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9 1995

STOCK EXCHANGE ACT, 1995

PART VI

Miscellaneous

Power to require a second audit.

36. —(1) If, on the basis of the information obtained through the first audit, the Bank has a real and substantial concern about the audited accounts of an approved stock exchange or an authorised member firm, it may direct the approved stock exchange or authorised member firm to submit for examination by a person appointed by the Governor of the Bank or by such other person designated by the Governor for the purpose of appointing persons (including an auditor) any or all of the following, namely—

(a) any accounts on which the auditor of that approved stock exchange or authorised member firm has reported or any information which has been verified by that auditor,

(b) any information as is specified in the direction,

and the person making the examination shall report his conclusions to the Bank.

(2) The person carrying out an examination under this section shall have all the powers that are available to an auditor under this Act and under the Companies Acts and it shall be the duty of the auditor of an approved stock exchange or authorised member firm to afford him all such assistance as he may require.

(3) Where a report made under this section relates to accounts which under any enactment are required to be sent to, or made available for inspection by, any person or to be delivered for registration, the report, or any part of it (or a note that such a report has been made) may be similarly sent, made available or delivered by the Bank.

(4) An officer or employee of an approved stock exchange or authorised member firm or of an associated or related undertaking who knowingly or recklessly makes a statement to a person appointed under this section that is false or misleading or deceptive in a material particular shall be guilty of an offence.

(5) If any officer, employee, shareholder or agent of the approved stock exchange or authorised member firm or associated undertaking or related undertaking refuses to produce to the person appointed under this section any book or document which it is his duty under this section to produce, refuses to attend before the person appointed under this section when required to do so, or refuses to answer any question put to him by the person appointed under this section with respect to the affairs of the approved stock exchange or authorised member firm or associated undertaking or related undertaking, the person appointed under this section may certify the refusal under his hand to the Court and the Court may thereupon inquire into the case and, after hearing any witnesses who may be produced against or on behalf of the officer, employee, shareholder or agent of the approved stock exchange or authorised member firm or associated undertaking or related undertaking and any statement which may be offered in defence, make any order or direction as it thinks fit including a direction to the person concerned to attend or re-attend before the person appointed under this section or produce particular books or documents or answer a particular question put to him by the person appointed under this section, or a direction that the person concernedneed not produce a particular book or document or answer a particular question put to him by the person appointed under this section.

(6) The expenses of and incidental to an examination under this section may be paid in the first instance by the Bank.

Employment of disqualified person.

37. —(1) (a) If the Bank becomes aware that the probity of any officer or employee of an approved stock exchange or authorised member firm is such so as to render him unsuitable to act as an officer or employee of an approved stock exchange or authorised member firm, the Bank may, on notice to the person concerned and on notice to the approved stock exchange or authorised member firm concerned, apply to the Court to issue a direction to direct the approved stock exchange or authorised member firm concerned to have the officer concerned removed or to dismiss the employee concerned from their employment.

(b) If the Bank becomes aware that any officer or employee of an approved stock exchange or authorised member firm is not competent in respect of matters of the kind with which he would be concerned as an officer or employee of an approved stock exchange or an authorised member firm, the Bank may, on notice to the person concerned and on notice to the approved stock exchange or authorised member firm, apply to the Court to issue a direction to direct the approved stock exchange or authorised member firm concerned to have the officer concerned removed, or suspended for a specified period of time, or to dismiss the employee concerned from their employment or to remove that employee from a particular area of their employment.

(2). The Court may make such interim or interlocutory orders as it considers necessary under this section.

(3) Subject to subsection (5) of this section, a person who is the subject of a direction under subsection (1) of this section may not, without the written consent of the Bank, be employed in any capacity in connection with an approved stock exchange or authorised member firm or any other entity which the Bank supervises or regulates as part of its statutory functions.

(4). A direction under this section (to be known and in this section referred to as “a disqualification direction”) shall specify the date on which it is to take effect and a copy of it shall be served on the person to whom it relates.

