High Court to decide fate of Morrogh shares

The receiver to the collapsed Cork stockbroking firm W&R Morrogh will seek direction from the High Court on Monday on what to do with a block of US shares held in the firm's name on behalf of clients.

The shares were bought on behalf of Morrogh clients but are not held in their names. Instead, they were held electronically on their behalf, under Morrogh's name, by a custodial agent such as Merill Lynch or Crest.

The issue to be decided by the High Court is whether the shares belong to the Morrogh clients who thought they were bought for them or whether they should be pooled in the general body of the assets of the receivership.

A group of Morrogh clients is considering challenging the High Court application by the receiver, Mr Tom Grace of PricewaterhouseCoopers.

Around 1,850 out of Morrogh's client base of more than 9,000 are thought to be affected by what happens to the shares and a number have come together to set up the Morrogh Action Group.

"We contend the shares are held under conditions of Stock Exchange regulation and the receiver should not be holding onto them," said Mr Kieran Coogan, a member of the action group's executive committee.

Many people choose not to hold shares in their own names but to hold them through nominee accounts or under the names of banks and brokers. As a result, they have no share certificates and may not appear on the shareholders' register.

If the High Court rules that the receiver should sell the shares and include the proceeds as part of Morrogh's assets, it could have serious implications for the thousands of people who hold their shares indirectly.

One market source said people who hold shares in this way would have to reconsider how their shares were held.

An alternative would be to open a personal account with a settlement house, like Crest, which would then hold the shares on the stockholders' behalf.

Shareholders might also become more inclined to hold their shares in the nominee account of a major bank, which is less likely to run into difficulties that could lead to liquidation.

Morrogh, one of the oldest stockbroking firms in the State, collapsed in April last year, leaving many of its clients seriously out of pocket. It is thought losses at the firm could have been as high as £7 million (€8.9 million).

Although small - it employed just 12 people - Morrogh had a loyal client base drawn in the main from the "old money" of Cork city and its environs.

An indication of the wealth of Morrogh's clientele is demonstrated by the fact that a minimum of £50,000 was required for Morrogh to manage a portfolio for any of its clients.

Close to 2,500 clients of the stockbroker applied to the Investor Compensation Company Ltd (ICCL) for compensation by last December's deadline.

Under the scheme, run by the Central Bank, claimants can receive 90 per cent of their net loss or €20,000, whichever is less.