The controversy enveloping Davy, Ireland’s largest stockbroker, following a record €4.1m fine earlier this week, has led to the resignation of a trio of senior executives, including its chief executive and the early departure of its deputy chairman.
The Central Bank announced the fine earlier this week — the largest ever handed out for an Irish stockbroker — after Davy failed to supervise a group of 16 of its own employees in their personal account dealings in the sale of Anglo Irish bonds for a client in late 2014.
The controversy has marked a further stain on the financial services industry here.
The pressure continued to pile on Davy after it botched its initial response to the Central Bank findings when first announced on Tuesday and because it plays such a dominant role as a corporate broker and adviser to Ireland Inc. The firm is also run by some of Ireland’s leading business figures.
Significantly, the stockbroker also holds a longstanding and lucrative contract with the State’s National Treasury Management Agency (NTMA) as a seller of Irish sovereign debt, in which it effectively acts as a representative for the Government around the world.
In an announcement early Saturday afternoon, the Davy board said it had accepted the resignation of its chief executive Brian McKiernan, and the resignations of Kyran McLaughlin as its non-executive director and deputy chairman, as well as that of Barry Nangle from his job as head of bonds at the firm.
“All three offered to step down subsequent to the recent settlement agreement between Davy and the Central Bank of Ireland in respect of its investigation into a bond transaction that occurred in 2014,” Davy said in a statement.
“These resignations have been accepted and take effect immediately,” the stockbroker said.
Davy again said it “deeply” regretted its “shortcomings” revealed by the Central Bank’s investigation.
Davy chairman John Corrigan, a former chief executive at the NTMA, said he acknowledged the “substantial contribution to the development of the company over many years” made by the three departing employees.
“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,” Mr Corrigan said.
Davy has named its deputy chief executive Bernard Byrne, a former AIB chief executive, as its interim CEO.
In a separate statement, Mr McLaughlin said he spoke to the Davy chairman on Saturday morning to confirm he was bringing forward his planned retirement as a non-executive deputy chairman by a year.
Davy will be hoping the resignations will put some sort of line under the Central Bank investigation.
The stockbroker had made matters worse for itself when it appeared to initially play down the seriousness of the findings by the Central Bank.
As part of the settlement with the firm, the Central Bank said that part of the fine reflected Davy’s lack of “candour” when the regulator first started asking questions about the 2014 trade.
However, in a briefing to staff on Tuesday afternoon, Mr McKiernan appeared to row back on the seriousness of the Central Bank ruling, claiming there were "no findings of actual conflict of interest" in the decision.
That appeared to break the terms of the settlement agreement struck with the Central Bank.
By Wednesday morning, Mr McKiernan was forced to issue an amended briefing to Davy staff that dropped the inaccurate claim.
The Central Bank’s investigation showed that the group of 16 “circumvented” Davy’s framework over personal account dealing and conflicts of interest.
“In permitting a group of employees to pursue a personal investment opportunity, conflicts of interest were not properly considered, the rules in place in relation to personal account dealing were easily sidestepped and Davy’s compliance function was kept in the dark,” Seána Cunningham, the director of enforcement at the Central Bank, had said in announcing on Tuesday the settlement with the firm.
The Central Bank investigation had threatened to build into a full-scale political row involving Finance Minister Paschal Donohoe. Following pressure from Mr Donohoe, the broker also on Wednesday issued a statement saying that it apologised "unreservedly and unequivocally that these failures occurred".
The scandal is the latest to put the focus back on the financial services industry, a decade after disastrous overlending by banks forced the State into a €64bn international bailout with the troika.