'Unacceptable' block on ISE complaints

Thu, Apr 15, 2010, 01:00

THE HEAD of financial regulation has described as “unacceptable” and “not a happy situation” a regulatory gap which stops complaints about stockbrokers being made to the Irish Stock Exchange on investments before November 2007.

Matthew Elderfield told the Oireachtas Joint Committee on Economic Regulatory Affairs that changes to the exchange’s rule book meant that nobody could raise a concern about a transaction before that date.

He called on the senior management of the exchange “to step up to the plate” if it is impossible to solve the gap through legislative or regulatory mechanisms.

If this was the case, “then it is clear that there is only one solution that remains – for the stock exchange to turn its rules back on and take responsibility for this gap”, he told the committee.

Mr Elderfield said there were a number of claims being pursued against stockbrokers relating to purchases of investment products between 2004 and 2006.

They arose where investors lost significant sums of money and believed they should have been better advised by brokers, he said.

Before November 2007, such complaints would have been referred to the stock exchange, but subsequent changes had prevented complaints being made.

“It is clear that the transition between the different regulatory regimes could have been handled better by all the parties.”

The parties did “not do a great job” to check whether complaints on older transactions would be covered after the changes by either the exchange or the regulator.

“That is not a great piece of history,” he said.

The stock exchange initially told the regulator that it would deal with older complaints and “we took comfort from that”.

“Then two or three senior counsel later entered the picture, the stock exchange changed their mind about it, which we are not very happy about.”

Mr Elderfield said he had asked the Minister for Finance for the Attorney General’s advice but that the initial legal advice was “not very encouraging” as they could not apply retrospective legislation on the exchange’s member firms.

“I am by no means content with the situation,” he said.