A majority of potential claimants in the case of Custom House Capital (CHC) have yet to receive compensation, some seven years after the broker was found to have misappropriated some €66.5 million from customers.
According to the Investor Compensation Company (ICCL)’s annual report published on Wednesday, the State’s investor compensation fund returned just €160,000 to eight claimants in the 12 months to July 31st, 2018, to former clients of CHC, bringing total compensation paid out up to € 7.4 million to 574 former clients. However this is little more than a third of the estimated final bill of €19.7 million owed to some 2,000 investors.
The ICCL provides a level of protection for retail clients of Irish-regulated investment firms. It pays up to 90 per cent of the amount lost, subject to a maximum of €20,000, to each investor, and is funded by levies from its members. The collapse of CHC, has turned out to be the single largest compensation event to date for the ICCL.
Chairwoman Jane Marshall said a majority of potential claimants have yet to see their claims certified by the administrator/liquidator, Kieran Wallace of KPMG , “and thus have not received compensation due”. There is no deadline by which claims must be certified by an administrator, but once made, the ICCL must pay out within three months.
“ The company has made provision for all outstanding claims relating to CHC, which will be paid promptly on receipt of certifications from the administrator,” Ms Marshall said.
Following a High Court judgment last year, it had been expected that there would have been “meaningful progress” on the certification of outstanding claims.
“Disappointingly, this has not materialised as the liquidation process has been further protracted due to the complexities encountered,” Ms Marshall said. She added that the assessment of some of the losses incurred may be contingent on the resolution of property related investments into which misappropriated client funds had been diverted, and this may delay the process by “at least a further two years”.
Ms Marshall also said that unless legislative change is embarked upon, other investors caught up in a similar failure could expect to endure similar delays.
There were no new cases at the ICCL during the year. While joint liquidators were appointed to Charleville Credit Union , which was a participant in the ICCL scheme, in November 2017 no compensatable losses were incurred by either clients or members of the credit union.
Financial statements show that reserves stood at some €57 million as of July 31st, and the fund is expected to reach €60 million next year. This means that when combined with insurance policies, the ICCL is in a position to cover compensation from potential failures of investment firms amounting to some €167 million.
Some 3,603 investment firms were affiliated to the ICCL on this date, up 10 per cent on the year, due to a “significant” number of new firms joining the scheme. These largely comprised 450 member firms of Chartered Accountants Ireland which joined the scheme.