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Davy breaches ‘not criminal offences’, says Central Bank


Patrick Kearney

Patrick Kearney

Patrick Kearney

Breaches in relation to the Davy bond-dealing scandal that enriched 16 staff at the stockbroker at the expense of a Northern Ireland client did not constitute criminal activity, the Republic’s Central Bank has claimed.

In a letter to TD Róisín Shortall, the Central Bank’s top regulatory enforcer Derville Rowland said her agency hit Davy with a record €4.13m fine and a reprimand for serious regulatory breaches, but said “those breaches are not designated as criminal offences under the MiFID regulations”.

The letter dated March 31 was published by the Central Bank on April 7.

The comments would appear to negate earlier suggestions the Central Bank would engage with gardaí on the issue.

At a hearing in March Derville Rowland, the Central Bank’s Director General, Financial Conduct, told the Oireachtas Finance Committee that she planned to take up the Davy case with gardaí and the Office of the Director of Corporate Enforcement (ODCE).

“But I absolutely intend to have a proactive discussion with a number of agencies about this, including An Garda Síochána and the Office of the Director of Corporate Enforcement, to sit down with them in the full facts of the information so that from their perspective they can consider this matter,” she said last month.

However, in the letter written in reply to queries on the case from Social Democrat Party co-leader Róisín Shortall, the Central Bank appears to dismiss the prospect of any criminal aspect to the Davy affair and pushed the question of corporate enforcement onto the ODCE.

Ms Shortall asked: “Did the activity that these 16 people at Davy engaged in constitute criminal activity in 2014, and does that activity currently constitute criminal activity? Ms Rowland replied: “Davy admitted to four breaches of the MiFID regulations. Those breaches are not designated as criminal offences under the MiFID regulations. However, the breaches were very serious regulatory breaches and the public reprimand and financial sanction imposed reflect that.”

Asked if the Central Bank had raised any issues with the ODCE, which is responsible for enforcing corporate governance standards for all companies, Ms Rowland said whether Davy executives and directors had complied with their responsibilities under the Companies Act, 2014 was a matter for the ODCE.

The Central Bank findings against Davy related specifically to breaches of regulation around control functions and policies rather than the controversial deal at the heart of the case.

Asked about the profits of that 2014 deal – where seller, Belfast-based developer Patrick Kearney, unwittingly sold Anglo Irish Bank bonds to Davy employees after going to the broker to find a buyer only to later discover they were subsequently sold on for a higher price – Ms Rowland indicated that issue had been settled in court.

Ms Shortall asked: “What happened to the money that was made from the transaction involved?”

Ms Rowland replied: “The Central Bank’s investigation concerned breaches of the MiFID regulations by Davy in relation to conflicts of interest, personal account dealing and provision of information to the compliance function. It is a matter of public record that the transaction that prompted the Central Bank’s investigation was the subject of civil proceedings between Davy and its client. It has been widely reported that those proceedings were settled between the parties. It is not a matter for the Central Bank to comment on the terms of that settlement.”