The Minister of State at the Department of Finance, Mr Martin Cullen TD, today announced the publication of the Investor Compensation Bill, 1998.
The Bill does three things:
(i) it establishes a right to compensation for clients of investment and insurance intermediaries where a client loses money through the default of the intermediary,
(ii) it transposes the EU Investor Compensation Directive into Irish law, and
(iii) it provides for a number of amendments to the Insurance Act, 1989, the Investment Intermediaries Act, 1995 and the Stock Exchange Act, 1995.
Investors will be entitled to compensation of 20,000 Ecu per client (currently about £15,500) or 90% of the losses suffered through the default of an intermediary, whichever is the lesser. This is in line with the Investor Compensation Directive. In the case of insurance, the compensation scheme will cover the premium paid or the loss suffered by an investor where a claim under an insurance policy arises, whichever is the greater, up to the scheme limits, where an insurance intermediary defaults with an insurance premium. Compensation will be available only to private investors and smaller companies, and not to professional investors.
All investment firms, i.e., investment business firms, stock exchange member firms, credit institutions, insurance agents and insurance brokers will be required to participate in investor compensation arrangements approved by the Central Bank. The Bank will be the supervisory authority for investor compensation. In addition, the provisions of the Law Society Compensation Fund will apply to clients of a solicitor who is acting as an investment or insurance intermediary where the solicitor is not a contributor to a compensation fund under this Bill.
Compensation will be funded by investment firms and, in some circumstances, by product producers (e.g., credit institutions, insurance companies, unit trusts) in respect of products they sell through intermediaries. The Bill provides for the establishment of The Investor Compensation Company Limited, which will oversee investor compensation and maintain compensation funds. Certified persons (e.g., accountants) will be allowed to establish separate compensation schemes, subject to the approval of the Central Bank. The Investor Compensation Company will set contributions to be paid by investment firms contributing to its compensation funds, having consulted the Central Bank.
A product producer is required to give a written appointment to any intermediary through whom it sells its products. A product producer will be required to recoup the Investor Compensation Company for compensation paid where it can be established that a restricted intermediary with a written appointment from that product producer did not transmit client funds intended for that product producer.
In general, the principles underlying the Investor Compensation Directive will apply to investor compensation under the Bill.
|Users who read this document also viewed|
|01 June 2003Welcome from the Minister|
|27 July 1998Freedom of Information|
|06 October 2002 The Strategic Management Initiative was set up in 1996 and marks a major step towards improving the Civil Service. SMI...|
|20 February 2003 Recruitment to all Civil Service Departments/Offices is co-ordinated centrally by the Office of the Public Appointments...|
|02 January 2003 Welcome to the Legislation section. Here you will find Department of Finance legislation and related publications...|