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37 1998

INVESTOR COMPENSATION ACT, 1998

PART IV

Miscellaneous

Joint accounts and trustees.

37. —(1) Where—

(a) an eligible investor is a trustee making an application for payment under section 34 on behalf of a trust, and

(b) any beneficiary of the trust concerned is beneficially entitled against the trustees to any identifiable part of the amount so claimed, either absolutely or jointly with a fixed number of other beneficiaries,

then, the net loss in respect of which the trustee makes an application for payment under section 34 shall be treated, but only for the purpose of ascertaining a compensatable loss—

(i) where the beneficiary is entitled absolutely, as if legal ownership of the money and investment instruments which comprise the net loss had passed to the beneficiary,

(ii) where the beneficiary is entitled jointly with a number of other beneficiaries, as if the money and investment instruments which comprise the net loss were joint investment business maintained by the beneficiaries and legal and joint ownership had passed to the beneficiaries concerned.

(2) Where persons (being persons other than trustees or persons to whom subsection (1) applies) having, or treated by virtue of subsection (1) as having, joint ownership of money or investment instruments comprising a net loss are entitled to the money or investment instruments by virtue of their joint ownership of the monies or investment instruments, then, they shall, in the absence of special terms and conditions, each be treated, but only for the purpose of ascertaining a compensatable loss, as having a separate investment equal to the amount that would be produced by dividing equally the money and the value of the investment instruments concerned among the number of persons having joint ownership.

(3) Where two or more persons are entitled to money or investment instruments received, held, controlled or paid by an investment firm as members of a partnership, association or grouping of a similar nature, without legal personality (whether or not in equal shares), such money or investment instruments shall be treated as a single investment.

(4) The supervisory authority and, where necessary for the purposes of ascertaining a net loss, the administrator concerned may require any person claiming payment under section 34 to supply sufficient information to enable a decision to be made as to whether this section applies to such money or investment instruments.

(5) Where, in a case to which subsection (1) or (2) applies, a client's claim for payment under section 34 also relates to other money or investment instruments, that other money or investment instruments shall, for the purpose of ascertaining a net loss, be aggregated with any amount of money or investment instruments maintained by that person for the purpose of either or both subsections (1) and (2) and the compensatable loss so ascertained shall be divided and duly paid to the person concerned and either or both (as the circumstances may require) the trustees concerned and the said person jointly with others, in the same proportion or proportions as the amounts so aggregated bear to each other.

Information to investors and advertising.

38. —(1) Except where subsection (2) applies, investment firms shall make available to actual and intending investors such information concerning investor compensation as may be specified by the supervisory authority in a manner and form specified by the supervisory authority.

(2) Where a branch of an investment firm authorised or formerly authorised by the supervisory authority is established in another Member State in accordance with the provisions of the Investment Services Directive, the information provided for in subsection (1) shall be made available in the prescribed manner in the official language or languages of the Member State in which the branch is established.

(3) Except with the prior written consent of the supervisory authority, an investment firm shall not advertise or cause to be advertised the fact (however expressed) that monies or investment instruments placed with the investment firm are protected by or through an investor compensation fund.

Investment firms joining compensation schemes in other Member States.

39. —(1) This section applies where an investment firm has established a branch in another Member State in accordance with the provisions of Article 17 of the Investment Services Directive or in accordance with the provisions of Article 18 of Council Directive No. 89/646/EEC of 15 December, 1989 and has under the provisions of Article 7 of the Investor Compensation Directive joined an investor compensation scheme within the territory of that Member State.

(2) Where the supervisory authority has been notified that a branch established in another Member State which has joined an investor compensation scheme for the purposes of subsection (1) has not complied with the obligations imposed on it as a consequence of its membership of that investor compensation scheme, the supervisory authority shall, in collaboration with that investor compensation scheme, take all appropriate measures to ensure that those obligations are complied with.

(3) Sections 27 and 28 shall apply to an investment firm to which subsection (2) applies as if the obligations to which the investment firm is subject as a consequence of its membership of a compensation scheme in another Member State in accordance with Article 7 of the Investor Compensation Directive were obligations imposed on the investment firm by or under this Act.

Membership of compensation scheme by investment firm authorised in another Member State.

