Far from the end of the Davy affair, 10 days after the eruption of a scandal
The offices of Davy stockbrokers in Dublin. Picture: Niall Carson/PA Wire
TD John McGuinness said he has not experienced such raw public anger since the fallout of the banking and property crash a decade ago.
Ten days after the Central Bank published the findings of its five-year investigation into Davy, Ireland's largest stockbroker, Mr McGuiness, who is chair of the Oireachtas finance committee, said that the anger has erupted from voters who would not have even come across the Davy name.
The finance committee held the first hearing into the scandal a week after the Central Bank laid out in full and fined Davy €4.1m over its failure to detect wrongdoing in a 2014 sale of Anglo Irish bonds.
The transaction involved what the Central Bank called "a consortium" of 16 staff, that included senior management shareholders, from which they directly profited from their participation in both sides of the trade, without the knowledge of the client.
Mr McGuinness said that despite the financial crash of 2008, there is still a malign culture within financial and banking.
"The anger out there is actually damaging the political fabric of this country," he said.
Praising the Central Bank investigation, however, he said that the regulator had to apply the full resources of the State to take on Davy, a private enterprise, which he said had used all its corporate lawyer firepower to prevent the unearthing of the scandal.
Launching an inquiry would be the most straight forward way to build public trust, he said, and a route which would not prevent other agencies, such as the Office of the Director of Corporate Enforcement from further investigations.
"My understanding is that the Central Bank is discussing various aspects of this scandal with other agencies, the director of corporate enforcement would be one of them," he said.
On Thursday evening, Davy put itself up for sale as it fought to contain a scandal that recalled the worst excesses of the Irish financial services industry during the boom-and-bust years, and appointed investment firm Rothschild to advise it on the sale.
Davy also appointed an external investigator, which Professor Niamh Brennan, a corporate governance expert, could prove significant.
"The appointment of an outside investigator might find further issues, which could potentially lead to the involvement of other agencies," Prof Brennan said.
She said that the scandal has again raised public anger.
The Central Bank report detailed the lack of "candour" when it first started asking questions of the firm in 2015.
The Central Bank report effectively marked the end of one part of the State's investigation into the Davy as a corporate entity but it potentially provides a roadmap or avenues for other investigations.
Davy appeared at first to play down its culpability but last weekend a trio of senior personnel and prominent shareholders exited, including chief executive Brian McKiernan, Kyran McLaughlin as deputy chairman, and head of bonds Barry Nangle.
The sale means the Davy board has acted to limit even more financial fallout but it seems unlikely that the firm will fetch the €350m that its shareholders of former managers and existing staff paid in a buy out of the stockbroker over 15 years ago.
Davy is an unusual investment broker in that it still has diverse activities under one roof.
It is made up of a number of parts, including a property business that is difficult to value and involves Davy running for clients property funds.
It also has an investment management piece that was shaped out of old AIB Investment Management and Davy Investment Management and the Bloxham Investment Management, which is also unlikely to be worth a great deal.
The main profit engine is Davy's direct private client business which has about €8.5bn under management.
It is the part of Davy that any buyer will focus on, in particular potential buyers from the UK and US, who won't automatically want the other parts, including the institutional and corporate finance and research side of the Davy firm.
Davy was stripped of its role as a primary dealer to the National Treasury Management Agency as a seller of Irish sovereign bonds earlier this week.
It could be likely that adviser Rothschild will seek to break Davy up to get the best price for its shareholders.
Given the scale of the scandal, the price of the parts could still fall far short of the €350m Davy shareholders paid Bank of Ireland for the firm.
What that means for the key shareholders among the consortium of 16, is that they may get even less for their stakes.
Under a shareholder agreement, there is a mechanism that classifies shareholders as so-called poor leavers and good leavers.
It is meant to protect the firm and the other shareholders if shareholders got up and left to set up as a competitor.
The same mechanism may be triggered if a large majority of shareholders deem the behaviour of the 16 has adversely affected their proceeds from the sale.
The scandal may yet take new turns as the focus turns on other Davy deal-making during the boom-and-bust years.
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