STOCKBROKERS DAVY HAS announced that its chief executive Brian McKiernan has resigned days after the Central Bank levied a fine of €4.1 million against the company.

The stockbrokers’ board also accepted the resignations of Davy’s deputy chairman Kyran McLaughlin and Barry Nangle from his executive role as Head of Bonds.

The Central Bank levied the multi-million euro fine after an investigation revealed four breaches of market rules by Davy stockbrokers between 2014 and 2016. It’s understood to be the largest fine a brokerage in Ireland has ever faced.

The Central Bank said the issue at Davy related to a transaction involving the sale of bank bonds on behalf of “a client” of the brokerage.

It said it had determined that €5.9 million would be the appropriate fine. This was reduced by 30% to €4,130,000 “in accordance with the settlement discount scheme provided for in the Central Bank’s Administrative Sanctions Procedure,” because Davy reached an early settlement agreement with the regulator.

The Central Bank would not comment any further on the matter and has not named the client or the Davy employees involved in the transaction.

Davy said it “deeply regrets” the shortcomings outlined in the investigation and apologises “unreservedly and unequivocally” that these failures occurred.

“In accepting their resignations, I acknowledge their substantial contribution to the development of the company over many years,” John Corrigan, Davy chairman, said. 

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.

Bernard Byrne, deputy CEO of Davy has been appointed interim CEO – subject to approval by the Central Bank. 

Announcing his resignation as CEO Brian McKiernan said:

“I have today informed the Board of J&E Davy of my resignation as CEO and director of the company. I regret my role in a transaction in 2014 and I am very sorry for the hurt that it has caused to the reputation of Davy and its people.

“I have decided to stand down from my role as my continued presence in light of the extended commentary on those events is damaging for the company and my colleagues.”

Deputy Chairman Kyran McLaughlin said he was bringing forward planned full retirement from the company with immediate effect.

“Having previously stepped back from a full-time role in 2018 this will bring a close to my long association with Davy in an executive or leadership capacity,” McLaughlin said. 

‘catastrophic failure’

Sinn Féin finance spokesperson Pearse Doherty welcomed the resignation of the three senior executives but said it should not have been left up to those individuals to decide what counts as accountability.

“Let’s be very clear here, these resignations have only come about after enormous public pressure following the naming of these three individuals publicly. This whole saga has been laced with arrogance and attempts by senior figures at Davy to brazen on through,” said Doherty. 

“This was not a case of some low-level staff going rogue, but the top brass of one of the most powerful players in the financial sector.”

He said that questions still remain about the other individuals involved, and called on the Central Bank to instigate a wider investigation into Davy.

“Who are they? Are they still employed by Davy? If so, will they resign too or do they hold senior positions elsewhere? These questions require answers – Davy cannot be allowed to hunker down in the hope that the storm will pass.”

Doherty said he was written to the Governor of the Central Bank Gabriel Makhlouf requesting that it carries out investigations into those involved with reference to MiFID and the Market Abuse Regime.

“Separately, I have called on the state and NTMA to cut all ties with Davy until those involved are held to account and there is a root and branch review of the organisation,” he said. 

“The state cannot permit any individual or organisation who puts personal gain above its regulatory obligations to have any involvement in its assets and liabilities.”

Co-leader of the Social Democrats Róisín Shortall said there has been a “catastrophic failure” of the internal checks within Davy, including its compliance department and auditors.

“While the Central Bank, as regulator, did identify the problem and took action, this was five years after the issue came to light,” said Shortall.

“It then required pressure from some Opposition politicians, Davy staff and clients, and the media to ensure that the unsustainable decision of allowing these individuals to remain in their roles was corrected.”

Shortall has also written to Makhlouf asking a number of “unanswered questions” as the public needs assurance that the Central Bank is doing everything within its power and that it will put in place “robust measures to ensure that we don’t see a repeat of what happened here in the future”.