(5) The Bank may consent to the employment of a person who is the subject of a disqualification direction and such consent may—

(a) relate to employment with any entity which the Bank supervises or regulates as part of its statutory functions generally or to employment of a particular kind,

(b) be given subject to conditions or requirements or both, and

(c) be varied by the Bank from time to time.

(6) Any person who accepts or continues in any employment in contravention of a disqualification direction shall be guilty of an offence.

(7) An approved stock exchange or an authorised member firm or any entity supervised or regulated by the Bank under this Act or any other enactment shall take reasonable care not to employ or continue to employ a person in contravention of a disqualification direction.

(8) A person who is the subject of a disqualification direction may apply to the Court to revoke that direction at any time.

(9) The Bank may apply to the Court to revoke a disqualification direction at any time.

(10) Where the Bank refuses consent under subsection (5) of this section, the person who is the subject of a disqualification direction may appeal to the Court against that decision and the Court may make such order as it considers necessary including making an interim or interlocutory order.

Codes of conduct.

38. —(1) Subject to subsection (2) of this section, the Bank shall draw up and issue a code of conduct for approved stock exchanges or member firms or both which shall include provisions which seek to ensure that a member firm—

(a) acts honestly and fairly in conducting its business activities in the best interests of its clients and the integrity of the market,

(b) acts with due skill, care and diligence, in the best interests of its clients and the integrity of the market,

(c) has and employs effectively the resources and procedures that are necessary for the proper performance of its business activities,

(d) seeks from its clients information regarding their financial situations, investment experience and objectives as regards the services requested,

(e) makes adequate disclosure of relevant material information in its dealings with its clients,

(f) makes a reasonable effort to avoid conflicts of interests and, when they cannot be avoided, ensures that its clients are fairly treated, and

(g) complies with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of its clients and the integrity of the market,

and the Bank may impose conditions or requirements on a member firm in respect of compliance with the provisions of such a code of conduct.

(2) Subsection (1) of this section shall not apply where an approved stock exchange has drawn up and maintains in force rules of conduct in respect of matters referred to in paragraphs (a) to (g) of that subsection.

(3) The code of conduct or rules of conduct or both, referred to in subsections (1) and (2) of this section, may be applied in such a way or to such an extent as to take account of the status or experience of the person for whom the services are provided.

(4) The code of conduct or rules of conduct or both, referred to in subsections (1) and (2) of this section, may include criteria for distinguishing between different categories of investor for the purposes of this section.

Acquiring transactions.

39. —(1) In this Part, “acquiring transaction” shall be construed in accordance with subsection (2) of this section and “disposal” shall be construed in accordance with subsection (3) of this section.

(2) In this Part “acquiring transaction” means any direct or indirect acquisition by a person or more than one person acting in concert of shares or other interest in an approved stock exchange or authorised member firm, provided that, after the proposed acquisition—

(a) the proportion of voting rights or capital held by the person or persons making the acquiring transaction would exceed a qualifying holding, or

(b) the proportion of voting rights or capital held by the person or persons making the acquiring transaction would reach or exceed 20 per cent., 33 per cent. or 50 per cent., or

(c) the approved stock exchange or authorised member firm would become a subsidiary of the acquirer.

(3) In this Part “disposal” means any direct or indirect disposal by a person or more than one person acting in concert of a qualifying holding or a disposal which would reduce such a qualifying holding so that the proportion of the voting rights or of the capital held by the person or persons would fall below 20 per cent., 33 per cent. or 50 per cent. or so that the approved stock exchange or authorised member firm would cease to be its subsidiary.

Notification of certain transactions.

40. —(1) Any person who proposes to make an acquiring transaction shall notify the Bank in writing of the proposal as soon as may be and such notification shall include such information concerning the proposed acquiring transaction as may be specified by the Bank from time to time.

(2) Any person who proposes to make a disposal shall notify the Bank in writing of the proposal as soon as may be and such notification shall include such information concerning the proposed disposal as may be specified by the Bank from time to time.

