Three working parties will be set up to examine the consequences of the collapse three years ago of Ireland's smallest stockbroker, W&R Morrogh, the Department of Finance has confirmed.
The Department is trying to agree terms of reference for the working parties. One group will examine issues concerning the regulation of the funds industry, said a Finance spokeswoman.
A second group is expected to review funding matters, including the compensation available to clients of investment firms that go bankrupt.
The third will focus on the legal implications arising from last October's High Court ruling that receiver Mr Tom Grace of PricewaterhouseCoopers could use funds from assets held by the broker for clients to pay for the costs of his investigation.
The Department of Finance, the Irish Financial Services Regulatory Authority (IFSRA), the Investor Compensation Company Ltd (ICCL) and certain industry representatives will comprise the working parties.
The Irish Association of Investment Managers (IAIM) said it was delighted the working groups were being set up and that it would seek early completion dates. "We have been pushing for this for a considerable time," Ms Ann Fitzgerald, IAIM secretary general said.
Ms Fitzgerald expects the structure and scope of the working groups to be finalised within days.
"The fundamental thing at the moment is to make the Investor Compensation Company strong," she said. "It needs to be strengthened considerably."
At the moment, compensation the ICCL can give investors who have lost out due to collapsed investment firms is limited to 90 per cent of the loss, subject to a maximum payout of €20,000.
Interim payments have been issued to 747 out of the 2,600 Morrogh investors who made claims before the December 2001 deadline. Further compensation may be payable on the shares held in the nominee accounts affected by the High Court ruling.
The ICCL must wait for the receiver to act on the judgment before it can issue payments to more than 2,500 investors.
Investors whose holdings have been frozen in nominee accounts are unhappy they have been denied access since Morrogh's collapse due to fraud in 2001.
The High Court ruling has also caused significant disquiet within the investment industry, which believes that allowing liquidators to use client assets to pay their expenses puts investors at even greater risk.
"It's no exaggeration to say that, if the situation remains as it is, there is potential for damage to the investment management, custody and funds administration business in Dublin," said Mr Seán Hawkshaw, chief executive, KBC Asset Management.
Mr Hawkshaw has warned pension fund trustees that the Morrogh ruling has increased the need to be comfortable with the reputation and financial stability of their broker.
At the time of its collapse, Morrogh was the longest established Irish broker and the only one based outside Dublin.
Previous financial irregularities at the firm by junior partner Mr Stephen Pearson had not been disclosed to the regulator or customers.
