The Irish Stock Exchange has found that stockbroker Davy breached some of the exchange's rules. The breaches were linked to Davy's sale of bonds known as CMS bonds to some credit unions. The bonds subsequently fell in value because of the credit crisis on financial markets.
The ISE statement said the breaches related to the 'completeness of disclosure' of certain information about the bonds to the credit unions. It also concluded that Davy had not taken all reasonable steps to ensure the bonds complied with the Trustee (Authorised Investment) Order 1998.
But the exchange said it acknowledged that there were mitigating factors, including credit unions' search for higher yield investments and 'fundamentally' changed conditions in bond markets.
The ISE said it was satisfied Davy had taken action to ensure that these breaches would not happen again.
Last year, Davy agreed to address concerns about the performance of the bonds. Under the deal, Davy agreed to fund the purchase of another investment product by credit unions holding the CMS bonds. It says this product will provide a return - based on today's prices - over the next ten years which will make up any shortfall caused by a drop in the value of CMS bonds. The move cost Davy €35m.
Earlier this year, Davy took legal action against the Financial Services Ombudsman after he ruled that the sale of the bonds to one credit union was unsuitable. The High Court quashed the Ombudsman's ruling, but this decision has been appealed to the Supreme Court.
