Morrogh clients in line to get payments

Around 900 clients in the failed stockbroking firm W&R Morrogh can expect to receive compensation payments over the next few months, the Investor Compensation Company (ICCL) has indicated in its annual report.

The Cork-based stockbrokers collapsed in 2001 after a series of frauds by junior partner Stephen Pearson, but so far only 835 of the 2,618 claims received by the ICCL have been paid.

The ICCL can only make payments once the administrator, Tom Grace of PricewaterhouseCoopers, certifies the claims.

ICCL chairwoman Caitríona Murphy said she expected Mr Grace to certify around 860 claims before the end of 2005 and that these investors were on course for swift payment, well within the ICCL's statutory three-month limit. That would leave a further 900 claims outstanding.

"We are assured by Tom Grace that he is not far from certifying the remainder of the claims," Ms Murphy said.

Over €3 million has been paid out to Morrogh clients to date, with the total cost of the collapse expected to exceed €10 million.

The ICCL said the complexities in the winding up of the firm and the delays in certifying claims were "a matter of considerable concern".

The delays occured after legal clarifications were sought by the receiver following a High Court ruling that he could use funds from shares held in nominee accounts to pay for the cost of his investigation. This meant some investors were denied access to the remainder of their assets.

Ms Murphy called for company law legislators to specify a timeline by which wind-ups must be completed.

The issue is among several discussed last year by working groups set up by the Department of Finance to address the fallout from the Morrogh case. A draft report by the working group, which reconvened last month, has yet to be finalised but is expected shortly.

Ms Murphy said a recently published EU review of investor compensation schemes had highlighted the ICCL's position that an annual cap should be placed on members' contributions and that provision should be made for more speedy wind-ups.

The Department of Finance review is also looking at the idea of creating a long-term fund for the "what if" scenario of an even larger collapse than Morrogh.

The ICCL annual report shows that its Fund A reserves, which cover certain investment intermediaries, stockbrokers and credit institutions, have jumped from just under €400,000 at the end of July 2004 to €2.1 million at the end of July 2005. This followed a fourth consecutive year without new cases of failed firms.

But the ICCL said yesterday it would not meet its target to build Fund A reserves to €9 million by the end of July 2007.