LIKE the banks, stockbrokers present themselves as rock solid – but the reality is that gambling on the financial markets is inherently risky and the stockbroking industry is far more fragile than is often appreciated.
Stockbrokers regularly go bust both here and overseas. Sometimes they fall prey to bad bets on the markets. Sometimes it's fraud – a danger that always lurks close to the surface in an industry which attracts those of a materialistic bent.
One sign of how quickly things change in this world is the fact that there were 16 domestic stockbroking firms with a stake in the Dublin stock exchange in 1988. Today there are just six.
This year, we also saw the country's oldest firm disappear when 150-year-old Bloxham Stockbrokers went bust. No clients lost money but the situation was far from ideal.
The Irish Independent understands that the Central Bank is sitting on a detailed report into the entire sector, which expresses major concerns and recommends further consolidation. It has left the regulator which much to ponder.
The Central Bank is scrutinising all aspects of the financial services industry and is lifting stones to see what scurries out. Fines are being issued to banks, insurers and stockbrokers.
Earlier this month, Dolmen Stockbrokers paid €20,000 to the Central Bank for failing to report a suspicious transaction.
One of the creepy crawlies to come blinking into the light when a stone was lifted was the state of Bloxham's accounts.
The key conclusions from the report are undeniable.
The report takes it as a given that the sector is under pressure and further consolidation is essential. The challenge for the regulator is how to encourage this. The bank is also scrutinising the solvency and capital positions of all the firms.
While the collapse of Bloxham was a shock, the silver lining was that no client lost money. The Central Bank is anxious to ensure the adequacy of client-asset controls. This is essential.
A string of cases in the courts show that corrupt solicitors have been dipping into client funds. The same thing happened when the 100-year-old Cork stockbroker firm W & R Morrogh went bust in 2001 and again in 2011 when Custom House Capital ran into problems.
The Central Bank faces a delicate balancing act in the months to come. Regulators will want to bring the sector under control and ensure that it is rock solid but the bank will also be anxious not to unduly pressurise any broker in the process.
There are already many unanswered questions about the stockbroking sector. We know very little about what happened in Bloxham or who was at fault, for example.
All we know for sure is that all the partners are now working again in other financial institutions. Reports are promised but, as usual, they have failed to materialise. Don't hold your breath. The promised report into W & R Morrogh, one of the worst frauds in recent Irish history, was never published.
The Central Bank deserves credit for cleaning up the financial services industry here. It has been a truly Herculean task, which has seen a concerted campaign of vilification from followers of men like Sean Quinn.
We can be thankful that the bank has ignored these crazy cries of 'foul'.
At this juncture, the regulator is focusing his beady eye on the stockbroking industry, just as he did with the banks.