The Investor Compensation Company Limited (ICCL) is expected to seek £8 million (#10 million) from banks, stockbrokers and financial institutions over the next two years to build up sufficient reserves to pay future claims.

The board of the ICCL will shortly sanction a levy to build its reserves to £8 million by 2003. It is expected to collect £4 million this year and the same amount in 2002 to ensure it has sufficient funds to meet investor claims.

The ICCL currently has reserves of around £1.6 million which will rise to close to £2 million when institutions pay their contributions in August. Over the next five months though, the ICCL will have to pay claims lodged by investors affected by the collapse of the Cork-based stockbrokers, W & R Morrogh.

It has said it is too early to estimate how much money will have to be paid to these investors but some sources suggest it could be as high as £2 million which would completely deplete its compensation fund.

The ICCL aimed to have built reserves of £8 million within five years and the directors are understood to be determined to achieve that objective.

The ICCL was established three years ago and has had to pay claims to investors affected by the collapse of MMI Stockbrokers and some who were affected by the closure of Cork-based investment intermediary, Andrew Casey Insurances.

Up to 2,000 investors are expected to claim for compensation arising from Morrogh's collapse and the ICCL is obliged to pay out these claims within three months of them being certified by the appointed administrator. Mr Tom Grace, who was appointed by the Central Bank of Ireland as administrator, has formally invited investors to begin to lodge claims and they have five months to do so.

The ICCL operates two funds for compensation claims, the bigger of which Fund A, is funded by the banks, stockbrokers and financial institutions. Fund B's reserves are contributed by non-life insurance intermediaries.

Around 200 companies contribute to Fund A with their contributions based on the number of clients on their books. These fees range from £1,400 to £40,000.

A levy is expected to be based on the respective size of each organisation with the bigger institutions bearing the bulk of the costs. If it were to be flatly applied each one would have to pay £40,000 over the two years. Annual fees are due in August and the ICCL has begun taking soundings with the institutions on the imposition of a substantial levy to be followed by another one again next year.