COMPENSATION: The failure of Cork stockbrokers W&R Morrogh is expected to cost the Investor Compensation Company (ICCL) about €5 million (£3.94 million) in compensation payments to clients, according to chairman Mr Joe Maher.
To cover this cost, ICCL is seeking special "top-up" contributions from stockbrokers and other members of its "A" reserve fund over a three-year period.
"This has to be addressed as a top-up contribution because our on-going reserves just could not handle it. There is no alternative. We cannot finance this from ongoing contributions," Mr Maher said yesterday.
The ICCL had reserves of €1.85 million in its "A" fund at the end of July 2001, according to its annual report released yesterday. The 12 stockbroking firms in Fund A have been asked to fund half of the €5 million cost as special contributions, in addition to their regular annual contributions to ICCL reserves.
The balance will come from the other members of Fund A - mainly banks providing investment services and investment firms. The top-up amount required from each firm will be based on their existing annual contribution rate, which is determined by the number of eligible clients and business levels, Mr Maher said.
The ICCL, a Central Bank company set up to provide compensation for the clients of failed investment firms, received 2,500 claims from Morrogh clients. Some 700 of these claims related to cash losses, which early ICCL assessments indicate could cost about €3 million. The balance involved share claims. ICCL chief operations officer Mr Bernard Sheridan said it was too early to put figures on the compensation cost of these shares claims.
The cost of Morrogh compensation will be "much more significant" than the MMI Stockbrokers collapse, according to Mr Maher. The annual report said the MMI collapse would cost ICCL about €1.15 million (£903,000) in compensation payments, administration and legal costs. It reported 305 compensation claims from MMI clients with payments of €453,478 made in the year to end-July 2001, and 280 claims settled.
ICCL expected the cost of compensation to reach £603,000 (€765,000), while the administrator and legal expenses added costs of £300,000.
The collapse of insurance brokerage Andrew Casey Life and Pensions cost ICCL £15,751 with nine claims made - of which six were rejected, two were settled and one remains outstanding.
ICCL reserves at end-July were lower than planned because of these payouts. The amount of compensation payable to investors by ICCL is limited to 90 per cent of the amount lost, subject to a maximum payout of €20,000.
