Wednesday, 5 May 1999
Seanad Éireann Debate
Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy): I am pleased to have an opportunity to address the Seanad and to bring the Companies (Amendment) (No. 3) Bill, 1999, before this House.
I should explain how we have arrived at this Bill so soon. In February of this year, a Private Members' Bill was tabled by Deputy Pat Rabbitte. That Companies (Amendment) Bill, 1999, had as its sole objective the amendment of section 21 of the Companies Act, 1990, in relation to the disclosure of information which becomes available as a result of investigations carried out by inspectors or officers appointed by the Minister for Enterprise, Trade and Employment under sections 19 or 20 of Part II of the Companies Act, 1990. The Bill has still to be discussed.
In March of this year, the Companies (Amendment) (No. 2) Bill, 1999, was published. That Bill deals primarily with amendments to the  Companies (Amendment) Act, 1990, which introduced the process of examinership into company law, the removal of the statutory audit requirement for certain small private limited companies and will introduce a number of company law amendments as part of an overall package involving company law and finance law to tackle the problems created by Irish registered non-resident companies. The proposed Bill will be brought before the Dáil for its Second Stage in the near future.
The Companies (Amendment) (No. 3) Bill, 1999, which I am bringing before this House today, is designed to introduce amendments in two areas of existing law – those relating to insider dealing and disclosure of interests and securities – in such a way as to permit price stabilisation in the context of issues or offers of securities to the public.
It might be helpful to the House if I were to sketch in the background that has led to the introduction of this legislation. Part V of the Companies Act, 1990, introduced into Irish law provisions to deal with the issue of insider dealing in relation to the securities of companies. Insider dealing essentially occurs when people who are in possession of price sensitive information use that information to buy or sell shares to realise a gain or avert a loss. Thus, section 108 of the Companies Act, 1990, provides that it shall not be lawful for a person who is at any time connected with the company to deal in any securities of that company if, by reason of his or her connection with the company, he or she is in possession of information that is not generally available but which, if it were, would be likely materially to affect the price of those securities. The section goes on to prohibit people who indirectly obtain price sensitive information from dealing, as well as people seeking to have the dealing done by procuring other people to engage in the deal on their behalf.
Chapter 2 of Part IV of the Companies Act, 1990 deals with the disclosure of information in the shareholding of a company. In particular, a person who has an interest of 5 per cent or more of the share capital of the company has to disclose that information to the company. In addition, where as a result of buying or selling securities, the interest increases or decreases by one percentage point, that information has also to be disclosed to the company.
In the context of the public issuing or offering of securities, international practice permits those organising the issue or offer to engage in what is termed “price stabilisation” for a limited period after the issue or offer takes place. The purpose of the price stabilisation is essentially to ensure that the price of the security which has been issued or offered does not vary significantly from the issue or offer price in the immediate aftermath of the issue or offer. However, as our law currently stands, such action would be in contravention of Part V of the Companies Act, 1990 prohibiting insider dealing, if carried on within the State. By virtue of regulations made by the  then Minister for Industry and Commerce in 1992, if the stabilisation activity were carried on outside the State, for example, if the securities were also listed on the London, New York or Tokyo stock exchanges, such stabilisation could be carried on without breaching Part V of the Act.
When the Company Law Review Group submitted its report on a number of areas of company law that it examined at the request of the Minister of the day, the group made recommendations for a number of changes in relation to the insider dealing provisions. Because of the diversity of the areas examined by the Company Law Review Group, the decision was taken early on to progress implementation of the recommendations on a phased basis. It was in that context that the Companies (Amendment) (No. 2) Bill, 1999 was prepared to implement the Company Law Review Group recommendations in relation to examinership and the removal of the statutory audit requirement for certain small companies. Work on the preparation of proposals to implement the changes recommended by the Company Law Review Group to Part V has not yet been progressed.
However, with the proposed offer of securities in Telecom Éireann due to take place later this summer, the Government has decided that it would be appropriate, given the size and nature of the proposed offering, and the fact that the principal market for the shares will be the Irish Stock Exchange, that price stabilisation should be possible in this jurisdiction as well as the other jurisdictions in which the securities may be listed, for example, in London and New York as proposed at present.
