The Minister for Finance has said that the actions of a number of senior executives in Davy fall below the standards required in the financial services sector and have damaged the reputation of the sector.

Paschal Donohoe said that the behaviour by the Davy executives was "outrageous and utterly unacceptable".

He also said that he was unambiguous in his criticism of the matter, which he said had resulted in an unprecedented fine and statement from the Central Bank.

The minister said the issue must be adjudicated on impartially and it is a matter for the Financial Regulator and other legal bodies as to what actions they may or may not take in relation to the individuals involved in the regulatory breach.

Speaking on RTÉ's News at One, he said that he plans to bring a new Bill before summer time to strengthen the individual accountability of senior executives.

He said this will strengthen the existing legal framework, including a 1942 Act and a 2010 Act, to hold individuals responsible for their behaviour, but said that any legislation cannot be retrospective so would not apply in this scenario. 

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Yesterday the National Treasury Management Agency decided to withdraw Davy's authority to act as a primary dealer for Irish Government bonds and the company said it was closing its bond desk with immediate effect. 

Minister Donohoe stressed that the NTMA, who act on behalf of the State, "acted unambiguously" yesterday in withdrawing Davy's authority to act as a primary dealer in Irish Government bonds.

He said the reason it took a week for NTMA to act on this issue was due to the independence of the Board, although the Department of Finance is represented on the NTMA Board.

Meanwhile, the Labour finance spokesperson Ged Nash has accused the Minister for Finance of "dragging his feet" on the establishment of a senior Executive Accountability Regime, which he said needs to be implemented as soon as possible.

"We need a regime like this to make sure that individuals are held to account, because it's not just corporations that make decisions like this, it is individuals, separately and collectively," Mr Nash said on News at One. 

He said they need to hear from the Central Bank this afternoon if any similar investigation is currently under way in relation to any other transactions involving the Davy 16 or if any other firms are involved in
any other issues like this.

He said Davy's announcement of an independent third party investigation "is completely unacceptable". 

Mr Nash said the Central Bank used a section of law to carry out the investigation on this transaction a number of years ago, but he said that investigation has taken "far too long".

He said there's an opportunity under that same section of law for the Central Bank to pursue individuals who may have been involved in wrong doing and he expects officials from the Bank to make
a clear statement on where that particular issue is at this afternoon.

Mr Nash added that the bank also has a very clear obligation to share information from that investigation with the Office of the Director of Corporate Enforcement and the gardaí, who he said "may have a view on whether aspects of the Criminal Justice Code might come into view in relation to how this transaction occurred". 

The Central Bank last week fined Davy €4.13m for breaching market rules in relation to a transaction involving the broker's own staff - the biggest fine of its kind ever levied on a broker in Ireland. 

The transaction in question took place in November 2014.

A "consortium" of 16 Davy employees, including a group of senior executives, bought what are understood to have been unlisted corporate bonds from a client at an agreed price.

The client was not made aware that the consortium was made up of Davy employees.

Over the weekend, Davy said its chief executive Brian McKiernan had resigned from his position as CEO. 

The board of the company also accepted the resignations of Kyran McLaughlin from his role as a non-executive Director and of Barry Nangle from his executive role as Head of Bonds at Davy. 

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READ MORE
Central Bank fines Davy €4.1m for breaching market rules
Q&A: What is going on with Davy?
Davy closes bond desk in wake of Central Bank investigation

Three senior executives at Davy stockbrokers resign over bond deal
 


Meanwhile, the interim chief executive of Davy has said an independent third party will be appointed imminently to conduct a review of matters arising from the recent Central Bank findings of regulatory breaches at the firm.

In a letter sent to the Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach yesterday, Bernard Byrne also repeated the board's recent unequivocal apology and regret for what had happened, saying it was truly sorry.

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Mr Byrne outlined the steps that had been taken since the committee wrote to Davy last week seeking further information about what had happened.

Bernard Byrne, the interim CEO of Davy Stockbrokers

These included the resignations of three senior Davy figures on Saturday including its chief executive, the closure of the Davy bond desk yesterday and Mr Byrne's own appointment as interim CEO.

He also highlighted that the Davy board is now comprised entirely of executive and non-executive directors who were not there in 2014 when the controversial transaction took place.

Mr Byrne also wrote that an independent third party will be appointed imminently aimed at conducting a review of matters arising from the Central Bank findings.

He said it would also ensure there would be an appropriate assessment of other relevant activity and determine the adequacy of enhanced compliance controls and governance designed to prevent possible conflicts. 

It said that following the decision none of the individuals involved in the 2014 transaction are working in Davy.

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Yesterday, the National Treasury Management Agency withdrew Davy's authority to act as a primary dealer in Irish Government bonds.

Last night Davy said it was closing its bond desk with immediate effect, with the result that four people would be made redundant.

The NTMA expects to raise €1.5 billion at a bond auction on Thursday.

Meanwhile, the Chair of the Oireachtas Finance Committee Fianna John McGuinness has said he believes there will have to be a separate independent inquiry into what happened at Davy, because "everyone questions whether or not this was just a single issue or whether it was much more". 

Mr McGuinness told Today with Claire Byrne that the State will have to intervene to establish an enquiry or the Central Bank will have to establish the enquiry and go through a random selection of transactions and determine whether there were other transactions affected. 

He said Dave's suggestion to appoint an independent third party to review practices at the company was "not acceptable at all".

"Putting this up as a suggestion is just another indication of how far removed they are from the public view that we've had enough of secrecy within the banks, within the financial services area and what we want now is transparency," he stated.

Mr McGuinness said the legal profession have questions to answer here as "there's an obligation on the legal profession that goes beyond solicitor client confidentiality when they see something that is wrong, to report it. 

He said as a result of Covid-19 restrictions, the committee has two hours to question senior officials from the Central Bank today, adding that he expects there may have to be further meetings.

Associate Professor Emeritus at DCU, Tony Foley, said events at Davy should not impact this week's bond sale. "It shouldn't. It will be interesting to see can it, but it shouldn't," he said.

"It removes some of the client base that Davy would have had because one of the roles of the primary dealers is that they participate in the auctions, so Davy would have presumably had clients that wanted to buy Government bonds and they would have participated in the auction on their behalf," he said.

He said in recent times most of the auctions have been oversubscribed so the NTMA could have sold more bonds than they did, "so I imagine that it shouldn't make much difference".