Transcript Document

Presentation to Seminar of the
Association of Compliance
Officers in Ireland
29 April 2009
The ODCE –Relevance to
Financial Service Companies
Paul Appleby
Director of Corporate Enforcement
Outline of Presentation
• What is the Office of the Director of Corporate
Enforcement?
• Our goals and work
• Our approach
• Our impact
• Concluding Comments
What is the ODCE?
• Business scandals of the late 1990s (Tribunals of
Inquiry – McCracken/Flood, High Court Inquiries
– Ansbacher/NIB and the PAC’s DIRT Inquiry)
• Working Group on Company Law Compliance
and Enforcement finding in 1998 of “a culture of
non-compliance” with company law duties
What is the ODCE?
• Remit focused on the Companies Acts 1963-2006
• Multi-disciplinary agency comprising 45 administrative,
legal, accounting and Garda staff
• Expenditure of €4.34 million in 2008
• Director must act on an independent basis
• Director obliged to respect commercial confidentiality
ODCE Goals
• Encouraging Improved Compliance
• Uncovering Suspected Breaches
• Sanctioning Improper Conduct affecting Insolvent
Companies
• Prosecuting Detected Offences/Breaches of Duty
• Providing Quality Customer Services
ODCE’s Compliance Work
• Publications
–
–
–
–
–
General Guidance on Duties of Directors, etc.
Specific Information on Auditor Reporting Duties
Guidance on Specific Issues, e.g., Directors’ Loans
Consultation Papers, e.g., Whistle-blowing
Occasional Articles, e.g., Practical Debt Management
• Seminars/Events/Press Statements (86 in 2008)
ODCE’s Compliance Work
• Policy Contributions
– Company Law Review
– Below Cost Selling
– DPP Discussion Paper on the Giving of Reasons
• International Dimension
– Research on ‘Phoenix Companies’
– Assisting EU Accession and other States
– Participating in OECD Peer Reviews of Bribery, etc.
ODCE’s Detection Work
•
•
•
•
•
•
ODCE legal model is primarily reactive
Public complaints about companies, directors, etc.
Auditor reports of suspected indictable offences
Information from the Financial Regulator, IAASA, etc.
Matters in the public domain, e.g., Press Releases
ODCE’s own inquiries, e.g., the CRO Register
ODCE’s Detection Work
•
•
•
•
•
Assess if ODCE intervention is called for
Identify if a prima facie breach has occurred
Consider if administrative rectification will suffice
Consider if legal action is necessary or desirable
Evaluate if other actions are warranted, e.g.,
referral of case to another regulator for evaluation
• Vast majority of issues dealt with administratively
ODCE’s Detection Work
• Prominent Company Case in 2008
–
–
–
–
Claimed gross dereliction of duty by past directors
Legal action taken by company and more contemplated
ODCE was asked to consider disqualifying them
We sought evidence of misconduct but also asked why
it was not taking the disqualification action
– We have heard nothing further
ODCE’s Insolvency Work
• A liquidator of an insolvent company must report
to the ODCE and apply to the Court for directors’
‘restriction’, unless relieved by the ODCE
• ODCE role resolves Court criticisms of “apparent
injustice” in corporate insolvencies where only a
few directors had to explain their conduct
• About five out of six directors avoid restriction
• Two directors of Irish plc were restricted in 2006
ODCE’s Insolvency Work
• ODCE may also seek restriction/disqualification in
unliquidated insolvent/struck-off company cases
• Our role is to ensure that persons who abuse their
position are brought to account in Court
• ODCE has successfully piloted actions in this area
ODCE’s Insolvency Work
• Prominent Phoenix-Type Case
– One person acted as director of eight struck-off
companies, all of which had debts outstanding
– Another acted as director of four of these companies
– Came to attention due to employee, creditor and
Pensions Ombudsman complaints in a failed company
– First director disqualified for 12 years
– Second director disqualified for 8 years
ODCE’s Enforcement Work
• Criminal Enforcement Options
– Summary Prosecution in the District Court
– Referral to the DPP for Prosecution on Indictment
• Typical Criminal Enforcement Offences
– Persons acting as Directors/Auditors while prohibited
– Accounting issues, e.g., failing to keep proper books
– Falsification of company documents
ODCE’s Enforcement Work
• Civil Enforcement Options
– Remedial order to secure compliance with law
– Formal company investigation, e.g., DCC plc et al
– Restriction of a director after a failure to act honestly
and responsibly in the insolvent company
– Disqualification of a person for serious misconduct,
e.g., fraud or prejudice
ODCE’s Enforcement Work
• Ansbacher (Cayman) Ltd. Case Evidence
–
–
–
–
–
High Court Inspectors’ Report
Unlicensed banking business carried on for 20 years
Business conducted with intent to defraud Revenue
Knowingly aided clients to file incorrect tax returns
Three persons disqualified for 9, 5 and 3 years due to
their being found to be unfit for company management
ODCE’s Enforcement Work
• Selection of Other Financial Service Company Cases
–
–
–
–
Conviction of Merrion Reinsurance Co. Ltd. in 2003
Directors of financial intermediary convicted in 2004
Investigation powers used against various financial firms
Disqualification of National Irish Bank manager in 2005 – rest
ongoing
– Investigations of Anglo Irish Bank events ongoing
ODCE Approach
to its Remit
DPP
Referrals
Disqualifications
Summary Prosecutions
Civil Enforcement Actions
(Compliance Orders, Restrictions)
Administrative and Legal Actions
(Investigations, Cautions, Corrective Measures)
Encouraging Compliance
(Guidance, Presentations, Promotions)
ODCE Approach to its Remit
• Directors’ Transactions – One Area of Work
–
–
–
–
–
–
–
General ban on personal use of company assets
Publication/issue of ODCE Guidance in late 2003
All directors circularised in 2004
Revenue informed of detected large loans in 2006
Voluntary or prompted remedial action often accepted
Handful of ‘wilful default’ cases prosecuted
Secured first convictions in 2008 in case taken by DPP
ODCE Approach to its Remit
• Directors’ Transactions – One Area of Work
– Doubt arose in late 2008 that banks were maintaining registers
of directors’ loans (S. 44, 1990 Act)
– We circularised banks seeking compliance with S. 44 and with
register of directors’ interests (S. 194, 1963 Act)
– We recommended legal changes to the law including reducing
the burden of proof for criminal prosecutions
– New Companies Bill plans to amend these provisions
– New Financial Regulator requirements
ODCE Impact
• Quantitive ODCE Results
–
–
–
–
–
–
Over 50 publications, etc. issued
4,000 complaints/reports dealt with administratively
280 convictions of companies, directors and others
70 disqualifications
800 restrictions (by liquidators primarily)
20 remedial or costs orders by the ODCE
ODCE Impact
• Qualitative ODCE Results
– 85% of 299 directors opined that compliance was
better
– All 141 accountants/liquidators believed so!
– 75% of directors rated the ODCE as effective
– 91% of accountants/95% of liquidators agreed
(TNS/MRBI Market Research 2007/2008)
Concluding Comments
• Future Direction
– Reach out to company stakeholders and SME directors
– Deal with minor offences administratively or by fine
– Concentrate more enforcement resources on complex
cases or areas of major non-compliance
– Some extra staffing resources in place to extend impact
Concluding Comments
• ‘Culture of compliance’ prevails more now
–
–
–
–
–
–
Directors, etc. now more accountable
Auditor’s independent role reinforced
Errant directors face ODCE inquiry/Court action
Creditors’ situation has improved
Better information disclosures to market
Reinforcing good practice in other areas
Thank You
Further Information is available from
www. odce. ie