I should also mention that while price stabilisation is permitted in these other jurisdictions, it is subject to certain rules and regulations. Accordingly, the Bill proposes to set aside the prohibition on insider dealing and certain of the disclosure requirements in the Companies Act, 1990, only where certain criteria are met.
Thus, in broad terms, the ability of the manager of the offer or issue to engage in price stabilisation will be available only where advance warning has been given in all relevant publicity that stabilisation may be engaged in; the stabilising action can only take place for a relatively limited period, 30 days from the date of allocation of and for the securities; only if the manager has satisfied himself or herself that all necessary compliance was observed; specific limits as to the price level at which intervention can be made – the issue price or the market price, whichever is the lower; proper records of any stabilisation interventions are retained by the stabilising manager; and appropriate notifications are made to the Irish Stock Exchange of any stabilisation intervention. These are the general requirements that must be met before stabilising action can be engaged in.
Turning to the present proposal, this Bill contains seven sections and a Schedule. The Schedule  contains the stabilisation rules, which must be observed by parties engaging in stabilising activity.
Section 1 contains the interpretation and definition of a number of terms that are used subsequently in the legislation. I would draw attention in particular to the definition of “stabilising period” and to the fact that it defines this period within the jurisdiction, by reference to the stabilisation rules, and the stabilising period for stabilising action outside of the jurisdiction is specifically defined in the definition. While the latter definition is similar to that applying within the jurisdiction, it is not identical because the same control will not apply to stabilisation conducted outside the jurisdiction.
Section 2 is the main operative part of the Bill as regards exempting stabilising action from the prohibition contained in Part V of the Companies Act, 1990, in relation to insider dealing. Paragraph (a) exempts stabilising action conducted within the State for the purpose of stabilising or maintaining the market price of securities once it is done in conformity with stabilisation rules. Paragraph (b) on the other hand, exempts stabilising action undertaken outside the State, but only if the action taken is in all material respects permitted by, or is otherwise in accordance with, all relevant requirements applicable to such actions in the jurisdiction where the stabilising action is undertaken, including the rules or regulatory requirements governing that stock exchange if the securities are listed on a stock exchange in the jurisdiction.
Section 3 exempts acquisitions or disposals of interests in the relevant share capital of the company, which is acquired by a person conducting stabilising actions during the stabilisation period, from the disclosure requirements contained in sections 67 to 79 of the Companies Act, 1990. This exemption only lasts for the duration of the stabilising period. At the end of the stabilising period, if the person engaging in the stabilising actions on behalf of the issuer or offeror still holds securities, then disclosure will have to be made in accordance with the relevant sections. The disclosure that is required by the relevant sections is a holding of 5 per cent or more of the share capital of the company in question. Where a person holds such a holding, disclosure of that fact must be made to the company. Moreover, where a person holds more than 5 per cent and engages in purchases or sales of securities which result in a 1 per cent change in the amount of securities held, then the fact must also be disclosed to the company concerned.
I should explain that chapter 2 of Part IV of the Companies Act, 1990, also implemented a European Union directive on the disclosure of major shareholdings. In this context, where a shareholder crosses certain defined thresholds, that is where a holding moves between the threshold of 10, 25, 50 or 75 per cent, then disclosure must also be made to the competent authority,  which in the case of Ireland is the Irish Stock Exchange.
Subsection (3) of section 3 provides that the obligations in respect of such disclosure will continue to apply even to the activities of any manager of an issue or offer of securities which is otherwise exempt from the earlier disclosure requirements described.
I will explain briefly the background to section 4. In 1991, the then Minister for Industry and Commerce made regulations under section 121 of the Companies Act, 1990, to modify section 110 to facilitate the operation of Part V. Specifically, a number of clarifications were made in respect of the activities undertaken by underwriters in offerings and issues of securities. The opportunity is being taken in the present Bill to revoke this statutory instrument and to replace it by the content of section 4. In other words, that which we had in secondary legislation is now being adopted into primary legislation.
Section 5 is designed to enable the Minister, by regulation, to make what would be termed minor adjustments to the stabilisation rules to remove any difficulty that may arise in their operation. Any such amendments would obviously be within the policies and principles contained in the present legislation.
