind of situations arise. There could be a bank strike or something on. They must be given some time. I suggested seven days, the usual settlement day in the Dublin Stock Exchange. One can think of any other reasonable time. But if they have a right to get their units bought back they should be there with all their certificates, and the certificates should be in order, properly executed by the holders of them. Time should be given to the unit trust manager to realise sufficient of the assets under his control to enable him to pay. Even here, the fact that you are going to have unit trust schemes, not associated with life assurance, which themselves would be unregistered unit trust schemes to which this Bill will not apply at all, but unit trust schemes in contemplation under this Bill with investments in property and, therefore, not necessarily liquid. To be required to pay back in that situation is most unfair to the people who do not want to buy out from this unit trust because it may force the managers to realise too speedily investments that they think should be held for a longer time. I am not sure that the seven days after the settlement day gives enough time but certainly there ought to be some time given to them because this is a statutory obligation.
Mr. Lalor: This amendment sets out various matters of detail which seem to be designed mainly to protect the manager from unreasonable demands by unit holders. The Senator pinpointed some of the problems which professional  people have as a result of unreasonable demands being made by the ordinary man on the street. Perhaps I might refer, from the man in the street's point of view, to the reception which some of the professional people may in turn give to them.
Mr. Lalor: The man in the street in this case is the unit holder. He is the fellow who has bought shares or units and wants to cash his chips. It would be improper if the manager were to tell him to go off and come back in a week.
Mr. Lalor: This brings us back to the degree of flexibility necessary in such a piece of legislation. I am asked why I do not spell out “when”. The Senator is specifically speaking against making it a statutory obligation. What is said here in the section is that the unit holder is entitled to go to the manager and buy back such number of units which the holder may specify at the price for the time being at which the manager buys units for the scheme. It does not put the manager in the position, as is visualised by the Senator in justifying his amendment, that the unit holder can sit in the office and refuse to get out until he gets his money. All that is spelt out in this section is that the unit holder is entitled to cash his units as such. Complications cannot be anticipated at this time. It is far better that such difficulties should be overcome by orders rather than having something added in a statutory manner that cannot be adjusted except by the Minister coming back to the House seeking  powers of amendment. I am not saying that the amendments proposed are unreasonable. I remember what the Senator said when speaking on a previous amendment about having too much written into the Bill. The type of eventuality which the Senator seeks to cover in his amendment is one which should be dealt with by order rather than by having it written in here in a statutory way.
Mrs. Robinson: The import of Senator FitzGerald's amendment is relevant to the fact that under section 19 the contravention of section 11 makes the manager of a unit trust scheme guilty of an offence. Apart from the certain amount of leeway in dealing with the unit trust holder as to when the money should be paid on demand, there is the danger that the manager would be immediately guilty of a criminal offence in not paying immediately. This might be relevant in deciding whether the manager would require the type of protection which Senator FitzGerald proposes in his amendment.
Mr. Alexis FitzGerald: I am grateful to Senator Robinson for drawing attention to this, particularly if I am reading section 19 correctly. The offences are not small. Summary conviction may bring a fine not exceeding £100 or on conviction on indictment a fine not exceeding £5,000, and so on for further offences each day the contravention is continued. Where there is a bald statutory duty on the manager to buy units is he not guilty of an offence when the man comes in and requests payment and does not get it? Is an offence not then committed, there being no provision as to when he has to pay? A man may not understand the whole business of certificates and how invaluable they are, the risks that are taken if payment is made without the certificates being produced, and how costly it can be sometimes for an insurance company to insure one against a lost certificate.
I wonder has the Minister power or is he not impeded by the terms of this section from making an order under section 8 which would provide for compliance by the unit trust holder with any conditions once there is a  statutory obligation on the manager to pay up. The Minister may not like the language I have used. I suppose one can talk on an amendment by indicating what a more sensible man might introduce as an alternative. At any rate I will make the point in that kind of language. I think I would be quite satisfied if the Minister would insert in section 11 the words “on due compliance by the holder with the requirements of the trust deed” because this will be stuff which will be in the trust deed anyhow. He would have to comply with the requirements of the trust deed before he could get his money for his units.
