Two significant claims have been made against Pritchard Stockbrokers thought to total £6.5 million. If successful, the claims could triple its cash shortfall and mean clients that are claiming back more than £100,000 may not recover their money in full.
Pritchard went into administration in March 2012 after it was suspended from trading by the Financial Services Authority, which ruled the firm had used client money to cover its own expenses, putting that money at risk.
The Bournemouth-based firm’s client book was bought by fellow stockbroker WH Ireland, which is headed by chief executive Richard Killingbeck, for £500,000, and administrators Mazars was tasked with settling around 11,000 claims on the firm’s assets.
These claims totalled £26.5 million against £23.5 million of pooled client assets. But the two ‘significant’ additional claims were not detailed in Pritchard’s records when it went bust and, if agreed, could potentially triple its £3 million client cash shortfall.
‘Correspondence from additional parties who purport to have pooled client money claims, which potentially exceed £6.5 million, are still being investigated with the assistance of our solicitors, as appropriate,’ Mazars said in a progress report.
Approximately 3,000 claims totalling £2.5 million are still to be agreed more than two years after Prichard went into administration, and clients have been told they will have to wait for these two additional claims to be resolved before further distributions can be made.
If the separate claims are agreed, they will reduce the remaining cash pool, affecting around 50 ex-Pritchard clients with claims in excess of £100,000.
‘A relatively small number of people would be potentially seriously affected by these two disputed claims’, which, if agreed, ‘would dilute the fund dramatically’, chief administrator Tim Ball confirmed to Wealth Manager.
‘If these claims are valid it creates a much larger loss for the clients. There is not the money to pay out to the remaining creditors and the new ones. That is what makes it worse and we have to deal with it properly,’ Ball said, although he pointed out the claims had not yet been accepted.
Ball stressed that of the 3,000 claims yet to be agreed, the vast majority are from clients who have not responded to repeated attempts by Mazars to get in touch with them.
He added that more than 99% of Pritchard’s total client base had got all their money back through a combination of an earlier dividend of 50p in the pound and a payout of up to £50,000 from the Financial Services Compensation Scheme.