IRELAND - Leading Irish pensions associations are locked in frantic talks to review legislation following a recent High Court ruling that has lumbered the costs of trust wind-ups at the door of trustees.
In September, the Irish High Court ruled that Tom Grace, receiver to the Cork-based W&R Morrogh stockbroking firm, could use shares held electronically to pay his e3m legal and administration costs on a pro rata basis.
Pension funds are now panicking that the move could set an unwelcome precedent if another stockbroker went bust, explained the newly appointed Pensions Ombudsman, Paul Kenny.
“The pensions fund industry is in crisis and many trustees feel they are walking a tight rope,” he said.
“Trustees are now waking up to the fact that when trusts wind-up, the expenses of winding-up can be charged against them.”
Since coming under fire for not guarding the industry against more crippling costs, the Irish Association of Pension Funds has urged the government to grant pension funds some protection against any potential damage caused in the wake of the ruling.
The Ministry of Finance, the Irish Financial Services Regulatory Authority (IFSRA) and the Investor Compensation Company are also collaborating to examine the implications of the court case and to decide if any changes in the current law are required.
Although reports have focused on the security of electroncially-held shares, the current law does not stipulate that a liquiditor can extract costs from just these, but can claim “reasonable expenses” from any source of client money. In September, Mr Justice Roderick Murphy ordered that the estimated e5m in shares held in trust for clients by W&R Morrogh should be used to pay the costs of receiver Grace of PricewaterhouseCoopers.
W&R Morrogh had been under administration since 2001.
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