Custom House investors may not get compensation
DOUBTS have been raised about whether people who lost money in the Custom House Capital debacle will be able to claim back some of the money from a statutory compensation scheme.
Lawyers, accountants, doctors and business people are among the 1,600 who are at risk of losing millions after the collapse of the investment firm Custom House. On Friday the High Court appointed a liquidator to the Dublin firm after Central Bank inspectors found "systemic and deliberate misuse" of more than €56m in client funds.
The firm was using client funds, without their knowledge, to prop up property investments.
An inspector's report into the firm described it as a "sort of Irish Ponzi scheme".
Clients of the firm were told last week that compensation payments of up to €20,000 could be made.
The Investor Compensation Company, which was set up by statute and has offices in the Central Bank, said investors would be written to by next month inviting applications for compensation.
But yesterday it emerged that people who lost money in the firm, many of whom had taken out pensions with the firm, may not be able to claim compensation.
This is because the compensation scheme is not supposed to pay out for investments in pensions and unregulated unit trusts.
Leading pensions expert Tony Gilhawley said the Investor Compensation Act only covers losses arising from what he called regulated financial services.
Mr Gilhawley, who runs Technical Guidance Ltd, said the Destiny Unit Trust (in which some Custom House Capital pension funds were invested) was outside the Unit Trust Act 1990 and so it was an unregulated unit trust.
This casts doubt over whether investments in units of the Destiny Unit Trust funds were an "investment instrument" under the Investor Compensation Act.
And he added that the Investor Compensation Act specifically excluded investors in "a pension or retirement fund". This meant pension scheme members, those with personal retirement savings accounts (PRSAs), and approved retirement funds (ARFs) may not be able to make any claim.
Asked to comment, Anne Troy, chief operations officer of the Investor Compensation Company, said in general the scheme did not cover pensions.