No mention of size of €4.1m fine in Davy communication and apology to clients

The offices of Davy stockbrokers in Dublin. Picture: Niall Carson/PA

A communication and apology to Davy clients sent on Friday by the stockbroker made no mention of the size of the €4.1m fine imposed by the Central Bank.

The email was the first external communication since the political storm erupted over the scandal almost two weeks ago when the Central Bank revealed the findings of its five-year investigation into a 2014 Anglo Irish bond deal in which a consortium of 16 of Davy employees personally profited, behind the back of the client.   

The communication came from interim chief executive Bernard Byrne, who replaced Brian McKiernan at the top of Davy when Mr McKiernan resigned, with other key employees, in the wake of the Central Bank's settlement and the fine of €4.1m.   

In the communication, Mr Byrne, who had joined Davy around two years ago from his post as CEO of AIB, deeply apologised on behalf of the firm to clients.      

"The first thing that I want to do is to offer my unreserved and unequivocal apology and regret to all Davy clients for what has occurred. I fully acknowledge that Davy failed to adhere to the standards that are expected of us," Mr Byrne told clients. 

He said that "the failures at Davy have impacted our reputation and your trust in us". 

"As the new leader of Davy, I will do everything I can to rebuild that trust. We remain fully committed to and focussed on serving your needs," Mr Byrne wrote in the communication.  

The covering letter also included a link to a Q&A section and to the Davy website.     

However, neither the letter nor the lengthy Q&A section cites the size of the fine which, at €4.1m, was the largest ever imposed on a stockbroker for wrongdoing by the Central Bank. 

The Q&A section covers 24 questions to reassure clients they will suffer no financial fallout from the affair. 

In the first question, the broker asks itself about the Central Bank of Ireland's investigation. 

In its answer, the Davy communication tells clients that "the CBI’s investigation was centred around a transaction that took place in 2014". 

It continues: "The transaction involved 16 employees of Davy at the time, including certain senior managers, making an unsecured loan and a payment to a third party in exchange for the transfer of ownership of a series of illiquid corporate bonds. This was part of a larger debt settlement transaction undertaken by the third party with his lender." 

Almost two weeks ago, in a statement addressed to staff by then Davy CEO Mr McKiernan, Davy had appeared at first to play down its culpability in the affair despite the unprecedented settlement it had agreed with the regulator.     

The Central Bank intervened to get Davy to amend the original statement to staff.               

Three senior personnel and prominent shareholders exited, including chief executive Mr McKiernan, Kyran McLaughlin as deputy chairman, and head of bonds Barry Nangle.

Days before a €1.5bn debt auction, Davy last week was stripped of its government-nominated lucrative role to participate in selling Irish sovereign bonds around the world. 

Davy then decided to put itself up for sale and appointed adviser Rothschild to get the best price for its shareholders.

The broker was bought out by its key manager shareholders and other staff from Bank of Ireland almost 15 years ago, but will likely be damaged by the scandal, and could be broken up.    

It also said it will appoint an external adviser to investigate what happened at the firm.             

The Central Bank and a spokesman for Davy separately said they would not comment on whether the Central Bank had reviewed Friday's communication.