First Active, Garda spoke of Kilbane accounts in 1997

First Active and the Garda are understood to have been in contact as far back as 1997 regarding the accounts of former broker Mr Brian Kilbane.

Mr Kilbane, a director of BRK Financial Services in Dublin, whose assets were frozen by an interim court order earlier this week, appeared to be using First Active - then called the First National Building Society - to legitimise his operation.

It is not clear what action, if any, was taken on foot of the contacts between the Garda and First Active.

Mr Kilbane, whose whereabouts are not known, came to public attention only in recent weeks amid allegations that he owes substantial sums of money to clients who gave him funds to invest.

Ms Bernadette Donnelly, of Charlemont Street, Dublin, who was granted the injunction against the broker, has claimed that he owes her £20,000. According to Ms Donnelly, she regularly received interest repayments on First Active cheques from Mr Kilbane, who delivered them to her personally.

"I assumed that, because he seemed to be linked with a reputable institution, he would be honourable," she told The Irish Times.

However, it now appears that Mr Kilbane operated an ordinary personal account with First Active to which he would have lodged small cash lump sums. These would then be withdrawn with the cheques made out to third parties such as Ms Donnelly. First Active appears to have unaware of the exact nature of Mr Kilbane's business.

But the whereabouts of the lump sum itself, which Ms Donnelly said she believed was in "offshore corporate paper", is still unknown.

Other former clients of Mr Kilbane are alleged to have lost sums of £20,000 and £37,000. Mr Kilbane appeared to be offering a return of some 8.125 per cent in April 1997 for a £10,000 six-month term account, compared with 2.75 per cent available at the time through Bank of Ireland.

Mr Kilbane has yet to respond to the allegations. There was no reply at his office, while the telephone number at the family home in Prosperous, Co Kildare was not operational.

Mr Kilbane was not authorised by any of the myriad financial services' regulators and only his company number appeared on his letterheads. But the case, as outlined in court, again raises questions about the regulation of financial intermediaries, the degree of control over them and the number of audits carried out.

A committee under the chairmanship of former Progressive Democrat TD, Mr Michael McDowell SC, is currently examining how best to set up a single financial regulator.

While the committee will miss its February 20th deadline, it appears certain that all investment and insurance intermediaries will be covered by any new regulator, although there are doubts about some categories, including credit intermediaries, money lenders and even pawn brokers and hire purchase agreements.

The Central Bank currently holds the register of intermediaries and since late last year has authorised many of them. Before that, the building societies and banks merely informed the Bank when they took on a new agent, who was then added to the register. That procedure has now been tightened up, and the Bank must now authorise all investment brokers.

A spokesman for the Bank said it could not be expected to identify errant brokers who are not registered. The problem is compounded because even a regular check through Company Office files will not identify companies purporting to be solely investment brokers.

"Even that would throw up insurance and credit and other financial services brokers not covered by us," a spokesman for the Bank said.