INBS escapes after breaking law

IRISH Nationwide Building Society (INBS) became the latest financial institution to break the law and escape with just a rap on the knuckles from the financial regulator yesterday.

The Irish Financial Services Regulatory Authority (IFSRA) said INBS failed to comply with its legal requirements in preparing for its annual general meeting of members last year. But the regulator was powerless to do anything about it, because it was only granted powers to penalise legal breaches in August this year.

IFSRA began an investigation into INBS’s conduct of the AGM after receiving complaints from members. The investigation focused on the issue of proxy voting forms to members, which allowed those who could not attend the meeting to have their say on motions put to a vote. Proxy forms were issued to some INBS members without being requested in writing and had not been included in the notice of the AGM. This was against the law, the regulator said. The members who raised the complaint with IFSRA said the law was in place to prevent the society from issuing blank proxy forms without providing members with statements arguing for and against the motions under discussion. They claimed the blank proxies helped INBS chief executive Michael Fingleton defeat motions of no confidence that they had tabled.

IFSRA chief executive Liam O’Reilly said building societies needed to ensure they complied with the law in order to retain the confidence of members. “Regardless of the technical nature of this issue, it is clear that the actions of Irish Nationwide 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.

But Mr O’Reilly said the regulator would use its powers to sanction if it came across breaches of the law in future. “We will continue to monitor compliance with the requirements of the legislation,” he said.

Yesterday’s announcement came less than a month after the regulator made a number of findings against AIB in respect of its foreign exchange charging practices and the activities of its investment management subsidiary. But IFSRA had no power to fine or prosecute the bank and did not name the individuals involved, citing fears of legal complications. Mr O’Reilly declined to give assurances that IFSRA would publicly comment on the final outcome of AIB’s internal disciplinary procedures involving staff linked with the IFSRA investigation.