A stockbroking collapse on the scale of W&R Morrogh in Cork is a shocking development, particularly as it now seems likely that many investors with the firm are going to be seriously out of pocket.

Whether the final deficit is the £5.5 million (€7 million) indicated in the High Court this week or whether it is substantially higher - as has also been suggested - there are few who believe that the personal assets of Alec Morrogh and Stephen Pearson will be anywhere near sufficient to cover the final deficit. Inevitably, the investor compensation scheme and its very limited compensation awards will come into play.

It is shocking enough that Morrogh has collapsed because of the fraudulent activities and futures gambling of Stephen Pearson. But what is truly shocking is that, according to the Central Bank's affidavit, Mr Pearson had been involved in similar activities eight years ago but the matter had in effect been shoved under the carpet after Mr Pearson's father covered that particular shortfall.

Neither the Stock Exchange nor the Central Bank was informed about what Mr Pearson had been up to at the time. And when the Central Bank took over the regulation of stockbrokers in 1995, Mr Pearson's activities two years earlier were also kept under wraps. At that time, the Central Bank interviewed the Morrogh partners, its auditors and the Stock Exchange to ensure that Morrogh was being properly run.

Many questions have to be answered by Mr Pearson, but also by senior partner Alec Morrogh who was unaware of Mr Pearson's latest embezzlement from client accounts.

Not least of the questions is why Mr Pearson had the task of making the regular returns to the Central Bank and whether this was an appropriate job for somebody who had previously been caught embezzling funds.

The other big question is why the firm decided to keep Mr Pearson's 1993 episode quiet and simply sorted a problem of embezzlement by making up the losses.

This time around many people who had no reason to distrust Mr Pearson's honesty and probity are going to lose money because a known embezzler had been left with access to client monies.

If there ever was any doubt that the Stock Exchange's self-regulation prior to 1995 was ineffective, it is the Morrogh saga. A detailed investigation is required - whether it is by the Central Bank, the Stock Exchange, the Fraud Squad, receiver Tom Grace or all the parties combined. The outcome of that investigation must also be made public.