We know that the trust deed will not be registered unless the Minister is satisfied that its provisions are right. The Minister will be advised as to what ought to be in a trust deed or in an altered trust deed. He will provide for this contingency in detail, as to how a man will sell back his units to the company. He will find that there are varying provisions with regard to what the holder must do. That is, in general, what I have set out in my amendment and it indicates what will be found in a lot of trust deeds. If the Minister does not like to make this statutory he can give himself flexibility and in so doing, to remake another point I have made on other sections he will make this Bill more attractive to people who want to establish unit trusts. They might not want to take it on, if they are advised that they are running a risk, as in section 11, of having to pay back unit holders immediately. If they are satisfied that they can provide for this in the terms of the deed which they will draw up and of which the Minister will approve, then the statutory obligation will only arise if the unit holder complies with the requirements of the trust scheme and the deeds phrasing it.
Mr. Alexis FitzGerald: The Minister will not register a unit trust scheme unless the deed is in a form of which he approves. He will see that the provisions protective of the investor  and protective of the manager are in it. You can have in that trust deed any of 50 different formulae requiring the unit trust holder to do what he ought to do reasonably in order to get his money back. He has a statutory right to get it back if he complies with the requirements of the deed.
Mr. Alexis FitzGerald: It was to meet the Minister's own point that my proposed amendment was inflexible. I introduced the idea to him to propose an amendment to his own section which would not be inflexible in any way and which would give him complete control of the situation, particularly because—Senator O'Higgins shares my view on this—the Minister will have no power to make an order with regard to this matter. It does not come under the umbrella.
An Leas-Chathaoirleach: Amendments Nos. 43 and 44 must be taken together. There is also an amendment to amendment No. 43. It is suggested that the best procedure would be to have a joint debate on the amendment 43, the amendment to amendment No. 43 and amendment No. 44. Following this debate a decision could be taken on the amendment to the amendment and then such decisions as are necessary on amendments Nos. 43 and 44. Is that procedure agreed?
“12. Neither a body corporate  that is a manager under a unit trust scheme or is a subsidiary or a holding company of the manager or is a subsidiary of the holding company of the manager nor a director or person engaged in the management of such a body corporate shall carry out transactions for itself or himself, or make a profit for itself or himself from transactions, in any assets held under the scheme.”
Mr. Lalor: Amendment No. 43 covers a point made by Senator Alexis FitzGerald previously that section 12 should take account of the position of directors, subsidiaries of the manager and subsidiaries of other holding companies of which the manager himself may be a subsidiary.
I must explain that I find myself in a difficult position in relation to this. First of all, I wholly agree with the spirit of the proposal that there should not be any concealed, or what one might describe as illicit, profits made by a manager. I am grateful to the Minister for proposing an amendment which sensibly extends the definition of a manager to take in all those persons associated with him from making these concealed or somewhat illicit profits.
I am also recognising that, in fact, unit trust schemes are managed by managers who are in business for the purpose of making money. As these schemes work they make money in a number of different ways. They make money when the quotient of the division of the assets among the number of units deemed to be in issue does not work out, and they are entitled to adjust upwards the price at which they would sell by 1.25p or 1 per cent of the total being realised, whichever is the lesser; they do not take 1.25p but  not more than 1.25p to get an exact, quotable figure. They also make money in the simple situation that arises for them that people who are unit holders want money and take a view of the market which is different from the view of the market taken by the managers who are skilled in interpreting its moods and motivation and who keep units themselves and reissue them themselves at a higher price, reflecting the increased value in the assets since the time they bought in the units. They take that profit for themselves.
I know some people think—wrongly in my estimation—that this is not a transaction in the underlying assets. I think the reflection in the increased value, in the increased price at which they sell the units, is, on the strict interpretation of this section, as amended by the Minister's proposal. This remuneration should be recognised as necessary remuneration for the successful management of a unit trust. All other types of remuneration, involving, for example, going into an unquoted company six months before it is going to be quoted, buying the shares in the unquoted company for themselves and then reselling them on the public issue with profits to themselves —that is the type of remuneration which they or their associates should be prevented from making. They should be prevented from utilising information which they have and which they should be using for the benefit of the unit trust for their own benefit.
That explains why these two amendments have been put down. What I would prefer would be that the House accept the Minister's proposed amendment and for the Minister to continue his generosity by accepting the first of our two amendments: “save in accordance with the provisions of the deed expressing the unit trust scheme of which the Minister has approved.” That deed will, in fact, set out all these matters. It will set out that they are entitled to a preliminary charge. It will set out that they are entitled to take the difference when they are buying back units if the resultant figure does not work out properly. It will recognise their right to keep units in the drawer —as they call it—and not to cancel  them at all but to retain them for themselves and to reissue them at the higher price, if they judge that is the way the asset values are going. This will all be set out in the deed and, if approved of by the Minister, his amendment catches all transactions that lie outside the deed of which he has approved and should be illegal; I would support that illegality. The second amendment was to cut out this altogether.
