• Thu. Aug 18th, 2022

Davy Group is facing scrutiny from some of its major corporate clients after being hit with a record €4.13m fine from the Central Bank over conflicts of interest relating to a bond deal in 2014.

Mar 4, 2021

Davy Group is facing scrutiny from some of its major corporate clients after being hit with a record 4.13m fine from the Central Bank over conflicts of interest relating to a bond deal in 2014.
The firm has come under increasing pressure over the case, understood to relate to a deal in which businessman Patrick Kearney and his Kilmona Holdings Ltd sold Anglo Irish Bank bonds via Davy at a steep discount in order to settle a debt without knowing the buyers were Davy employees who went on to sell the assets at a profit.
While only the firm has been fined so far, some or all of the 16 individuals involved in the transaction could still face regulatory or legal action from the Central Bank or other authorities.
The stockbrokers bank clients, Bank of Ireland (BOI) and Permanent TSB, have both said they are watching closely to see what the firm does in response to the sharp reprimand from the regulator.
We are disappointed by Davys breach of its MifID obligations and falling short of the standards expected, a Bank of Ireland spokesperson said in a statement. We have been in contact with Davy to understand how the failures are being addressed. We have also sought assurances that the Central Bank of Irelands findings do not impact any aspect of Davys role as corporate broker to Bank of Ireland.
Permanent TSB noted the seriousness of the Central Banks findings but stopped short of expressing disappointment about the firms behaviour in relation to the transaction.
We have no comment to make on this matter at the moment except to acknowledge that the statement from the Central Bank of Ireland raises serious issues and we will carefully monitor the situation and how the firm responds to the Central Bank findings, it said in a statement.
Davy is corporate broker to 32 listed companies including the largest on the Euronext Dublin, CRH and Paddy Power owner Flutter.
Davys blue chip corporate relationships have been an extremely lucrative source of fees for the firm, as many of its clients have been especially active in markets recently.
The firm raised more than 3bn in equity for corporates last year, including major share placings for Flutter, Smurfit Kappa and Ryanair.
Davy apologised yesterday for the behaviours that led to its fine and promised a detailed review of the findings detailed in the enforcement action against the firm, which was published on Tuesday.
Davy deeply regrets the shortcomings that emerged from the Central Bank of Irelands investigation and apologises unreservedly and unequivocally that these failures occurred, and that Davy failed to adhere to the high standards expected of the firm both internally and externally, the company said.
The company also said that there had been a process of board, management and staff renewal and that the board is satisfied on the basis of actions taken to date that the issues that led to the Central Bank reprimand would not happen again.
The apology came after Minister for Finance Paschal Donohoe yesterday said that Davy’s behaviour fell short of expected standards and that the firm should issue a public statement.
The NTMA, which manages government borrowing, including appointing dealers and managers for billions of euro in bond deals, also indicated its close relationship to Davy could be thrown into doubt following the Central Bank fine.
Davy has a prized status as a primary dealer in Irish government bonds.
Online Editors