Davy CEO quits over bond deal scandal
THE CEO of Davy Stockbrokers and two senior executives have stepped down over the 2014 bond deal which led to a €4.13m fine from the Central Bank.
Davy announced yesterday that it had accepted the resignation of its CEO Brian McKiernan, non-executive director Kyran McLaughlin and head of bonds Barry Nangle.
In a statement, chairman of the stockbroker company, John Corrigan said: ‘As we reflect on the Central Bank investigation our priority now is to restore trust in the integrity and robustness of our control environment and culture, and to ensure we provide our clients with the standard of service and protection that I know our people are committed to.’
The company also apologised ‘unreservedly and unequivocally’ that these failures occurred. The
resignations have come following the largest fine of its kind ever levied on a broker in Ireland. After an investigation which exposed ‘serious issues’ with the stockbroker, the Central Back discovered that 16 Davy employees, including senior executives, bought unlisted corporate bonds from a client at an agreed price.
The client was unaware the deal was being struck with Davy employees. Davy did not have a system in place to prevent conflict of interest in personal transactions, the bank found. It also found the 16 ‘sidestepped’ the firm’s personal account dealing framework completely by not informing compliance officials of the transaction at the time. The company’s actions were found to be ‘reckless’ in allowing the transaction to go ahead.
After the news emerged this week, Finance Minister Paschal Donohoe called on the firm to address how it fell ‘gravely short of standards that are expected of leaders in position of financial responsibility’.
In a personal statement, former CEO Mr McKiernan said: ‘I regret my role in a transaction in 2014 and I am very sorry for the hurt that it has caused to the reputation of Davy and its people. I have decided to stand down from my role as my continued presence in light of the extended commentary on those events is damaging for the company and my colleagues.’
Bernard Byrne, deputy CEO of Davy, has been appointed interim CEO subject to approval from the Central Bank of Ireland. The stockbroker said the board of the company now consists of directors who joined the board after 2014 and the company’s consideration of the central bank’s findings has been described as ‘ongoing’.
Reacting to the resignations Sinn Féin finance spokesman Pearse Doherty said: ‘This whole saga has been laced with arrogance and attempts by senior figures at Davy to brazen on through.
‘These three resignations also pose further questions. This can’t be the end of it. There were 16 employees of Davy involved – what now for the other 13?’
Spokespersons for the Central Bank and the Finance Minister noted Davy’s statement yesterday. ‘The Central Bank’s reprimand and fine imposed on Davy reflects the serious regulatory breaches and aggravating factors in this investigation, including the firm’s lack of candour when first reporting the matter to the Central Bank,’ the spokesman for the regulator said.
‘The Central Bank reiterates that this case serves as an important reminder that conflicts of interest are an inherent risk to all regulated entities, and when not properly managed they pose a risk to investors and diminish market integrity.’
‘I am very sorry for the hurt that it has caused’
1. Michael Chester (Irish Mail on Sunday) 2. Tom Honan (Irish Times) 3. Gareth Chaney (Collins) 4. Sam Barnes (Sportsfile)
5. Niall Carson (PA) 6. Keith Heneghan (Freelance) 7. Niall Carson (PA) 8. Andres Poveda (Freelance) 9. Arthur Carron (Freelance) 10. Brendan Moran (Sportsfile) 11. Damien Eagers (Freelance) 12. Keith Heneghan (Freelance) 13. Dara Mac Dónaill (Irish Times) 14. Mark Condren (Independent News and Media)
15. Dominic Walsh (Eye Focus) 16. James Crombie (Inpho)