40. —(1) In this section—

client” means an investor who has, in connection with investment business, entrusted money or investment instruments to a branch established in the State by an investment firm in accordance with the provisions of Article 17 of the Investment Services Directive or in accordance with the provisions of Article 18 of Council Directive No. 89/646/EEC;

competent authority”, in relation to an investment firm, means a competent authority for the purposes of the Investor Compensation Directive in another Member State;

eligible investor” means a client of an investment firm who is entitled to compensation in accordance with Article 2 and the first paragraph of Article 7.1 of the Investor Compensation Directive and who has made an application for compensation within the meaning of Article 2 of that Directive;

investment business” has the same meaning as it has in the Investor Compensation Directive;

investment firm” means an investment firm within the meaning of subsection (2);

investor” has the same meaning as it has in the Investor Compensation Directive.

(2) An investment firm (within the meaning of the Investment Services Directive) which is authorised in another Member State for the purposes of that Directive or of Council Directive No. 89/646/EEC of 15 December 1989 which has established a branch in the State in accordance with the provisions of Article 17 of the Investment Services Directive and which wishes to exercise the option of participating in investor compensation arrangements in the State in accordance with Article 7.1 of the Investor Compensation Directive, shall notify the Company accordingly and shall then be and become an investment firm for the purposes of this Act.

(3) An investment firm shall supply all relevant information which the Company may request and shall pay a contribution to a fund maintained by the Company in accordance with subsection (4).

(4) The contribution to be paid by an investment firm to the Company in accordance with section 21 shall be determined by the Company, with the agreement of the supervisory authority, on an annual basis, having regard to Article 7 and the guiding principles set out in Annex II of the Investor Compensation Directive.

(5) The contribution to be paid by an investment firm to the Company in accordance with section 21 shall stand to the credit of the fund maintained by the Company which, in the view of the supervisory authority, most closely meets the requirements of the fourth paragraph of Article 7.1 of the Investor Compensation Directive.

(6) Sections 27 , 28 , 31 , 32 and 33 shall not apply to an investment firm within the meaning of this section.

(7) The amount payable under section 34 to an eligible investor in the case of an investment firm shall be an amount equal to the amount by which the eligible investor's compensatable loss relating to money or investment instruments entrusted by the eligible investor to a branch of the investment firm in connection with investment business exceeds the amount of compensation payable to the eligible Investor in accordance with Article 2 and the first paragraph of Article 7.1 of the investor Compensation Directive.

(8) The Company shall make payment under subsection (8) as soon as practicable and at the latest within three months of the date on which the Company is informed by the competent authority of the amount of compensation payable to the eligible investor in accordance with Articles 2 and 7.1, first paragraph, of the Investor Compensation Directive, unless the competent authority agrees that payment may be made later than three months after that date.

(9) Where an investment firm has not complied with its obligations under this Act, the Company shall inform the competent authority and the supervisory authority and may, with the consent of the competent authority, notify the investment firm that, with effect from a specified date, being a date not less than 12 months after the date of the notification, the Company shall not be liable to make payments under section 34 to clients of the investment firm in respect of money or investment instruments entrusted by clients to the investment firm after the date specified by the Company unless the investment firm has complied in full with its obligations under this Act within 12 months of the date of the notification.

(10) If an investment firm does not comply fully with its obligations under this Act following a notification by the Company under subsection (9), the Company shall not, with effect from the date specified by the Company in accordance with subsection (9), be liable to make payments in accordance with section 34 to clients of the investment firm in respect of money or investment instruments entrusted by clients to the investment firm in connection with investment business after the date specified by the company.

(11) Where an investment firm has not complied in full with its obligations under this Act within 12 months of the date of the notification referred to in subsection (9), the Company shall, on the expiry of that period of 12 months, inform the investment firm and clients of the investment firm that the Company shall not be liable to make payments under section 34 to clients of the investment firm in respect of money or investment instruments entrusted by clients to the investment firm in connection with investment business after the date specified by the Company in accordance with subsection (9).

(12) Where an investment firm notifies the Company that it no longer wishes to exercise the option of participating in investor compensation arrangements in the State in accordance with Article 7.1 of the Investor Compensation Directive, the Company shall not, with effect from the date of such notification, be liable to make payments under section 34 to clients of the investment firm in respect of money or investment instruments entrusted by clients to the investment firm in connection with investment business after the date of such notification.

Compulsory insurance of authorised investment firms.

