The Irish Financial Services Regulatory Authority will take over the policing of the stock market from the Irish Stock Exchange. From the end of next year, the regulator will have day-to-day responsibility for detecting and investigating market abuse, write Colm Keenaand John McManus
These functions are carried out by the Irish Stock Exchange - a private body controlled by stockbroking firms - on a devolved basis.The changes to the stock exchange's powers, details of which have only recently been finalised between the regulator and the exchange, have been driven by a Europe-wide reform of the regulation of financial markets, a spokesman for the regulator said.
Under the EU directive on market abuse, the regulator became the body with responsibility for supervising the market last summer.
It could have devolved day-to- day responsibility to the stock exchange indefinitely, as happens in other jurisdictions, the spokesman added, but it opted instead to bring the role in-house at the end of next year, which is seen as the earliest practical date it can do so.
The regulator will also assume responsibility for the vetting of companies which list on the stock exchange, but not until 2011.
Both the regulator and the stock exchange said yesterday that the changes were on foot of EU directives and not the fall-out from the high-profile insider dealing case taken against industrial conglomerate DCC by fresh fruit company Fyffes.
Last month, the High Court cleared DCC and its chief executive, Jim Flavin, of insider dealing allegations in the civil action taken by Fyffes.
However, damaging allegations about the impartiality of the Irish Stock Exchange were aired in the course of the case, which heard that DCC exerted considerable pressure on the exchange to help it prevent a possible criminal prosecution of the company.
The new structure will be "more robust", according to a spokeswoman for the Department of Enterprise, Trade and Employment, the Government department with oversight of the stock market.
In line with the market abuse directive, the regulator is now the competent authority for such inquiries. The Irish Stock Exchange is no longer the regulator as the directive stipulates that it must be a national authority.
Future inquiries into matters such as suspected insider dealing will either be implemented by the Financial Regulator or it will ask the stock exchange to conduct inquiries on its behalf. Any decision on whether a report should be filed to the Director of Public Prosecutions or to the Office of the Director of Corporate Enforcement will rest with the regulator.
The exchange now has an obligation to report suspected breaches to the regulator.
"During 2005, more robust arrangements were put in place for the vast majority of listed companies here, including a new competent authority, namely the Financial Regulator, equipped with a new enforcement regime to ensure compliance," the spokeswoman said.
"It is planned to bring the IEX [ smaller listed] companies under the new regime, the timing to be agreed with the Financial Regulator."
The chief executive of the stock exchange, Tom Healy, said the directive was part of the Financial Services Action Plan, which aims to harmonise aspects of the financial services sector across the EU.
While the new system has been agreed between the Financial Regulator and the exchange, "how it will actually work in practice may not happen until something has to be looked into", Mr Healy said.
He said a related prospectus directive also made the regulator the competent authority here for reviewing and approving new prospectuses. All Irish-registered firms wishing to list must have their prospectuses approved by the regulator. Once approved, the firm can be listed anywhere in the EU.