(3) On becoming aware of any proposals of the type referred to in subsection (1) or (2) of this section, the authorised member firm or approved stock exchange concerned shall inform the Bank of such proposed acquiring transactions or disposals that cause holdings to exceed or fall below a qualifying holding or 20 per cent., 33 per cent. or 50 per cent. of the capital held or voting rights, or that cause theapproved stock exchange or authorised member firm to become, or cease to be, a subsidiary.

(4) Where, having received a notification under this section, the Bank is of the opinion that in order to consider, for the purposes of this section, a proposed acquiring transaction, it requires further information, it may, within one month of the date of receipt by it of a notification, request such further information in writing from any one or more of the undertakings concerned.

(5) The Bank may approve of, or approve of subject to conditions or requirements or both, or may refuse to approve of an acquiring transaction.

Approval of acquiring transactions.

41. —An acquiring transaction shall not proceed until the Bank has informed the authorised member firm or approved stock exchange and the party making the acquiring transaction in writing that it approves of the acquiring transaction or until three months have elapsed during which the Bank has not refused to approve of the acquiring transaction, whichever first occurs, such period beginning on the date on which the Bank first receives a notification under section 40 of this Act, or, where the Bank requests further information from the person or persons concerned under section 40 (4) of this Act, the date of receipt by the Bank of such information.

Period for implementing acquiring transactions.

42. —Where the Bank approves of an acquiring transaction, it may specify in writing a period for the implementation of that transaction.

Imposition by Bank of conditions or requirements in respect of proposed acquiring transactions.

43. —(1) An approval given by the Bank to a proposed acquiring transaction shall be subject to such conditions or requirements or both as the Bank may impose (being conditions or requirements which in the opinion of the Bank are necessary for the orderly and proper regulation of approved stock exchanges and authorised member firms).

(2) The Bank may, at any time, amend or revoke such conditions or requirements or both referred to in subsection (1) of this section.

Limitation on validity of certain acquiring transactions.

44. —Subject to section 42 of this Act, an acquiring transaction shall only be valid if it is entered into—

(a) within 12 months of the Bank giving its approval in writing to the transaction, or

(b) within 12 months of the end of the three month period referred to in section 41 of this Act,

and, accordingly, any purported acquiring transaction which does not comply with either paragraph (a) or (b) of this section shall be invalid and—

(i) title to any shares or other interest shall not pass, and

(ii) any consequential purported exercise of powers relating to such shares or other interest shall be invalid.

Refusal by Bank to approve acquiring transactions.

45. —(1) The Bank shall refuse to approve an acquiring transaction where it is not satisfied as to the suitability of the person proposing the acquiring transaction or where the Bank considers thatthe acquiring transaction is likely to be prejudicial to the sound and prudent management of the approved stock exchange or authorised member firm or the proper regulation of the approved stock exchange or authorised member firm or both.

(2) Where the Bank refuses to approve an acquiring transaction or where the Bank becomes aware of a proposed acquiring transaction of which it has not been notified under section 40 of this Act, the Bank may issue a direction under section 29 of this Act to the directors and those responsible for the management of the approved stock exchange or authorised member firm concerned.

Appeals to Court.

46. —(1) Where the Bank informs a person making an acquiring transaction in accordance with section 40 of this Act that it—

(a) refuses to give its approval to that transaction, or

(b) gives its approval subject to conditions or requirements,

an appeal may be made by that person to the Court against the refusal or the conditions or requirements attached to the approval, as the case may be, within one month of that refusal or approval being so communicated.

(2) Where the Court allows the appeal, it shall direct the Bank to make a decision in accordance with the determination of the Court and the Bank shall make its decision within the period of three months beginning on the date of the determination of the Court.

(3) Where the Court is satisfied, because of the nature or the 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 heard otherwise than in public.

Inquiries by Bank into acquiring transactions.

47. —(1) The Bank may carry out such inquiries and obtain such information as it considers necessary to enable it to consider a proposed acquiring transaction.

(2) Any person who wilfully or knowingly obstructs or prevents inquiries by the Bank under this section or knowingly or recklessly provides false or misleading information shall be guilty of an offence.

Obligation to inform Bank of shareholdings, etc.