41. —(1) The supervisory authority may require authorised investment firms to effect a policy of professional indemnity insurance in a form specified by the supervisory authority (and different forms may be specified for different classes of authorised investment firm), indemnifying the authorised investment firm up to such sum, in such manner, in respect of such matters and valid for such minimum period as the supervisory authority may specify from time to time.

(2) When the supervisory authority requires an authorised investment firm to effect a policy of professional indemnity insurance it shall have regard to any existing statutory requirements for a particular category or categories of investment firm to hold professional indemnity insurance.

Exemption from liability for damages.

42. —(1) The supervisory authority or any employee or officer of the supervisory authority or a subsidiary established by the Bank for the purposes of section 20 or any employee or officer of the subsidiary or an authorised officer for the purposes of section 9 or any member of the Board of the supervisory authority or any member of the Board of the subsidiary shall not be liable in damages for anything done or omitted in the discharge or purported discharge of any of its functions under this Act unless it is shown that the act or omission was in bad faith.

(2) The Board of the Company or any employee or officer of the Company shall not be liable in damages for anything done or omitted in the discharge or purported discharge of any of its functions under this Act unless it is shown that the act or omission was in bad faith.

(3) Without prejudice to the generality of subsections (1) and (2), the approval, supervision, regulation or revocation of approval of a fund for the purposes of section 19 or an investor compensation scheme under this Act shall not constitute a warranty or other claim as to the solvency or performance of the fund or any investment firm which has contributed to the fund or investor compensation scheme or any of its members and the State and the supervisory authority and the Company shall not be liable in respect of any loss or losses incurred through the insolvency, default or performance of the fund or investment firm or investor compensation scheme or any of its members.

Offences and penalties.

43. —(1) A person who is guilty of an offence under section 29 (3) or subsection (4), (7) or (8) of this section shall be liable—

(a) on summary conviction to a fine not exceeding £1,500 or, at the discretion of the court in the case of an individual, to imprisonment for a term not exceeding 12 months, or both, or

(b) on conviction on indictment, to a fine not exceeding £1,000,000 or, at the discretion of the court in the case of an individual, to imprisonment for a term not exceeding 10 years, or both.

(2) Summary proceedings in relation to an offence under this Act may be brought and prosecuted by the Director of Public Prosecutions or by the supervisory authority.

(3) Notwithstanding section 10(4) of the Petty Sessions (Ireland) Act, 1851, summary proceedings for any offence under this Act may be instituted within two years from the date of the discovery of the offence.

(4) Where an offence under this Act is committed by a body corporate or by an unincorporated body or person or by a sole trader and is proved to have been committed with the consent, connivance or approval of, or to be attributable to, or to have been facilitated by any neglect on the part of, any officer or employee of that entity or person purporting to act on behalf of that entity, that officer or employee shall be guilty of an offence and shall be liable to be proceeded against and punished as if that officer or employee were guilty of the first-mentioned offence, provided, however, that an officer or employee shall not be sentenced to imprisonment for such an offence unless in the opinion of the court the offence was committed wilfully.

(5) (a) Where, on an application made in a summary manner by a supervisory authority, the Court is of the opinion that there has occurred or is occurring—

(i) a contravention of this Act, or

(ii) a failure to comply with a condition or requirement imposed by the supervisory authority in accordance with this Act or with a direction issued by the supervisory authority under section 27 ,

the Court may by order prohibit the continuance of the contravention or failure by the person or persons concerned.

(b) The Court when considering the application may make such interim or interlocutory order as it considers appropriate.

(c) This section is without prejudice to the statutory functions of the supervisory authority.

(d) Where the Court is satisfied, because of the nature or circumstances of the case or otherwise in the interests of justice, that it is desirable, the whole or any part of proceedings under this section may be held otherwise than in public.

(6) If the contravention, breach or failure in respect of which a person was convicted under subsection (1) or (4) is continued after conviction, the officer or employee shall be guilty of a further offence on every day on which the contravention, breach or failure continues and for each such offence the officer or employee shall be liable on summary conviction to a fine not exceeding £1,500 or on conviction on indictment to a fine not exceeding £5,000.

