Securities Firm Davy Accused of ‘Lack of Candour’ by Regulator
(Bloomberg) -- Ireland’s largest securities firm, Davy, was fined, reprimanded and accused by regulators of a “lack of candour” in dealing with allegations of rule breaking, in one of the worst scandals to hit Dublin’s stockbroking community in years.
Ireland’s central bank fined Davy 4.13 million euros ($5 million) for breaches around a deal involving a client and 16 employees, who were not identified. Davy provided misleading details around the deal during the investigation, the regulator said on Tuesday. The four breaches took place between July 2014 and May 2016.
The case centers on a deal which saw a consortium of employees, including senior executives, buy bonds from a client in a personal capacity, the central bank said. Three weeks later, the consortium sold a large tranche of the debt securities. It wasn’t made clear to the client that the consortium was comprised of Davy staff.
While Davy allows personal trading, the deal was booked through a system designated for institutional clients and so wasn’t picked up by its compliance team.
“We deeply regret and are sorry for the shortcomings that gave rise to the findings which could not recur today,” Davy Chief Executive Officer Brian McKiernan said in a note to staff seen by Bloomberg News on Tuesday. “While there are no findings of actual conflict of interest or customer loss, there were significant shortcomings in how the transaction was conducted.”
The transaction involved the employees, including senior managers, making an unsecured loan and a payment to a third party in exchange for the transfer of ownership of a series of unlisted corporate bonds, he said.
While Davy provided an explanation to the central bank after the deal became public, it “provided vague and misleading details and willfully withheld information that would have disclosed the full extent of the wrongdoing as was known,” the regulator said.
“In particular, the information provided by Davy was presented in such a way as to make the involvement of certain individuals appear more central to the transaction than in fact was the case,” the central bank said. “This has been treated as an aggravating factor in this case.”
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