48. —(1) At least once in each year, approved stock exchanges and authorised member firms shall inform the Bank of the names of direct shareholders and members possessing qualifying holdings and the sizes of such holdings.

(2) At least once in each year, approved stock exchanges and authorised member firms, having made best efforts to ascertain the identity of all indirect shareholders and members possessing qualifying holdings, shall inform the Bank of the names of such persons.

Other enactments relating to acquiring transactions.

49. —(1) Nothing in any other enactment shall be construed as relieving an approved stock exchange or an authorised member firm or other person of any of its obligations to comply with subsections (1), (2) and (3) of section 40 of this Act.

(2) An order under section 201 or 203 of the Companies Act, 1963, in respect of a proposed amalgamation (being an acquiring transaction) shall not be made until the Bank has given its approval to the acquiring transaction or the period referred to in section 41 has elapsed without the Bank having given or refused to give approval.

Amendment of section 16 of Central Bank Act, 1989.

50. Section 16 of the Central Bank Act, 1989 , is hereby amended by—

(a) the substitution in subsection (1) of “unless such disclosure is to enable the Bank to carry out its statutory functions” for “unless such disclosure is to enable the Bank to carry out its functions under the Central Bank Acts, 1942 to 1989 or under any enactment amending those Acts” and the subsection as so amended is set out in the Table to this section;

(b) the substitution for subsection (2) (e) of the following paragraph:

“(e) made to an authority in a jurisdiction other than that of the State duly authorised to exercise functions similar to any one or more of the statutory functions of the Bank and which has obligations in respect of non-disclosure of information similar to the obligations imposed on the Bank under this section.”;

(c) the insertion in subsection (2) of the following paragraphs:

“(h) made to any approved stock exchange (within the meaning of the Stock Exchange Act, 1995) in respect of member firms of that stock exchange for the purpose of monitoring compliance by member firms with stock exchange rules or with conditions or requirements imposed by the Bank or both, or where the Bank considers it necessary to do so either for the proper and orderly regulation of stock exchanges and their member firms, or for the protection of investors, or both,

(i) made to a financial futures and options exchange within the meaning of section 97 of this Act whose rules have been approved by the Bank under Chapter VIII of this Act for the purpose of monitoring compliance by the members of that exchange with the rules or with conditions or requirements imposed by the Bank, or both, or where the Bank considers it necessary to do so for the proper and orderly regulation of such futures and options exchanges and their members,

(j) made to a Committee appointed under section 65 of the Stock Exchange Act, 1995,

(k) made to an inspector appointed under section 57 of the Stock Exchange Act, 1995,

(l) made to any body which is a competent authority for the purpose of Council Directive 93/22/EEC of 10 May, 1993(1) or Council Directive 93/6/EEC of 15 March, 1993(1),”;

(d) the insertion of the following subsection:

“(6) In this section, ‘statutory functions’ has the meaning assigned to it by section 3 of the Stock Exchange Act, 1995.”.

TABLE

(1) A person, who at the commencement of this section is, or at any time thereafter is appointed. Governor or a Director, officer or servant of the Bank or who is employed by the Bank in any other capacity, shall not disclose, during his term of office or employment or at any time thereafter, any information concerning—

(a) the business of any person or body (whether corporate or unincorporate) which came to his knowledge by virtue of his office or employment, or

(b) the Bank's activities in respect of the protection of the integrity of the currency or the control of credit,

unless such disclosure is to enable the Bank to carry out its statutory functions.

Investor compensation.

51. —A member firm shall not engage in business with clients and investors unless, and in accordance with any procedures to be set out in the rules of an approved stock exchange, it informs clients and investors of—

(a) whether or not there is a compensation fund or protection of comparable form, and

(b) the nature and level of protection, if any, available from any such fund.

Client money and investment instruments.

52. —(1) The Bank may, from time to time, impose requirements or may approve of rules in the rules of an approved stock exchange, or both, with respect to clients' money and clients' investment instruments, and such requirements or rules (in this Act referred to as “client money requirements”) may include conditions under which member firms may hold money or investment instruments, or both, for clients.