Section 6 revokes two statutory instruments which were made by the former Minister, and to which I have already referred briefly, on the basis that the present legislation effectively replaces them. Section 7 contains the title, collective citation and arrangements for the commencement of the legislation.
The Schedule to the legislation contains the stabilisation rules which must be observed by any parties who wish to engage in stabilisation activity. Rule 1 contains a number of definitions which set out precisely what the terms mean within the rules. Of particular note are the definitions of “introductory period” and “stabilising period”, which set the limits on the periods during which certain actions must be or can be taken.
Rule 2 defines the scope of application of the rules, and the securities to which they apply. Essentially, any issue or offer of securities for cash which are not already dealt with on a stock exchange will be covered once arrangements are made for the securities in question to be listed on the exchange. In respect of an offer of securities for cash where the securities are already listed, the offer will have to be for at least £15 million. This is designed to ensure that the exemption provided for stabilising action is not used in normal sales of securities on the Stock Exchange.
Rules 3 and 4 set out what action or ancillary action may be taken by the stabilising manager, and includes the purchase or sale of securities or associated securities. The stabilising manager must be satisfied that he or she meets the other conditions set out in later rules. Rule 5 sets out the information that must be contained in any preliminary announcements or other publicity  issued prior to the actual offering or issue taking place.
Rule 6 prohibits stabilising action in relation to associated securities where the basis on which the associated securities may be exchanged for, or converted into, relevant securities had not been finally settled and been made the subject of a public announcement.
Rule 7 imposes limits on the price that the stabilising manager may pay for the securities. Essentially, the issue price is the maximum that may be paid. However, if a stabilising manager undertakes intervention at a lower price, then he or she can intervene again at that price or, if there had been an independent deal in the marketplace, at the market price.
Rule 8 is designed to deal with the early termination of stabilising actions and provides that notification must be made to the stock exchange where this occurs. This will have the affect of ending the period during which interventions may be made by the stabilising manager.
Rule 9 sets out the requirements as regards records to be kept by the stabilising manager, and the fact that these must be communicated to the Irish Stock Exchange where the stabilising actions take place within the State. The Irish Stock Exchange is the competent authority in respect of the examination of possible breaches of Part V of the Companies Act, 1990, in relation to insider dealing. It is considered appropriate that it should be informed of any actions undertaken by the stabilising manager in the course of an issue or offer. In this particular instance, however, the information which is communicated to the Stock Exchange will not be disclosed by the Stock Exchange to the market. However, it will help the Stock Exchange to understand better how and why prices may be moving in the market place.
That is a brief overview of what is contained in the Companies (Amendment) (No. 3) Bill. As I mentioned, the Government has decided that the ability to engage in price stabilising activities in the context of the forthcoming Telecom Éireann flotation, is considered appropriate and, accordingly, there is an urgency in having the present Bill enacted without delay.
I thank the House for its co-operation in arranging this early debate on the Bill and I look forward to the Bill passing all remaining Stages in this and the other House as a matter of urgency. I commend the Bill to the House.
To date, I have not crossed swords in this House with the Minister of State. The time for us to differ seriously over legislation is running out as he will be making a bolt for Europe. We will not differ over this Bill. I find myself broadly in agreement with everything the Minister of State has said about the legislation, notwithstanding  that I was only able to begin perusing it yesterday.
I appreciate the intention of the Bill which is designed to reflect good international practice in national law. I also appreciate the fact that it will only apply in the case of large issues or offers of securities to the public. The Bill sets out to permit price stabilisation on the Irish Stock Exchange regarding new issues of securities or large offers of existing securities. Price stabilisation is a mechanism that has been allowed in other countries for a number of years. It would be rather incongruous if in the case of the launch of Telecom Éireann, to which the Minister of State referred, the price stabilisation mechanism was available in London and New York but not in Dublin. It is important in the national interest that Irish companies have this facility available to them in the case of a launch and that their hands are not tied behind their back.
However, it is equally important that the strictest rules apply in order to prevent any wrongdoing. Accordingly, the exemptions proposed must not be fettered, the market must be forewarned and the Stock Exchange kept fully informed. Investors naturally do not like uncertainty and price stabilisation is therefore a mechanism which, when properly used, can enhance confidence. We all know how important confidence is to any market. As I said, it would be unreasonable to expect us to operate without such a mechanism when it is available elsewhere.