Finally, I want to express my view that, in principle, if it is to be as blank as this it would run completely counter to the proper operation of a unit trust and would kill the interest of people in establishing unit trusts here, that is, if they had to comply with these sections. I was going to say, but I know this is wrong, that the only unit trusts schemes that we have are the unit trusts schemes that by virtue of our amendments today are not going to be subject to the Unit Trusts Bill. This is not quite correct, but it is two out of three correct.
You will not find this in the Prevention of Fraud Investments Act, 1958. There is no provision with regard to that in that Act. What the Board of Trade do with regard to it is to see that the right sources of remuneration are established in the deeds with which you establish the unit trusts. I do not think the Board of Trade are right. There ought to be a statutory provision which would take in others as well as the manager. The source of the manager's remuneration ought to be identified in the deed which the Minister approves of.
Mr. O'Higgins: On a point of clarification, before the Minister concludes, is it the position that if the Minister's amendment is accepted, either amended  or unamended, that amendment No. 44 would go anyhow?
Mr. Lalor: I look upon section 12 as being essential to protect the interests of the unit holders. It would be clearly against the interests of the unit holders if a manager could buy assets from the fund if he thought there was a possibility of their appreciating in value and, conversely, that he could sell assets to the fund if he thought their values were about to decline.
The amendment to the amendment is considered unacceptable because it could nullify the effect of the section. Senator FitzGerald spoke about management charges for providing the service. These are not affected by this section. They come under section 8 (2) (h).
Mr. Alexis FitzGerald: What about keeping units? What about units being brought back and not being cancelled? They are doing that and making money out of the movement in the value of the underlying assets?
Mr. Alexis FitzGerald: Yes, they buy back on Monday a lot of units from people who were either taking a wrong view of the market or want money. They take a certain view of the market and they do not cancel them. They keep them because they, the managers, think they will make money because the market is going to go up. A week later, the market having gone up, they reissue them. Is that not making money out of the assets?
Mr. Alexis FitzGerald: I would like to see that put in. As drafted, that is not in and there is no equivalent UK section we can cite. I construe that as meaning that dealing in a unit of the  kind I mention involves transaction in the assets. If you have a right to share in a fund you believe the fund will rise and you keep that right. Your dealing in that right is a dealing in the fund. It is recognised procedure.
Mr. Alexis FitzGerald: There is no equivalent to this section and, therefore, we do not know how it would be construed. I certainly would think that anybody in the semi-trustee position of the manager vis-à-vis his unit trust holder would be in a peculiar situation with regard to this section if the unit trust holder heard that, having sold back the unit, the manager had re-sold that unit with a profit to himself and not to the other unit holders.
(i) on the agreement thereto of a majority of not less than 75 per cent in value of the holders of the units in issue of  the unit trust scheme concerned present and voting in person or, where proxies are permitted, by proxy at a meeting summoned for the purpose, and
(a) to invalidate any provision in force on the operative date so long as any person then entitled to the benefit of that provision or afterwards given the benefit thereof under subsection (4) of this section remains a trustee of the deed in question; or
by a resolution passed by a majority of not less than 75 per cent in value of the holders of the units in issue of the unit trust scheme concerned present in person or, where proxies are permitted, by proxy at a meeting summoned for the purpose in accordance with the provisions of the deed or, if the deed makes no provision for summoning meetings, a meeting summoned for the purpose in any manner approved by the High Court.”
Mr. Lalor: Section 13 of the Bill is based on section 93 (1) of the Companies Act. Senator FitzGerald thought it desirable that other provisions in section 93 should also be brought into section 13. The amendment brings in the provisions of subsections (2), (3) and (4) of section 93. It is felt that these elaborate provisions from the  Companies Act are designed to meet remote contingencies. I feel that we should envisage this type of situation and now is the time to put in the amendment.
