Morrogh case ruling must be fought
It won't.
The latest instalment of the two-and-half year saga is set for the Supreme Court as a bunch of tenacious private investors fight for, of all things, the right to get their own property back.
This protracted case has unearthed major problems with the manner in which shares are traded in this country. Yet no one in authority at the Irish Stock Exchange (ISE) or the newly created Irish Financial Services Regulatory Authority (IFSRA) has given any guidelines on the perils of holding shares in stockbroker-controlled electronic nominee accounts.
Prodded in an interview with the Irish Examiner,
IFSRA prudential director Patrick Neary conceded that a recent High Court judgement by Mr Justice Roderick Murphy put all shares held in electronic trust in peril if a stockbroker went belly-up. Three have done so gone to the wall in the past 20 years alone.
"If you want absolute security you should get your share certificate and put them under the mattress," Mr Neary said. "But you have to balance things out. If you want to trade in those shares, then you will have difficulties."
That was it, no general warning from IFSRA or the ISE that people needed to get their hands on their share certificates if they wanted to be sure their investments were secure.
Billions of euro in shares are held in trust by Irish brokers for their clients, almost all in electronic 'de-materialised' form. All are at peril.
In essence, Mr Justice Murphy ruled that the assets of a stockbroker's clients can be used to pay the costs of the receiver in a situation of default. Here's a simple analogy: imagine what would happen, if say, a High Court judged ruled that client assets like the title deeds to a house held in trust by a solicitor were to be sold off to pay for the costs of winding up the affairs of a solicitor who went bang.
There would be war. The Law Society would go to the ends of the earth to fight for the integrity of the client's assets.
It seems the stockbroking profession has a more passive streak. Their main concern, it appears, is to limit their exposure to funding compensation payments to out-of-pocket clients.
The ISE took legal advice and looked long and hard to see what could be "done to protect the integrity of client funds". Then they walked away from the fight and will not appeal a High Court judgement that undermines the very essence of their business the secure trade of shares.
None of the stockbroking companies who were notice parties to the Morrogh case are to lodge an appeal either. In fact, just one financial institution is appealing the judgement to the Supreme Court Anglo's interest is simple: it believes it is entitled to Stg£1.3m, the proceeds of shares in London Stock Exchange lodged at the direction of the Central Bank in a client account of the firm. The bank claims the LSE shares were pledged to it by Morrogh joint owner Stephen Pearson as security for a loan advanced to him in a personal capacity.
The main assault on the Murphy judgement is coming from an ad hoc group of small private investors who are lodging an appeal in the name of investor David Beechinor.
It is now 891 days since Morrogh went into receivership and still the entrails of the fiasco have not been deciphered.
You have to take your hat off to the Morrogh shareholders who are fighting the good fight. Their motto appears to be Noli arrogantium iniurias pati Don't let the bastards grind you down.
Best of luck lads.