The Bill provides for a maximum period of 30 days exemption from the insider dealing rules and some of the disclosure of interest requirements as set out in the Companies Act, 1990. The strict rules governing the operation of price stabilisation, to which the Minister of State referred, provide that all documentation relating to the issue or offer must contain and disclose the fact that stabilisation may take place so that potential investors will be fully aware. It is important that investors are made fully aware in all documentation to be made available in advance of any such offer or issue. These rules provide that stabilisation will only be permitted to stabilise or maintain the price of the share or security and that stabilisation may only occur within a period of 30 days of the date of allocation. The rules also provide that the stabilisation manager may only buy on the open market at or below the issue price and that the stabilisation manager is obliged to ensure that procedures are properly in place so that an accurate and detailed record of any transactions that take place in accordance with the rules is disclosed from his records to the Irish Stock Exchange.
It is obvious that we are placing huge trust and confidence in the stabilisation manager or managers and I may put down some amendments relating to this matter on Committee Stage. Who will guard the guards? Who will oversee the stabilisation manager? The Minister of State should clarify this. I respect the intentions behind  these strict rules but in practice there is huge scope for breaches of the rules if someone of insufficient integrity is involved. We cannot foresee the future but it is our duty to ensure that the Bill is as tight as we can make it to guard against possible breaches.
The Bill will obviously be of vital importance in the public offering of shares in Telecom Éireann this summer. It is expected that the flotation will be the largest to date on the Irish Stock Exchange; it will be the first sale of shares in a State-sponsored company comprising a retail offer to the public and will take place on the Irish, London and New York exchanges.
As Ireland will obviously be the main market for Telecom Éireann shares, it would be ridiculous if the other exchanges were to permit stabilisation, which they do, and the Irish Stock Exchange were not. It is, therefore, in the national interest to facilitate the Telecom Éireann offer by the passage of the Bill.
I look forward to examining the proposed stabilisation rules in greater detail. That is not to take away from the Minister of State's intentions regarding those rules, but we may have to look closer at the permitted stabilising action, at the preliminary steps before stabilising action and possibly at the restriction on stabilising action and associated securities as well as the limits on prices. My cursory reading of the Bill indicates that there is potential in those areas for breaches. One does not want to anticipate any wrongdoing, but we are all too aware of what can often happen with companies. The Tánaiste has several investigations under way, and I understand from preliminary reports that there have been instances of insider dealing and other breaches.
Ms Cox: I compliment Senator Coghlan on his contribution, and I thank the Minister of State for taking this Bill, as it is important that legislation like this is introduced in the Seanad. Any legislation that continues to protect Irish shareholders and investors is vitally important.
To continue the point on which Senator Coghlan finished, one reason for this Bill is to continue to have transparency in the securities market and in the operation of the stock market. That is vitally important for people to continue to have confidence in that market, in our society and in flotations such as that proposed by Telecom Éireann.
This Bill proposes allowing stabilising activity in relation to the issue or sale of securities and it provides for connected matters. When I started to read the Bill I began to wonder why the draftsmen cannot put matters in simple English, as it is often difficult to understand what is involved.  The stock market and share issues are matters that ordinary people are becoming interested in. The Irish Permanent flotation was one of the first instances where people who would never have thought of trading on the stock market suddenly became traders with shares to hold or sell. They had reason to look at the financial pages of the newspapers and it is important to continue to ensure that we come down to a level that the ordinary people in the street can understand. Securities mean the shares that we buy and the movement that will occur in particular companies. As we continue with the Single Market and the euro, we are more likely to see large share issues in Ireland, which is welcome. As the Minister of State and Senator Coghlan said, the Telecom Éireann share issue will give Irish people an opportunity to buy into a company that was previously owned in total by the Government. That is something the country should be proud of and we should ensure it is as successful as possible. This legislation will certainly be of benefit in doing so. It is important to remember that there are many people who are not experts and who do not know what is going on and therefore it is important we make things as understandable as possible.