In page 12, to delete lines 35 to 55, and to substitute “within such time after the end of each quarter of a financial year, or of such other period of a financial year, of the scheme as the Minister may from time to time specify in relation to all or any one or more of the particulars referred to in this subsection, furnish to the Minister and the registrar and, in any case where the Minister so specifies, to the holders of units of the scheme—
 (a) particulars of the total number of such units and the total number of them that have been bought from the holders thereof and are held for the time being by the manager under the scheme and particulars of any change in either total during the relevant quarter or period, as the case may be,
(b) particulars of the property for the time being subject to any trust created in pursuance of the scheme and of the value of the property, and of any purchase or sale of such property during the relevant quarter or period, as the case may be,
(c) particulars of any profits or losses made or incurred by the manager through dealing in, or holding, such units and of any such profits or losses so made or incurred by the manager during the relevant quarter or period, as the case may be,
(e) particulars of or in relation to such other matters connected with the business of the scheme during the relevant quarter or period, as the case may be, as may stand specified for the time being under section 8 (2) (i) of this Act,”.
Mr. Lalor: The main effect of this amendment is to allow the Minister discretion to vary the frequency of returns under section 15. On Committee Stage, both Senators FitzGerald and O'Higgins urged that the section should allow the Minister flexibility in this regard. The amendment also provides for notification of any change  of name of a scheme, any alteration of a trust deed or any changes in the managing or trustee company, for example, the replacement of a manager or trustee, change of directors or a change in capital structure. These provisions were recommended at that time by Senator Alexis FitzGerald and they are considered desirable.
In page 13, line 6, after “may” to insert “, on his own initiative or on the application in writing of the holders of not less than 10 per cent in value of the units in issue of a unit trust scheme (being an application in relation to which the Minister is satisfied that it is not merely vexatious),”.
“(2) Sections 167, 168, and 170 (other than subsection (3)) of the Companies Act, 1963, shall apply in relation to an inspector appointed under this section to carry out an investigation as they apply in relation to inspectors appointed under section 165 of that Act, but with the following, and any other necessary, modifications:
(a) the references therein to the company shall be construed as references to the unit trust scheme to which the investigation relates and the references therein to the affairs of the  company shall be construed as references to the administration of the scheme, and
(c) the reference in the said section 167 to appointment under section 165 of the Companies Act, 1963, shall be construed as a reference to appointment pursuant to an application under subsection (1) of this section, and
(3) (a) (i) An inspector appointed under this section may, and if so directed by the Minister shall, make interim reports to the Minister and, on the conclusion of the investigation for which he was appointed, shall make a final report to the Minister.
(b) The Minister may, if he so thinks fit, forward a copy of any such report to the registered offices of the manager and the trustee under the unit trust scheme to which the report relates and to any person whom he considers to have a bona fide interest in the matter.
(4) Section 171 of the Companies Act, 1963, shall apply in relation to the expenses of and incidental to an investigation under this section (including any costs or expenses incurred by the Minister in or in connection with proceedings brought by virtue of section 170 (4), as applied by this section, of the Companies Act, 1963 (including expenses incurred by virtue of section 170 (5), as so applied, of that Act)) as it applies in relation to the expenses (as extended by subsection (3) of the said section 171) of and incidental to an investigation referred to in the said section 171, but with the substitution in subsection (1) (c) (ii) of the said section 171 for the reference to appointment under section 165 of the Companies Act, 1963, of a reference to appointment pursuant to an application under subsection (1) of this section and with any other necessary modifications.
(b) by bankers as such of any information as to the affairs of any of their customers other than the unit trust scheme whose administration is being investigated or a body corporate whose affairs are being investigated by virtue of section 167, as applied by this section, of the Companies Act, 1963.”
Mr. Lalor: The effect of this amendment is to expand section 16 to include  additional provisions from the Companies Act which Senator FitzGerald felt should be included. The provisions adapted from sections 167, 170, and 171 of the Companies Act will, firstly, enable inspectors to investigate the manager's and the trustee's subsidiaries, holding companies or associated companies. Secondly, they will provide on foot of an inspector's report for proceedings which can be not merely criminal but also for the purposes of recovery of property that may be due to the unit holders. Thirdly, they will enable the Minister to recover the expenses of an investigation in a case where no prosecution is brought but where, on the basis of the inspector's report, recovery would be justified.
The provisions adapted from section 173 of the Companies Act gives safeguards to solicitors in respect of privileged communications and to bankers in relation to the affairs of customers other than the unit trust scheme. It is felt that these elaborate provisions from the Companies Act are designed to meet remote contingencies. However, I felt that, in order to keep in line with some of the other amendments, it was just as well to include this one.
