diff --git a/compiler/daemon/daemon-client/src/org/jetbrains/kotlin/daemon/client/KotlinCompilerClient.kt b/compiler/daemon/daemon-client/src/org/jetbrains/kotlin/daemon/client/KotlinCompilerClient.kt
index 8801f708583..efdcf2f18cd 100644
--- a/compiler/daemon/daemon-client/src/org/jetbrains/kotlin/daemon/client/KotlinCompilerClient.kt
+++ b/compiler/daemon/daemon-client/src/org/jetbrains/kotlin/daemon/client/KotlinCompilerClient.kt
@@ -339,7 +339,6 @@ object KotlinCompilerClient {
     }
 
     private fun DaemonReportingTargets.report(category: DaemonReportCategory, message: String, source: String = "daemon client") {
-        if (category == DaemonReportCategory.DEBUG && !verboseReporting) return
         out?.println("[$source] ${category.name}: $message")
         messages?.add(DaemonReportMessage(category, "[$source] $message"))
         messageCollector?.let {
@@ -421,19 +420,21 @@ object KotlinCompilerClient {
                         daemon.inputStream
                                 .reader()
                                 .forEachLine {
-                                    reportingTargets.report(DaemonReportCategory.DEBUG, it, "daemon")
-
                                     if (it == COMPILE_DAEMON_IS_READY_MESSAGE) {
                                         reportingTargets.report(DaemonReportCategory.DEBUG, "Received the message signalling that the daemon is ready")
                                         isEchoRead.release()
                                         return@forEachLine
                                     }
+                                    else {
+                                        reportingTargets.report(DaemonReportCategory.INFO, it, "daemon")
+                                    }
                                 }
                     }
                     finally {
                         daemon.inputStream.close()
                         daemon.outputStream.close()
                         daemon.errorStream.close()
+                        isEchoRead.release()
                     }
                 }
         try {
diff --git a/compiler/tests/org/jetbrains/kotlin/daemon/CompilerDaemonTest.kt b/compiler/tests/org/jetbrains/kotlin/daemon/CompilerDaemonTest.kt
index 5777cc9ed96..110d4abb491 100644
--- a/compiler/tests/org/jetbrains/kotlin/daemon/CompilerDaemonTest.kt
+++ b/compiler/tests/org/jetbrains/kotlin/daemon/CompilerDaemonTest.kt
@@ -208,6 +208,26 @@ class CompilerDaemonTest : KotlinIntegrationTestBase() {
         }
     }
 
+    fun testDaemonRunError() {
+        withFlagFile(getTestName(true), ".alive") { flagFile ->
+            val daemonOptions = DaemonOptions(shutdownDelayMilliseconds = 1, verbose = true, runFilesPath = File(tmpdir, getTestName(true)).absolutePath)
+
+            KotlinCompilerClient.shutdownCompileService(compilerId, daemonOptions)
+
+            val daemonJVMOptions = configureDaemonJVMOptions("-abracadabra", inheritMemoryLimits = false, inheritAdditionalProperties = false)
+
+            val messageCollector = TestMessageCollector()
+
+            val daemon = KotlinCompilerClient.connectToCompileService(compilerId, flagFile, daemonJVMOptions, daemonOptions,
+                                                                      DaemonReportingTargets(messageCollector = messageCollector), autostart = true)
+
+            assertNull(daemon)
+
+            assertTrue("Expecting error message, actual:\n${messageCollector.messages.joinToString("\n") { it.message }}",
+                       messageCollector.messages.any { it.message == "Unrecognized option: --abracadabra" })
+        }
+    }
+
     fun testDaemonAutoshutdownOnUnused() {
         withFlagFile(getTestName(true), ".alive") { flagFile ->
             val daemonOptions = DaemonOptions(autoshutdownUnusedSeconds = 1, shutdownDelayMilliseconds = 1, runFilesPath = File(tmpdir, getTestName(true)).absolutePath)