A number of issues regarding stocks and shares should be considered. The thrust of our legislation has been to ensure the protection of shareholders. Questions such as the matter of brokers being allowed to sell shares on to clients for which they are managing an issue of shares are probably covered in the Companies Acts but the Minister of State should keep these to the fore and bear them in mind when drafting legislation in this area so that any possible conflict of interest is dealt with. We must have confidence in the independence of those giving advice. We must be sure that so-called experts do not have a vested interest. If a single stockbroker is acting for a buyer and a seller, this must be made clear. This legislation brings Irish practice into line with international practice. When Telecom Éireann shares, for example, are traded on the London and New York stock exchanges, it is important that the same level of expertise is available in Ireland as in other countries.
The Minister has gone through the Bill in great detail and Senator Coghlan has dealt with the points made by the Minister. Therefore, I do not propose to itemise every rule set out in the Bill. The explanatory memorandum is clear, although I repeat my plea for clarity in the language. If shares fall below the issue price it will now be possible to support the share price without being guilty of insider dealing. The stabilising manager will be obliged to fulfil the rules laid out in the Bill. He or she must give advance warning of the stabilisation; act within a 30 day limit; satisfy himself or herself that all necessary compliance has been observed; have specific limits on the price at which the intervention can occur; maintain proper records of the actions to be taken and ensure that appropriate notifications are made. If these  rules are adhered to the stabilising manager may support a share issue in the interest of buyers and potential buyers.
This is a technical Bill with a specific purpose. It revokes some statutory instruments and replaces them with primary legislation. That is to be welcomed. The Bill protects the shareholder and ensures the transparency of the process. I welcome the fact that the Bill has been initiated in the Seanad and I look forward to hearing Government and Opposition amendments on Committee Stage.
Mr. Quinn: I welcome the Minister's explanation of a rather complex Bill. However, I do not welcome the Bill because I believe it is fundamentally misguided and highly undesirable. We are talking about rigging the market. Senator Cox cited the example of Telecom Éireann shares dropping from £2 to £1.60 and explained how the Bill would allow the opportunity to support the shares from inside and to pretend they had not dropped to that price. Senator Cox and the Minister both used the word “transparency”. This Bill proposes the very opposite of transparency. It will give permission to hide the fact that share prices are being supported.
I accuse the Bill of rigging the market and I am sorry if such a blunt phrase upsets people. To speak of stabilising markets sounds reassuring and comforting. It is such a lovely word that it is easy to fool ourselves into thinking that is what we are doing. The Bill, in fact, rigs the market rather than stabilises it.
A free market reflects the coming together of a willing buyer and a willing seller under conditions of full disclosure of all relevant information. That is how markets work, whether the product is a head of cabbage or a company share. The justification for a free marketplace is that at any given time and price, one person will want to buy and another will want to sell. Under conditions of openness and fair dealing the price agreed in this way is regarded as the correct price. The justification for a marketplace collapses if it is not totally free.
We rightly think it intolerable that a person should be asked to buy something from somebody who, because of his special position, knows something that no one else knows. That is fraud and insider dealing and is rightly against the law. People have gone to jail for behaving in that way. The chief executive of Guinness went to jail because an effort was made to “stabilise the market” during a takeover of United Distillers. An effort was made by Guinness executives to buy shares in the other company using Guinness shares. They ensured that the value of Guinness shares was different from the marketplace in order to use those shares to buy the other company. This was regarded as fraud and the chief executive of Guinness went to jail for doing it. This Bill will legalise such activity and enable it to happen in the future.
Since there have been markets, operators have  sought to manipulate them. If one corners a market, one manipulates it by restricting supply and thereby gains monopoly power over demand. If a seller gives buyers false information he manipulates the market in his favour by deceiving buyers about the true value of what he is selling. On the stock market, the market price is a key piece of information. Traders in the stock market are entitled to operate on the assumption that the price reported is a true price.
I do not refer only to stock brokers and wealthy people. Senator Cox mentioned that the general public now buys and sells shares. I speak on behalf of shareholders. People trading in the stock market are entitled to assume that a price reported is a true price from a willing seller to a willing buyer under conditions of information known to both. That is the implicit promise of a true marketplace. If the price is not made under those conditions it is not a true price; it is a rigged price. That is what this Bill seeks to make legal.
