Financial Regulator Matthew Elderfield has told stockbrokers to submit to voluntary investigations to help resolve a backlog of mis-selling claims against them relating to investments in bonds made before November 2007, when a rule change removed the stock exchange's authority to look into such cases.

In a letter submitted to the Joint Committee on Economic and Regulatory Affairs last week, Elderfield said the Irish Stock Exchange (ISE) and the brokers which make up its membership had an "obligation" to "voluntarily sign up to a procedure" to determine whether they acted appropriately in selling millions in bonds, now virtually worthless, to credit unions and other organisations.

"It is unsatisfactory that investors who had certain rights in 2007 have lost them because of a change in stock exchange rules," he wrote. "I don't consider it appropriate that stockbrokers might avoid expert investigation of their conduct because of the manner of the deletion of rules by the Irish Stock Exchange."

Elderfield wrote that he became aware when he came to office in January of a "number of claims" being pursued against stockbrokers for investments during the period 2004-06, but that these could only be advanced through expensive court cases because the stock exchange had eliminated its complaints procedure to comply with new legislation in late 2007.

The rule change opened a legal gap, with neither the regulator or the exchange in a position to investigate pre-2007 claims. Elderfield said the regulator was happy to do this work, but that he was "not confident that legislation can be introduced to give us a power to investigate such... cases". A spokesman for the ISE agreed that there was a problem with the current rules, but that the exchange was in the tough situation of being asked to restore a regime which had been regarded as unsatisfactory.

"The Irish Stock Exchange was not a credible investigator of its own members [the stockbrokers]," he said.

In a presentation to the committee last month, ISE chief executive Deirdre Somers said "given the ownership structure of the exchange, an investigation carried out by the exchange into alleged mis-selling of stockbroking firms would be regarded with a jaundiced eye". She said the exchange had senior counsel advice that the old rules could not be re-instated because of intervening legislation. The regulator's own legal advice said that organisation could not pick up the slack either.