(2) Without prejudice to the generality of subsection (1) of this section, client money requirements may include requirements or rules in relation to—

(a) the category or categories of member firm to which such requirements or rules apply;

(b) the type or types of accounts to be opened and kept by a member firm arising from its business as a member firm;

(c) the rights, duties and responsibilities of a member firm in relation to money and investment instruments received, held, controlled or paid by it arising from its business as a member firm, including the lodgement to and withdrawal from a client account of client money and client investment instruments;

(d) the acknowledgements or statements to be issued by a member firm in respect of client money and client investment instruments received, held, controlled or paid by it arising from its business as a member firm;

(e) the circumstances in which money other than client money ay be paid into accounts containing client money and the circumstances in which, and the persons to whom, money held in such accounts may be paid out;

(f) the safekeeping of client investment instruments and documents of title relating to such investment instruments;

(g) the use of nominee companies by member firms;

(h) client entitlements, including the treatment or retention of interest, income or profit arising from any client money or investment instrument or documents of title in such cases as may be specified;

(i) the extent to which such client money requirements apply to associated and related undertakings.

(3) Without prejudice to the generality of subsection (1) of this section and notwithstanding the provisions of subsection (2) of this section, an authorised member firm shall—

(a) designate all accounts containing money entrusted to it or received by it for or on account of a client a “ Section 52 account” in all financial records maintained by it,

(b) hold client money in an account or accounts with an institution or type of institution as may be specified by the Bank from time to time,

(c) keep at an office or offices within the State such books and records (including books of accounts) in respect of client money and client investment instruments as may be specified from time to time by the Bank and notify the Bank of the address of every office at which any such books or records are kept,

(d) ensure that any books or records required under this section are examined, at such intervals as may be specified by the Bank, by an auditor who shall report to the Bank and state whether in his opinion the provisions of the client money requirements imposed or rules approved under subsection (1) of this section and the provisions of this subsection have been complied with and on such other matters as may be specified in the client money requirements imposed under subsection (1) of this section,

and an authorised member firm which does not comply with the provisions of paragraph (a) or (c) of this subsection or which does not ensure that books and records kept in respect of client money and client investment instruments are examined by an auditor at such intervals as shall be specified by the Bank or which knowingly holds client money in an account or accounts with an institution other than an institution or type of institution as may be specified by the Bank from time to time, shall be guilty of an offence.

(4) (a) The Bank may specify different books and records for the purposes of this section and in relation to different member firms or different classes of member firms.

(b) Books and records to be kept pursuant to this section shall be—

(i) in addition to any books or other records to be kept by or under any other section of this Act or any other enactment, and

(ii) retained for at least such period as the Bank may specify.

(5) No liquidator, receiver, administrator, examiner or creditor of a member firm shall have or obtain any recourse or right against a client's money or a client's investment instruments or a client's documents of title relating to such investment instruments received, held, controlled or paid on behalf of the client until all proper claims of the client or of the client's heirs, successors or assigns against the client's money or the client's investment instruments or documents of title have been satisfied in full.

(6) A person with which an account is kept in pursuance of client money requirements or rules under this section shall not incur any liability as constructive trustee where money is wrongfully paid from the account unless the person permits the payment with knowledge that the payment is wrongful or having deliberately failed to make inquiries in circumstances in which a reasonable and honest person would have done so.

(7) It shall be an offence for a director, officer or employee of a member firm or any of them to misappropriate fraudulently any money or investment instruments held, controlled or paid on behalf of a client by that member firm.

Exemption from liability for damages.

53. —(1) The Bank or any officer or any employee of the Bank or any member of its Board or any member of a committee appointed under section 65 of this Act 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) Neither an approved stock exchange nor any of its officers, nor any employee nor any member of its Board shall be liable in damages for anything done or omitted in the discharge or purported discharge of any functions carried out in the exercise of a public duty under this Act unless it is shown that the act or omission was in bad faith.

