IFSRA names and shames Irish Nationwide

Press Statement from IFSRA


Irish Nationwide Building Society


In 2003, the Irish Financial Services Regulatory Authority received complaints from members of the Irish Nationwide Building Society, relating to the conduct of the Society’s 2003 annual general meeting. The Financial Services Regulator commenced an investigation into these complaints and that investigation has now been completed.

The investigation related to the provisions governing the conduct of annual general meetings as provided for in Section 72(7) of the Building Societies Act, 1989. Specifically it focused on the issuance of proxy voting forms to members.

The investigation found, and Irish Nationwide has accepted, that preparations for the 2003 annual general meeting did not comply fully with the legislation. In contravention of the legislation, the Society issued separate proxy forms to some members, which were not appended to a notice of the AGM and were issued in the absence of any written request for these forms. This breach did not invalidate the exercise of proxies in any way. No such issue arose in relation to the 2004 annual general meeting.

Liam O’Reilly, Chief Executive of the Financial Services Regulator, stated that strict compliance is necessary to ensure that mutual societies retain the confidence of their members. “Regardless of the technical nature of this issue, it is clear that the actions of Irish Nationwide in this case were in contravention of the legislation governing building societies. It is a cause for some concern that this breach was permitted to occur”, he said.

“It is important to stress that the new sanctions powers of the Financial Services Regulator will be available where contraventions of requirements occur in the future. We will continue to monitor compliance with the requirements of the legislation”, he added.

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Further information:
Neil Whoriskey: (01) 434 4276 / (087) 221 9199
Jill Forde: (01) 410 4096 / (086) 239 3313

Press release from Shane Hogan and Brendan Burgess

IFSRA names and shames Irish Nationwide

Shane Hogan and Brendan Burgess today welcomed IFSRA’s decision to name and shame the Irish Nationwide for their handling of the 2003 AGM.

The main significance of this statement is that it is their only public naming and shaming of a financial institution apart from IFSRA’s criticism of AIB. Although the words appear mild, IFSRA must have fully understood the significance of the events, given that it has taken 18 months to respond with today’s press release. What IFSRA appears to be saying is that it is unable to sanction the Irish Natiowide as it happened before the 1 August 2004, so they are naming and shaming them instead. There has been no response to the complainants, who assumed that IFSRA had closed their file on the matter.

The suggestion that the breach was technical in nature implies some minor infraction or non compliance. In reality, what happened was the deliberate riding of a coach and four through the provisions of the Buildings Societies Act. These provisions were designed to make sure that the management of a building society do not influence the outcome of a vote at the AGM.

Let’s recall what happened. At the 2003 AGM, we put down a number of motions including a motion of no confidence in Michael Fingleton as Chief Executive. Provisions in The Building Societies Act are designed to make sure that the members express their views on this motion without being canvassed by employees or executives of the Society. The key provision of the Act prevents the Society from issuing any blank proxy forms which are not accompanied by the statements for and against the motions. The Irish Nationwide issued specially printed blank proxy forms and mounted a huge campaign through their branches to get their employees to collect proxy forms signed by the members to vote in favour of Michael Fingleton. Needless to say, with these illegally obtained proxies, Mr Fingleton appeared to get a massive endorsement from the members.

IFSRA has not shown any basis for their statement “that the breach did not invalidate exercise of proxies in any way”. What does this statement actually mean? That the proxies were not invalid or that invalid proxies did not affect the results of the motions?

We made our complaint in May 2003 and provided documentary evidence of the illegal use of proxies. The Irish Nationwide has accepted that these complaints are valid. IFSRA must also explain why it has taken over 18 months to conclude their investigation into this matter.

While IFSRA does not have the power to impose sanctions for activities which took place before the 1 August 2004, it does have a responsibility to ensure that the executives and directors of all financial institutions are fit and proper persons to act in such a capacity.
The Irish Nationwide has been criticised by the Consumers Association, by the courts, by the Director of Consumer Affairs and now by the Financial Regulator. What has to happen before IFSRA makes a decision that someone is not a fit and proper person to act as a director or executive of the Society?