“(b) require a certificate of registration of a unit trust scheme, or a copy of or extract from any document or any part of any document certified by the registrar, on payment for the certificate or the certified copy or extract of such fees as the Minister may fix”.
In page 14, line 3, after “offence” to insert “save that the trustee shall not be guilty of an offence under section 10 if either the document has been issued by the manager without submitting it to the trustee or the trustee has disapproved of it or a copy thereof has been issued without the signature of a director or secretary of the trustee”.
I thought it very wrong that a trustee should be in a position of having committed an offence and become subject to the penalties attached to that offence in section 19, where the offence consists of the manager breaching the requirements of section 10 and issuing the document without submitting it to the trustee, or where the manager has submitted it to the trustee and the trustee has disapproved of it, or where a copy has been issued without the signature of a director or secretary of the trustee. It would only be if the document in question has been issued by the manager, with the approval of the trustee, and where that approval has been formally signified in the manner provided for under section 10, with the signature of the director or secretary of the trustee. The Minister must be satisfied, after consultation with the Central Bank of Ireland and after consideration by that bank of the relevant information in the application, that their competence in respect of matters of the kind with which they would be concerned in relation to the unit trust scheme and that the probity of the manager and trustee were such as to render them suitable to act as manager and trustee respectively under the scheme.
It seems to me to be intolerable to create a position where a trustee believes a manager to be honest and subsequently finds he is not, or finds that the manager has been taken over and is now in fact controlled by people entirely different from those in whose probity he had a proper faith at the beginning. It seems to me intolerable in those circumstances that the trustee should be rendered liable for an offence which is the offence of the manager, and where there is no formal  evidence that the trustee has signed the document which constitutes the offence. If the director and secretary of the trustee has signed a document which does not contain what it ought to contain under section 10, then he should be guilty of an offence, then he should be capable of prosecution, then he should be liable to the penalties under section 19. But if he is not in that position, if he has never seen the document, if he is as innocent of it as any Member of the Seanad, if, having seen it, he has gone further and disapproved of it and assumes that the manager is considering his criticisms—he may not have yet lost faith in him; he may not yet know the kind of body that he is now dealing with; he may not feel it right in the interests of the unit holders that he should address himself to the Minister on it, because he may think that his criticisms may already be met and there may be adjustments made in this document to see that it represents a full and proper compliance with the Act, which may be a new Act, a new code to the new owners of the manager who may have taken that manager over, and who may not be familiar with its requirements or careful in contemplating its consequences—if the manager does that and is careless, he should pay for it, because he may be giving rise, as a result of one of the Minister's amendments, to civil liabilities if his statement is incorrect. But he may be committing a crime, too, and it is such a breach of the law that it ought to be a crime and should be punishable as a criminal offence.
But the trustee may never have seen it, or may have seen it and disapproved of it; or he saw it and approved of it in an informal kind of way, through somebody who thought he had more authority in the trustee fund than he had, and in fact when it came to the board, the board refused to sign it, and the manager meanwhile assumed that it was all right, because his pal along the line had told him that it was all right, and then issued it without the signature. He may have printed on it the signatures of director and secretary. But where the manager is solely responsible the trustee ought not to be guilty of any criminal offence.
Mrs. Robinson: I should like to support this amendment for the reasons given by Senator FitzGerald and also because I think it follows from the amended version of section 10, that in proposing civil liability on the manager —acknowledging that it would probably be the manager, unless as Senator FitzGerald has said, the trustee has specifically approved the particular scheme—that he ought not to be guilty of a criminal offence, ought not to incur criminal liability, unless there is some mens re, unless there is some guilty mind there.
Mr. Lalor: I look on my function in this regard as protecting the investor. In relation to section 10, which is referred to here, it places a clear responsibility on the trustee by requiring him to approve of the prospectus. I do not look upon this as an onerous duty because, as a result of my amendment No. 40, the document does not now have to be updated too frequently. I feel that the acceptance of the Senator's amendment would mean that the trustee could neglect his duty without fear of incurring any penalty. I am opposed to the acceptance of this amendment at this stage.
Mr. Sheldon: Surely the Minister does not appear to follow the argument. Why should anything that the Minister has done, by way of amendment, have any effect where a manager does something without telling the trustee? How does this show the trustee was lacking in due care? If there is nothing to indicate to the trustee that the manager was doing something wrong, I cannot see where he fails in his duty. He cannot sit in the manager's office and watch everything he does.
