Central Bank investigators have been called into the Cork stockbroking firm of W&R Morrogh, one of the oldest stockbroking firms in the State, after the firm was ordered to cease trading when financial irregularities were discovered.
The Garda Bureau of Fraud Investigation has also been alerted, but has so far not begun any formal investigation into Morrogh's affairs, although sources said such an investigation is likely.
The extent of the financial irregularities has not been disclosed, but informed sources said that there may be a shortfall "well into six figures" and possibly in excess of £1 million. As of yesterday, client accounts have been frozen.
In a statement, the senior partner, Mr Alec Morrogh, said: "In light of apparent irregularities involving the junior partner in the firm, the Central Bank of Ireland has imposed a direction on the firm to cease trading." Mr Stephen Pearson is the junior partner in W&R Morrogh.
Mr Morrogh could not be contacted for further comment last night. A member of the Pearson family said that they had been advised by the Central Bank to make no comment. The Central Bank and the Irish Stock Exchange declined to comment beyond brief statements.
The extent of any shortfall will become clear only after the investigation is completed. But there are serious financial implications for the firm's partners. Because Morrogh is a partnership and not a limited company, the partners will have an unlimited liability for any financial shortfall and could be required to liquidate as much of their personal assets as are required to meet money owed to clients.
If the partners' personal assets are insufficient to meet money owed to the firm's customers, then the Investor Compensation Scheme comes into operation. This scheme, however, provides for a maximum payment of €20,000 (£15,860) to any individual client.
This makes the Morrogh case different from the collapse of MMI Stockbrokers three years ago. MMI collapsed when it was owed about £4 million from clients who failed to settle their accounts. However, because MMI was a limited company, the directors only had a liability up to MMI's paid-up share capital.