(7) A person who, in purported compliance with any provision of this Act or any regulation made thereunder—

(a) provides an answer or explanation, makes a statement or produces, lodges or delivers any return, report, certificate, balance sheet or other document false in a material particular, knowing it to be false, or

(b) recklessly provides an answer or explanation, makes a statement or produces, lodges or delivers any return, report, certificate, balance sheet or other document false in a material particular, or

(c) knowingly withholds or omits information,

shall be guilty of an offence.

(8) (a) An officer of a product producer or of an investment firm who destroys, mutilates or falsifies, or is privy to the destruction, mutilation or falsification of any record or document affecting or relating to the property or affairs of the product producer or any investment firm, or makes or is privy to the making of a false entry therein, shall, unless the officer proves that he or she had no intention not to comply with the law, be guilty of an offence.

(b) Any person mentioned in paragraph (a) who fraudulently disposes of, alters or makes an omission in any such record or document, or who is privy to the disposal of, altering or making of an omission in any such record or document shall be guilty of an offence.

(9) Where there is a contravention of this Act applicable to a partnership each partner may be charged alone or jointly with any one or more of the partners with any offence in respect of such contravention and on conviction shall be liable for the penalty imposed.

(10) In any proceedings for an offence under this Act applicable to partnerships it shall be a defence for a partner charged to prove—

(a) that the commission of the offence was due to a mistake or the reliance on information supplied to the partner or to the act or default of another person, an accident or some other cause beyond his or her control, and

(b) that the partner took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by himself or herself or any other person under his or her control.

(11) Nothing in this Act or any other enactment, and no rule of law, shall preclude the prosecution of a partner for an offence of which another partner or any other person has been previously charged or convicted.

Amendment of section 2(7) of Act of 1995.

44. —Section 2 of the Act of 1995 is hereby amended by the substitution for subsection (7) of the following:

“(7) Notwithstanding subsection (1) of this section, or any provision of Part VII of this Act, a solicitor in respect of whom a practising certificate (within the meaning of the Solicitors Acts, 1954 to 1994) is in force shall not be an investment business firm by virtue of the provision in a manner incidental to the provision of legal services of investment business services or investment advice, where—

(a) he does not hold himself out as being an investment business firm, and

(b) when acting as an investment product intermediary he does not hold an appointment in writing other than from—

(i) an investment firm authorised in accordance with Directive 93/22/EEC of 10 May 1993(1) by a competent authority of another Member State, or an authorised investment business firm (not being a restricted activity investment productintermediary or a certified person), or a member firm within the meaning of the Stock Exchange Act, 1995 , or

(ii) a credit institution authorised in accordance with Directives 77/780/EEC of 12 December, 1977(1) and 89/646/EEC of 15 December, 1989(2) , or

(iii) a manager of a collective investment undertaking authorised to market units in collective investments to the public,

which is situate in the State or the relevant branch of which is situate in the State.”.

Amendment of section 2 of Act of 1994.

45. —Section 2 of the Act of 1994 is hereby amended by—

(a) the insertion of the following definitions:

“‘authorised investment business firm’ has the meaning assigned to it in section 2 of the Investor Compensation Act, 1998;”;

“‘investment business services’ has the meaning assigned to it in section 2 of the Investor Compensation Act, 1998;”, and

(b) the substitution of the following definition for the definition of legal services:

“‘legal services’ means services of a legal or financial nature provided by a solicitor arising from that solicitor's practice as a solicitor, and includes any part of such services; and, for the avoidance of doubt, includes any investment business services provided by a solicitor who is not an authorised investment business firm;”.

Insertion of new section in Act of 1994.

46. —The Act of 1994 is hereby amended by the insertion of the following section after section 30:

“30A.—(1) Where it appears to the Society, after consultation with the Minister, that it is necessary to do so for the purpose of ensuring the fair and reasonable implementation in the public interest of the provisions of section 26 of the Act of 1994 and the provisions of sections 21 and 22 (as substituted by the Act of 1994) of the Act of 1960 (or regulations made by the Society relating thereto), the Society may make regulations, with the consent of the Minister, providing that a solicitor who—

(a) is an authorised investment business firm, or

(b) is, or who holds himself out as being, an insurance intermediary,

shall, as a condition of being issued with a practising certificate, effect and maintain, in respect of—

(i) the provision of investment business services as an authorised investment business firm, or

(ii) activities as an insurance intermediary,

such form or forms of indemnity against losses suffered by a client in consequence of the default, howsoever arising, of the solicitor or any employee, agent or independent contractor of the solicitor as shall be equivalent to the indemnity that would be provided to a client of a solicitor in the provision of legal services by means of the Compensation Fund or by means of the indemnity cover maintained pursuant to section 26 of this Act (or regulations made by the Society relating thereto).