Mr. Alexis FitzGerald: I am certainly assisted by Senator Sheldon's contribution. The Minister has been very generous in the many amendments that he has given us at this stage to meet points raised by Members of the House on Committee Stage. One of them has been to meet the suggestion that this Unit Trust Bill ought to create civil liabilities which do not exist in other codes and which are highly desirable  to exist. The Minister says that he is concerned with civil liabilities, he is concerned with the civilian investors. He is concerned, and ought to be concerned, with the entire Bill and its impact on the unit trust movement. He is concerned, or ought to be concerned, with the position of the trustee of whose probity he has been satisfied when he allowed the unit trust scheme to be established.
To take up the point made by Senator Sheldon and to emphasise how right he is in what he said, if you look at the amended section 10, which if it is not complied with will render the trustee liable to an offence with serious consequences, because a trustee who gets himself into this position will find his reputation extremely damaged if he is prosecuted. Partners sometimes come together; one partner finds the other a rogue and the one of integrity gets rid of the rogue as quickly as he can but he is in no position to be prosecuted because of offences he has not committed but the offences committed by the partner he has got away from.
The manager under a registered unit trust scheme shall prepare or cause to be prepared a document containing such information in relation to the scheme as the manager could reasonably require to have and after approval of the document by the trustee under the scheme.
Who secures the approval of the document by the trustee but the manager? Who is in a position, or called by this section, to see that the information is such as should reasonably be obtained—the manager not the trustee. He is now to be put in the position that he has got to satisfy himself with matters that are the concern of the manager as well as matters that are the concern of the trustee. The trustee has onerous duties. After approval of the document by the trustee under the scheme a copy thereof should be sent to the registrar. By whom? By the manager. It is not the trustee. It may be sent by the manager without having shown the document to the trustee; or after the document has been disapproved of by the trustee; or after  the trustee has declined to give it the formal sanction he is required to give by having it signed by a director and secretary.
In relation to a matter such as a prospectus, take the stern requirements of company law with regard to that. No prospectus can be issued unless every single person named in the document as a director or promoter signs a copy or has authorised lawfully his agent to sign it. He then takes all the consequences of the Companies Act if he does not read it or if he relies too much on advice he is getting. At any rate he knows the consequences or can be advised of the consequences.
The practice is very strong to see that the documents are signed by and the responsibility firmly taken on by the persons who sign them. Here we could have a situation in which the trustee has signed nothing, sealed nothing, seen nothing and yet he is being made liable for an offence and can be prosecuted and found guilty for an offence which has been committed by the manager because the manager has failed to get the information he could reasonably be required to have got. He has not told the trustee about it or has not asked him for his consent at all or perhaps he has even forged his signature. People are very lax in these matters unless the procedures require them to be otherwise. Thinking that, having had 25 approvals from the trustee—because it was all working through one man who got sacked in the meantime—the 26th approval will come as quickly as the 25 previous ones, he has perhaps printed on the signatures of the director and secretary although he did not, in fact, get any authority to do so. How could we enact legislation making a trustee liable for a criminal offence in a situation where all the burden is cast on the manager?
Mr. Lalor: This meets Senator Alexis FitzGerald's point of view that an officer of a body corporate should not be guilty of an offence because his neglect was unintentional rather than  deliberate and this is the object of this amendment.
“(2) This Act shall come into operation on such day or days as, by order or orders made by the Minister under this section, may be fixed therefor either generally or with reference to any particular purpose or provision and different days may be so fixed for different purposes and different provisions.”
Mr. Lalor: Senator FitzGerald also made a point on the Committee Stage in relation to section 7 that the moment the Act came into force no foreign newspapers carrying a prohibited advertisement could circulate in this country unless it was exempted by the Minister and exemption could not be given until the Act had been brought into force. This amendment will enable me to bring different provisions into force at different times. I could if necessary defer the operative date of section 7 or part of it. That is the purpose of this amendment.
Mr. Alexis FitzGerald: I welcome this amendment very much. It meets very well a point which I think was valid and could have been embarrassing in the operation of the Unit Trust Bill. It is appropriate that I should say generally—despite my comments on the last amendment, which at this point of time the Minister is not taking but may consider, I hope, at another point of time in another place—that I think all of us on this side of the House feel that we have been very generously treated in regard to our contributions. Even where the Minister has not accepted all our amendments tabled at this stage, in relation to many of them he has undertaken to consider them in the future. I feel that what he has done will encourage people who want to do this kind of work in the Seanad and make the House feel it is a better place to be.
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