Clients whose funds and shares have been frozen pending the outcome of investigations by the Central Bank and the Garda Bureau of Fraud Investigation into W & R Morrogh are being told it is too early to determine the extent of any irregularities.
Irish Stock Exchange chief executive Mr Tom Healy said yesterday it still didn't know which clients had been affected or the scale of the problem.
Clients immediately affected are those who had shares in the firm's nominee account.
This is an option commonly taken by shareholders for ease of trading, as their shares are held electronically and can be traded with greater ease and efficiency than in the paper form.
That nominee account, which W & R Morrogh would have held in trust for its clients, is likely to be frozen for some time until the various investigations determine what happened.
To prevent difficulties for shareholders who find themselves in this situation, the Irish Stock Exchange introduced a Crest personal account - part of the Crest stock settlement system - this year specifically for small independent stockbrokers.
W & R Morrogh did not offer the Crest personal account to its clients. The Crest personal account would have ensured that shareholders in similar circumstances would be able to continue to trade their shares themselves or through another stockbroker. When the nominee account is released by the Central Bank, shareholders will be given a choice of either opening a Crest personal account or reassigning their shares to another stockbroker but they may lose out in terms of investment gains in the interim. Any monies which may have been held at the firm, for example where shares were sold for a client, have also been frozen and the account will be examined to determine any discrepancies.
The scale of any potential losses is being initially estimated at up to £1 million (#1.27 million). The Central Bank will begin auditing the firm's records to determine the full extent of any losses and identify which individuals may be out of pocket.
The firm was run as a partnership and its two partners, Mr Alexander Morrogh and Mr Stephen Pearson, are personally liable to make good any client losses. Where their assets fail to cover fully the extent of the losses, investors will qualify to apply for compensation to the Investor Compensation Company. In these circumstances, clients are entitled to a maximum compensation payment of #20,000 or 90 per cent of the net loss, whichever is the lesser. The Central Bank can be contacted at 01 7616666 or the Irish Stock Exchange at 01 6778808. Staff at W & R Morrogh are also providing information to customers on 021 4270647.
