The liquidators of failed brokerage firm PACE Securities Corp. have been given the go-ahead for their plan to transfer clients’ accounts to new dealers.

In a letter to clients of PACE, which was placed in liquidation last month, Ernst & Young Inc. (EY) said the Ontario Superior Court of Justice has approved its plan for transferring clients’ accounts following a hearing on June 19.

The transfer process was delayed because the new dealers refused to accept certain securities held in many customers’ accounts — preference shares or warrants in related companies PACE Financial Ltd (PFL) and First Hamilton Holdings Inc. (FHH) — as those companies are also in the process of being wound up.

According to court filings, former PACE advisors have transferred to several other dealers (Aligned Capital Partners Inc., CIBC Wood Gundy and Manulife Financial) but the new dealers were unwilling to accept accounts holding these securities due to concerns about their valuation, among other things.

In order to enable the clients to transfer their accounts, EY proposed removing those holdings from clients’ accounts. EY would take custody of the troubled securities on behalf of the clients until PFL and FHH are wound up and the value of the securities can be determined.

“Once the wind-ups of PFL and FHH are complete, [Pace] customers will be notified as to the redemption value of their PFL and FHH preference shares so that they can deal with any tax or other reporting,” the letter said.

In the meantime, clients’ other portfolio holdings can be transferred into accounts at new dealers.

According to EY’s application, PACE managed approximately 2,000 accounts for about 1,200 clients, worth approximately $117 million. Nearly half of those accounts contained proprietary products, preferred shares of PFL and/or FHH, which were holding up the transfer.

Last week, the Investment Industry Regulatory Organization of Canada (IIROC) announced disciplinary proceedings against two former PACE executives  — the firm’s former CEO, Joseph Anthony Thomson, and former chief compliance officer, Douglas Gerald McRae. The regulator alleged violations of IIROC rules in connection with the sale of the proprietary products from PFL and FHH to the firm’s clients. Those allegations have not been proven.

According to IIROC’s allegations, PACE sold approximately $16.3 million worth of PFL preferred shares, including $10.7 million to its clients, and FHH sold approximately $29.8 million of its preferred shares, including $12.8 million to PACE clients.

The first appearance in IIROC’s case is slated for Aug. 17.