(2) The Society shall not amend regulations made pursuant to subsection (1) of this section without the consent of the Minister.

(3) The Minister may—

(a) direct the Society to make regulations under subsection (1) of this section or to amend regulations made under subsection (1) or (2) of this section;

(b) by regulations vary upwards the maximum amount of indemnity against losses specified in regulations made by the Society pursuant to subsection (1) or (2) of this section having regard to changes in the value of money generally in the State since the said maximum amount was first specified.

(4) In this section, ‘insurance intermediary’ has the meaning assigned to it in section 2 of the Investor Compensation Act, 1998.”.

Provisions relating to solicitors.

47. —(1) (a) A solicitor in respect of whom a practising certificate (within the meaning of the Solicitors Acts, 1954 to 1994) is in force shall be an investment business firm—

(i) where the solicitor provides investment business services or investment advice in a manner which is not incidental to the provision of legal services, or

(ii) where the solicitor holds himself or herself out as being an investment business firm, or

(iii) where, when acting as an investment product intermediary in a manner incidental to the provision of legal services, the solicitor holds an appointment in writing other than from—

(I) an investment firm authorised in accordance with the Investment Services Directive by a competent authority of another Member State, or an authorised investment business firm (not being a restricted activity investment product intermediary or a certified person), or a member firm within the meaning of the Stock Exchange Act, 1995 , or

(II) a credit institution authorised in accordance with Directives 77/780/EEC of 12 December, 1977, and 89/646/EEC of 15 December, 1989, or

(III) a manager of a collective investment undertaking authorised to market units in collective investments to the public,

which is situate in the State or the relevant branch of which is situate in the State,

and shall be required to be authorised as an authorised investment business firm pursuant to the provisions of the Act of 1995.

(b) A solicitor, in respect of whom a practising certificate (within the meaning of the Solicitors Acts, 1954 to 1994) is in force, who is an insurance intermediary or who holds himself out to be an insurance intermediary shall be an investment firm for the purposes of this Act and shall inform the supervisory authority and the Company that he or she is an investment firm for the purposes of this Act.

(2) (a) Section 26 of the Act of 1994 and sections 21 and 22 (as substituted by the Act of 1994) of the Act of 1960 (or regulations made by the Society relating thereto) shall not apply to a solicitor in respect of whom a practising certificate (within the meaning of the Solicitors Acts, 1954 to 1994) is in force in relation to the provision by the solicitor of investment business services (whether or not including the activities of an insurance intermediary) as an authorised investment business firm, or in relation to a solicitor who is an insurance intermediary and who has informed the supervisory authority and the Company pursuant to subsection (1)(b) that he or she is an investment firm.

(b) No client of a solicitor in respect of whom a practising certificate (within the meaning of the Solicitors Acts, 1954 to 1994) is in force and who is an authorised investment business firm, or who is an insurance intermediary and has informed the supervisory authority and the Company pursuant to subsection (1)(b) that he or she is an investment firm, shall, in respect of any loss suffered in consequence of the default, howsoever arising, of the solicitor, or any employee, agent or independent contractor of the solicitor in relation to the provision of investment business services as an authorised investment business firm or in relation to the solicitor acting as an insurance intermediary, be entitled to make a claim against the Compensation Fund (within the meaning of the Act of 1994) or against the indemnity cover maintained pursuant to section 26 of the Act of 1994 and regulations made thereunder.

(c) Nothing in this section shall otherwise affect the obligations of a solicitor in respect of whom a practising certificate (within the meaning of the Solicitors Acts, 1954 to 1994) is in force or the rights of a client, arising under section 26 of the Act of 1994 or sections 21 and 22 (as substituted by the Act of 1994) of the Solicitors (Amendment) Act, 1960 (or regulations made by the Society relating thereto), in respect of the provision by the solicitor of legal services.

(1)O.J. No. L.141, 11/6/93.

(1)O.J. No. L.322, 17/12/77.

(2)O.J. No. L.386, 30/12/89.