Compensation for investors who have their funds defrauded was fixed at the minimum EU level of 20,000 ecus, about £15,500, because the scheme might be unworkable if it was set higher, the Minister of State at the Department of Finance, Mr Cullen, said yesterday. Mr Cullen appeared before the Select Committee on Finance and the Public Service yesterday to answer questions from members on the Investor Compensation Bill, which will provide a fund to be paid by the industry.
He said that the levies to be imposed on investment firms "might have been so high as to be unworkable" if the investment fund payouts were above the minimum set in the EU's Investor Compensation Directive. "Funding [by investment firms] will have to be fair but the formulas will have to be worked out," he said. The Consumers Association of Ireland has stated that compensation levels should be higher because investor losses in the past have been often higher than 20,000 ecus. Last week, in the Dail, Mr Cullen said that the Government had decided that the minimum amount payable under the EU directive was "an appropriate level at which to set the entitlement to investor compensation". Mr Cullen added yesterday that the likely criteria for fixing the levies, which will be decided by the Investor Compensation Company, would be the number of clients a firm had, its capitalisation and number of employees, and its turnover.
The Fine Gael TD, Mr Michael Noonan, described the minister as a person legislating at White Paper stage. He said there were no guidelines in place for the overseeing company's board which would have responsibility for maintaining the fund.
The board will have financial services and consumer interest representatives. Mr Noonan asked how big the compensation fund was expected to be.
"We do not know the amounts to be levied, or if a levy system will be used at all and, if it is to be passed on to the consumer, then we do not know how much it will be," he said.
Mr Cullen said: "It is some way towards putting in place some measure of comfort to the small consumer, to the small investor that, in the event of being defrauded out of their means, there will be some recompense in place," he said. The committee's examination of the Bill's provision was adjourned until Tuesday. The Bill is due to go before the Dail next week.
