Stockbrokers’ shortfall undiscovered for five years

The Central Bank investigation into the collapse of Bloxham stockbrokers will focus on how the company managed to conceal a multimillion-euro shortfall in minimum capital requirements for a number of years.

There was shock across the IFSC when it emerged Bloxham had been incorrectly reporting its accounts since 2007.

“Internal issues were discovered by the firm for the first time late last week on foot of an enquiry from the Central Bank,” said a Bloxham spokesperson.

“They relate to the reporting and accounting of the firm’s income, which was overstated over a number of years.”

Bloxham partner responsible for the firm’s compliance and finance, Tadhg Gunnell, has been suspended, and a team of forensic accountants have been hired by the remaining partners to investigate what happened with the firm’s finances.

The firm’s independent auditor, Deloitte, has declined to comment on the matter.

The partners of Bloxham will be liable for any losses that arise out of the closure of the firm.

The immediate effect of the investigation was that Bloxham could no longer continue to trade as a stockbroker.

The Bloxham spokesperson said: “The impact on the firm is that it that it no longer holds sufficient capital to meet the licensing requirements of the Central Bank to carry on trading as a stockbroker. As a result, on Friday evening last, the Central Bank issued a direction to the firm to suspend trading.”

The irregularities were discovered on Thursday and, after a weekend of feverish negotiation, it was decided that Davy Stockbrokers, which had agreed to buy the profitable private client business from Bloxham in March, would acquire the fund management business as well. It is understood the deal was worth between €6m and €7.5m.

Finance Minister Micheal Noonan said the client funds were the Central Bank’s main concern in forcing Bloxham to cease trading.

“In situations like that, the concern always is that the funds of clients would be put at risk. But it seems from the Central Bank statement that clients’ funds are not held in Bloxham and that clients are protected, but there are other considerations which make it essential for the Central Bank to prevent Bloxham from trading.”

Of the 60 staff employed by Bloxham, 21 are expected to transfer to Davy. The remaining 39 are likely to lose their jobs.