I have heard no good argument to justify legalising this practice and I look forward to hearing the Minister try to convince me. There is no good argument in the public interest. I have heard arguments which reflect the interests of companies planning flotations, their advisers and those who run the marketplace and would prefer to see orderly markets. I have heard no good argument that answers to the interest of the ordinary shareholder or potential shareholder.
The Minister has referred to Telecom Éireann and this may explain why the Bill has come before the House in rather a hurry, as Senator Coghlan said. I speak on behalf of people who will buy shares in Telecom Éireann, ordinary citizens. We must protect them by not misleading them. In a free marketplace, market forces are allowed to determine price and nothing else is allowed to interfere. When we lose sight of that simple but demanding principle we undermine the cause of free markets. We are not talking about regulating or stabilising markets but rigging them. The State should never condone this practice for any reason. This is bad legislation and I hope the Minister the State will reconsider. We are operating in an era of openness and transparency.
On rule 9, the Minister of State said that the Irish Stock Exchange is the competent authority in respect of the examination of possible breaches and it is considered appropriate that it should be informed of any actions undertaken by a stabilising manager in the course of an issue or offer. In this instance, however, information communicated to the Stock Exchange will not be disclosed by the Stock Exchange to the market. The ordinary citizen who is tempted to buy shares will not be given relevant information. We will not, therefore, have an open or fair market where the willing buyer will have all the information he or she requires.
Mr. Mooney: I have a particular interest in this legislation. As I have stated on other occasions, I am a shareholder, albeit a small one. I was involved in some of the recent flotations such as Norwich Union and First Active. This is included in my statement of interest, if the Leas-Cathaoirleach is interested in my small amount of shares. Shareholding should be about the public, not just the elite group interested in the financial markets.
The thrust of the recent debate in relation to the flotation of Telecom Éireann was that the Government is committed to ensuring a broadening of the shareholder base. While I sympathise with what Senator Quinn said about shareholders' interests – I hope the price of the share, once bought at the fixed price, will rise – the term used in financial circles for this activity is “stagging the shares”. Investors, mainly those of a speculative bent, watch flotations to establish whether the price of the share is at an acceptable level.
It is generally accepted that the Telecom Éireann share will be a popular one. If it is left to the open market, the price will go up. The Government has indicated that it will ensure a larger than normal percentage of the shares will be made available to the public. I subscribe to the view that the largest amount possible should be held by ordinary citizens. The Government is committed to ensuring this in principle. As it is price sensitive information, it will not indicate the percentage at this stage. If there is a large shareholder base in the private sector, institutional investors will wait on the sideline, particularly pension funds which have limited investment options. As a consequence much Irish money is invested overseas. Telecom Éireann will, therefore, be seen as blue chip investment.
In the absence of legislation to permit price stabilisation there would be stagging of shares with the result that the price would go crazy. Institutional investors would pile into the market. The price might even go beyond the capacity of the ordinary investor to buy. It is being speculated that the largest tranche of shares available, even in the most liberal assessment, will be no more than 200 to 300. At current market prices – I have no inside knowledge – one is looking at a price range of between £2 and a little over £3. The share will need to be priced at an attractive level to encourage private investors to get involved.
There should be a free market with which my sympathy lies. The Government and those who support the share flotation, the largest the State will ever experience, are committed to ensuring the widest possible shareholder base. This infers that there is a need to inject confidence in the marketplace so that those who have traditionally put their money into banks and other safe deposit vehicles will be encouraged to put their money into the share.
There is merit, therefore, in what the Government is attempting to do. The 30 day limit proposed in the Bill, in the context of this flotation,  is not overly repressive. As has been pointed out by the Minister of State and my colleague, Senator Cox, it is by no means unusual but is the norm in international markets. It would be an anomaly if there was price stabilisation in London and New York but not in Dublin.
While by instinct I support what Senator Quinn said, it would border on a national calamity if the share flotation is the not the success we expect it to be. There should be encouragement to buy a blue chip share, not for a couple of weeks in the hope that it will rise significantly but for the medium to long-term as a savings vehicle. Because of low interest rates, more people should buy shares as a saving vehicle for the long term. For these reasons I support the Bill.
Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy): I sincerely thank Senators for their positive contributions. This is important legislation, the purpose of which is to bring Irish law into line with international practice. It will allow those trading on the Irish Stock Exchange to use the price stabilisation mechanism which has been available in other countries for a number of years.
