Washington-area investors with accounts in the local offices of John Muir & Co. face the possibility of having their money frozen for the next several months.

All the accounts are insured, however, for losses up to $500,000.

Muir elected to liquidate under the Securities Investor Protection Act Sunday night. By Monday, the firm had shut its doors to the public, a court-appointed trustee had taken control of the firm and negotiations were under way to find a taker for the bulk of the company's accounts. In New York, where most of the company's investors are located, another brokerage firm was on the verge of taking over Muir's retail business.

Hugh Owens, chairman of the Securities Investor Protection Corp., said that Rooney Pace Inc. was expected to move in and actually take over Muir's retail operations, which would free customer accounts that have been frozen since Muir shut down.

"Those people could conceivably be trading in their accounts by the end of the week," said Owens.

But no firm has offered to take over accounts of Washington-area customers who traded at either the firm's D.C. or Vienna, Va., locations. As a result, those accounts are likely to be frozen longer. But investors are protected against losses of up to $500,000 by the SIPC, an institution similar to the Federal Savings and Loan Insurance Corp. and the Federal Depository Insurance Corp.

If no one steps forward to take over Washington-area Muir accounts, getting relief for customers could take until near the end of the year. Because the firm's books and records are apparently in decent shape, customers might have their accounts settled "within 90 days or a couple of weeks thereafter," Owens said.

By late yesterday, an agreement had been reached between SIPC and Rooney Pace for that company to take over most of Muir's accounts and retail operations, with other firms buying smaller numbers of accounts. In Sarasota, Fla., where Muir also had offices, another brokerage company has expressed an interest in taking over Muir accounts.

"Right now we're trying to take care of the bulk of the customers which are in New York," said Owens. Approximately two-thirds of the firm's customers are there. "We're trying to work out a transfer of accounts. If we can get Rooney Pace to move in, it will reduce any impairments to customers accounts."

Muir is only the second New York Stock Exchange firm to liquidate under the Securities Investor Protection Act. Its accounts are being transferred under relatively recent amendments that allow transfers as an alternative to an insurance payment. Owens said the amendments had been sought after a study determined that investors often rather would keep their accounts alive than receive a cash payment.

Muir's shutdown was triggered by the company's failure to meet federal net capital requirements which obligate a firm to have a certain ratio of liquid assets to obligations.