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Irish Mirror
Irish Mirror
Sarah Slater

Central Bank fines stockbroker Davy €4.13m for breaching market rules

Davy Stockbrokers has been smacked with the largest ever multi-million euro fine for breaching market rules.

The Central Bank hit the renowned stockbroking firm with a whopping €4.13million fine in relation to a transaction which involved the company’s own staff.

The Central Bank investigation said they identified serious issues which warranted “a significant financial penalty”.

The investigation centred around a transaction which occurred seven years ago in November 2014.

The fine is in respect of four breaches of the European Communities (Markets in Financial Instruments) Regulations 2007 that occurred over different intervals between July 2014 and May 2016.

Termed a consortium of 16 Davy employees, including a group of senior executives, Central Bank officials say, bought what are understood to have been unlisted corporate bonds from a client at an agreed price.

It has emerged that the client was unaware that the Davy employees were part of the consortium.

The Central Bank report found that, “Following details about the transaction becoming public four months after it occurred, Davy contacted the Central Bank to provide an explanation.

“At that stage, Davy failed to disclose the full extent of the wrongdoing.”

The Central Bank found that the firm’s compliance section, which has responsibility for Davy sticking to the rules, were “sidestepped” by the consortium and acted in a “reckless manner” by allowing the transaction to proceed.

The financial and regulatory watchdog said that the stockbroking firm failed to have a system in place to prevent a potential conflict of interest when employees entered into personal transactions.

The firm was also found, according to the Central Bank, to have prioritised facilitating an opportunity for the group of employees to “make a financial gain” over sticking to the rules and posed a risk to the client.

The matter was exacerbated, the Central Bank said, when it contacted Davy, as they provided “vague and misleading details” while also withholding information, which they considered “an aggravating factor” in the case.

In a statement, Davy said they would not be commenting beyond what is contained in the settlement agreement.

However, in a note to staff Davy chief executive Brian McKiernan said, according to RTÉ, “...we deeply regret and are sorry for the shortcomings that gave rise to the findings”, which he said “...could not recur today.”

Mr McKiernan said Davy has gone through a significant investment in risk management since 2014.

He also highlighted that there were “no findings of actual conflict of interest or customer loss”.

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