The balance struck between permitting managers of issues or offers to engage in price stabilisation and the rules which they must apply are in accordance with international standards. Put at its simplest, the market will be aware that price stabilisation is a possibility before the issue or offer takes place. Stabilising activity may only happen within a short window period of 30 days after the allocation of securities. A stabilising manager may only buy securities on the open market at or below the issue price. He or she will have to be satisfied that appropriate procedures were followed leading up to the issue or offer and records of any stabilisation transactions will have to be maintained and be disclosed to the Irish Stock Exchange which acts as regulator.
Senator Coghlan asked who will guard the stabilising managers. Part 5 contains criminal and civil sanctions. The competent authority, the Stock Exchange, will keep stabilising action under review and if breaches occur it can investigate and, if necessary, report the matter to the Director of Public Prosecutions with a view to possible prosecution.
On the point made by Senator Cox that brokers may sell shares to other clients, the existing Part V, section 108, contains requirements in this regard. Senators Coghlan, Cox and Mooney referred to best international practice. As I mentioned in my introductory remarks, when formulating the present proposals we were very conscious of the rules which operate in other jurisdictions in relation to price stabilisation. We considered it desirable to mirror to the largest extent possible good practice in relation to such price stabilisation regimes while taking account of the differences in company law which already exist between this and other jurisdictions.
In this context, if we were to differ significantly  from what is required in other jurisdictions, it would make it more difficult for issues and offerings to be listed simultaneously on a number of exchanges. That would be very unfair to investors and the markets and it would allow for manipulation in particular jurisdictions in which there is not equality of opportunity across the international marketplace. We must guard against that position.
On the points made by Senator Quinn that we are talking about rigging the market, I make the following observations. In the case of new issues and offers, there is often temporary volatility in the market place for a short period after the issue. Stabilising is not aimed at rigging the market but at helping the share price settle at a sustainable price in the markets. Full disclosure of the fact that stabilisation is likely to take place must be made as soon as the first announcement of the issue or offer is made. The markets must be notified that the stabilisation mechanism will or may be used. The Guinness case mentioned related to a take-over offer. Stabilisation is prohibited in the case of take-over offers.
Senator Mooney spoke about the Telecom Éireann offer, as did other Senators. While it is intended to have the legislation in place to permit price stabilisation in Ireland in respect of the initial public offering of shares in Telecom Éireann, the Bill will apply to all offers and issues of securities into the future. This is general legislation and, obviously, it will be applicable in the case of Telecom Éireann. Unless we conform to best international practice, we will confine this country and consign investment opportunities into a very limited position which would be bad law and unfair to the capacity of the country to realise its asset value.
The Telecom Éireann flotation falls within the ambit of the Minister for Public Enterprise, Deputy O'Rourke, who is responsible for the issue. Due to stock exchange listing rules here and abroad for exchanges on which the securities may be listed, I do not wish to and I am precluded from commenting any further of the details of that specific offering.
I thank Members for their contributions. Member may be assured that this legislation is straightforward and enables Ireland to conform to that which exists in the international marketplace. When professional people, banks, institutions, stock brokers and other issue managers manage funds for investors or when funds are available for investment, the investors, shareholders and the people who control the liquid assets want to know that a stabilising mechanism is available where the issue takes place otherwise they would have no confidence in that issue. We live in a global economy and in the new euro zone and the situation is changing. We must legislate for that new environment and ensure that the country's assets, whether public assets owned by the State or private assets owned by the corporate sector, can fully realise their value once they are publicly floated.
 We are enshrining in legislation a new mechanism which will ensure that for a short period – a maximum of 30 days and at the discretion of the issue managers in conforming to the stock exchange regulator – this de facto structure is available to maintain confidence in the issue so that international and other investors, including the institutional and private investor, will know there is absolute confidence in the share offer taking place.
 As the market regulates, it is possible, through notification from the issue manager to the stock exchange, to withdraw from that stabilisation mechanism at any time before the 30 days are up. This is a mechanism which is accepted internationally. We are conforming only to best international practice and it is vitally important for the future of this country that we do so. I commend the Bill to the House.
Cregan, Denis (Dino).
Ó Murchú, Labhrás.
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