(3) Without prejudice to the generality of subsection (1) of this section, the approval or revocation of approval or supervision or regulation of a stock exchange or the approval, amendment, revocation or imposition of rules or the consent or refusal to consent to amendments of rules shall not constitute a warranty as to the solvency or performance of an approved stock exchange or a member firm and neither the State nor the Bank shall be liable in respect of any loss or losses arising out of the insolvency or default or performance of any approved stock exchange or member firm.

(4) Without prejudice to the generality of subsection (1) of this section, the authorisation, supervision, regulation or revocation of authorisation of a member firm under this Act shall not constitute awarranty as to the solvency or performance of a member firm and neither the State nor the Bank shall be liable in respect of any losses incurred through the insolvency, default or performance of the member firm.

Personal liability of officers.

54. —(1) If—

(a) an approved stock exchange or authorised member firm is being wound up and is unable to pay all of its debts and has contravened section 15 , 27 or 52 (3) of this Act, and

(b) the Court considers that such contravention has contributed to the inability of the approved stock exchange or authorised member firm to pay all of its debts or has resulted in substantial uncertainty as to the amount, location, ownership or otherwise of the assets and liabilities of the approved stock exchange or authorised member firm or of the money or investment instruments of clients of the said approved stock exchange or authorised member firm or has substantially impeded its orderly winding-up,

the Court, on the application of the liquidator or receiver or the Bank or any creditor or client or investor, may, if it thinks it proper to do so, declare that any one or more of the officers or former officers or both of the said approved stock exchange or authorised member firm who is or are in default shall be personally liable, without any limitation of liability, for all, or such part as may be specified by the Court, of the debts and other liabilities of the said approved stock exchange or authorised member firm.

(2) (a) Where the Court makes a declaration under subsection (1) of this section, it may give such directions as it thinks proper for the purpose of giving effect to the declaration and in particular may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the approved stock exchange or authorised member firm to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the approved stock exchange or authorised member firm held by or vested in him or any company or other person on his behalf, or any person claiming as assignee from or through the person liable under the declaration or any company or person acting on his behalf, and may from time to time make such further order as may be necessary for the purpose of enforcing any charge imposed under this subsection.

(b) In paragraph (a) of this subsection “assignee” includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation or mortgage was created, issued or transferred or the interest created but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the grounds of which the declaration is made.

(3) The Court shall not make a declaration under subsection (1) of this section in respect of a person if it considers that—

(a) he took all reasonable steps to secure compliance by the approved stock exchange or authorised member firm with section 15 , 27 or 52 (3) of this Act, or

(b) he had reasonable grounds for believing and did believe that a competent and reliable person, acting under the supervision or control of a director who has been formally allocated such responsibility, was charged with the duty of ensuring that section 15 , 27 or 52 (3) of this Act was complied with and was in a position to discharge that duty.

(4) This section shall have effect notwithstanding that the person concerned may be liable to be prosecuted for a criminal offence in respect of the matters on the ground of which the declaration is to be made or that such person has been convicted of such an offence.

(5) In this section “officer”, in relation to an approved stock exchange or authorised member firm, includes a person who has been convicted of an offence under section 194 of the Companies Act, 1990 or section 35 or 70 (7) of this Act, in relation to a statement concerning the keeping of proper accounting records by the approved stock exchange or authorised member firm concerned.

(6) A person who, being a director of an approved stock exchange or authorised member firm, fails to take all reasonable steps to secure compliance by the approved stock exchange or authorised member firm with the requirements of section 15 , 27 or 52 (3) of this Act or has by his own wilful act been the cause of any default by the approved stock exchange or authorised member firm thereunder, shall be guilty of an offence:

Provided, however, that—

(a) in any proceedings against a person in respect of an offence under this section consisting of a failure to take reasonable steps to secure compliance by the approved stock exchange or authorised member firm with the requirements of this section, it shall be a defence to prove that he had reasonable grounds for believing and did believe that a competent and reliable person was charged with the duty of ensuring that those requirements were complied with and was in a position to discharge that duty, and

(b) a person shall not be sentenced to imprisonment for such an offence unless, in the opinion of the Court, the offence was committed wilfully.

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