The Investment Intermediaries Act, 1995 ("the Act") came into force on 1st August 1995, in part, to meet obligations arising from the EU Investment Services and Capital Adequacy Directives which promote the orderly regulation of the Investment Services Industry for the protection of investors.
The Act applies to persons offering investment services - dealing in and providing advice on investment in shares, deposits, collective investment funds, futures and other derivatives - who were not regulated previously. Certain intermediaries (such as banks - stockbroking firms and insurance undertakings) are excluded from the ambit of the Act on the basis of existing or proposed regulation.
Under the Act:
- The Minister for Enterprise & Employment is designated as the supervisory authority for investment intermediaries offering investment services who deal only in certain specified investment products, for example, unit trusts, prize bonds and collective investments, and who do not have discretionary control over client funds;
- The Central Bank is designated as the supervisory authority for other investment intermediaries.
The Act imposes mandatory authorisation, sets out a broad list of authorisation requirements (including management probity and competence, minimum capitalisation and adequate organisational and management structures) and empowers the supervisory authorities to impose other requirements. The supervisory authorities are given considerable power to ensure compliance with the Act including the power to:
- issue codes of conduct;
- approve the acquisition of interests in investment intermediaries;
- appoint officers to carry out inspections, enter premises, inspect and take copies of and extracts from documents.
The Act makes breach of particular sections (in particular, giving investment advice without authorisation, giving false information in order to obtain authorisation, failure to keep specified records and failure to comply with directions of the supervisory authority) an offence subject to a fine of up to IR£1,000,000 or to imprisonment for a term of up to 10 years or both.
The Act has been welcomed as a necessary upgrading of the framework for regulation of investment business services in Ireland. It applies to a broad range of investment business services provided in Ireland or by firms established in, but providing those services outside, Ireland. Authorisation under the Act entitles investment intermediaries to take advantage of the "Single Passport/Home Regulator" principle which allows intermediaries authorised in one EU Member State to provide investment business services in other EU Member States (subject to fulfilling registration requirements).
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