Stockbroking firm Campbell O'Connor has decided to stop taking on new clients because of a huge increase in the volume of business it has taken on over the last year. The brokers concentrate on the retail end of the market, offering a relatively low-cost share-dealing service to clients.
The Campbell O'Connor decision means that since the beginning of the year, three firms of stockbrokers have stopped offering share-dealing services to new clients. At all three firms, it is business as usual for existing clients.
While Campbell O'Connor made its own decision to stop taking on new clients, the other two firms - Fexco and BCP - were directed by the Central Bank to do so.
Campbell O'Connor managing director Mr Brendan O'Connor said that with the explosion in demand for share-dealing services, the firm has already taken on all the business it can handle.
"We have got enough business to keep us very busy. It is a question of balance. Staff have been working 12-hour days and weekends, and we decided we did not want to continue to work this way," he explained.
In January, Fexco, the broker with the lowest share-dealing charges in the market, was told by the Central Bank that it could not take on new clients. Then, on April 7th, BCP Stockbrokers was given similar instructions. After Fexco, Campbell O'Connor has the lowest charges for buying and selling shares in the market. With these firms no longer taking on clients, people who want to buy and sell shares will face higher dealing charges.
All stockbrokers have reported a huge increase in interest in shares among retail investors in recent months. But there has not been a matching increase in stockbroking capacity to deal with the rising demand.
As a result, the Central Bank, which regulates stockbrokers, became concerned that some brokers' systems were becoming overstretched. It therefore instituted more stringent reporting procedures to ensure that administrative and settlement systems were keeping pace with the volume of business being transacted.
The Central Bank regulates the sector by information and detailed business returns from each broker. Where concerns arise, it issues directives to brokers. The severity of the directive reflects the seriousness of the bank's concern.
A spokesman explained that the directive issued in any case "would be proportionate to the level of the difficulties in the firm involved".
An order to stop taking on new clients reflects concern that staffing or systems would be unable to cope with an increase in the volume of business. In effect, the order is telling a broker to "take a breather" to get its systems and staffing up to speed. At the other end of the spectrum, the bank could suspend a broker from trading if it was concerned about the firm's financial stability.
However, the Central Bank does not comment publicly on its regulatory actions in relation to any individual firm unless it has the agreement of the firm concerned. It says it is expressly prohibited from releasing such information under Section 16 of the Central Bank Act 1989 and Article 12 of the EU First Banking Directive.
