Defunct stockbroker Pritchard, which was acquired by WH Ireland in 2012, faces further ‘significant’ client claims which, if agreed, could increase its £3 million cash shortfall.
Special administrator Mazars said a ‘significant additional’ number of claims, some of which are believed to be substantial, add to existing claims of around £26.5 million, against £23.5 million of pooled client cash Pritchard holds. These were not originally in Pritchard’s records. Mazars said it was investigating these claims in a progress report.
As of last month, around one third of the existing claims against Pritchard’s pool of client money were yet to be compensated. At this point 7,484 clients agreed to settle, while a further 3,726 are still to resolve claims that amount to an estimated £2.8 million, despite the administrator’s attempts to contact them.
A first distribution of 50p in the £1 is being paid to clients whose claims are agreed, but the administrator said it was unable to estimate the timing or size of future distributions until the issues around these additional claims are resolved.
WH Ireland, led by CEO Richard Killingbeck (pictured), has also suspended three lines of stock gained through the acquisition, which will not be transferred to the business. They are understood to be investments in companies that have since been liquidated.
The troubled stockbroker’s book of business was bought by WH Ireland for £500,000 in February 2012, where it acquired assets under management valued at £400 million.
The company said the deal would increase its private client stockbroking clients by approximately 50% and total assets under management by around 25%.
Prior to the acquisition, the then-Financial Services Authority suspended Pritchard from trading after ruling the stockbroker had used client money to cover its own expenses, putting that money at risk.
The financial watchdog also froze Pritchard’s assets, and the stockbroker was told to let its clients know it had been banned from trading. In November 2012, the Financial Services Compensation Scheme said it expected to pay out £16 million in compensation over Pritchards.
WH Ireland was due to pay £300,000, including VAT, to Mazars in August 2012 in accordance with the sale of Pritchard Stockbrokers, the document states, but this payment was disputed by WH Ireland.
Mediation at the end of last year resulted in a payment of £180,000 to the administrators.
Three of Pritchard’s employees were made redundant in November, but five people remain employed by the company, although ‘the ongoing need for retained staff continues to be reviewed’, Mazars said.
WH Ireland declined to comment.