Bombshell that spelled end for Bloxham
BACKGROUND:THE OTHER partners at Bloxham Stockbrokers knew that the firm’s financial partner Tadhg Gunnell (36) had been dealing with the Central Bank’s concerns about the firm’s capital position since early 2012.
Gunnell himself had acknowledged that the capital position was “tight” but the other six individual partners claim that at no stage were they aware that the country’s oldest and third largest stockbroker was undercapitalised.
These were the views of Patrick Dempsey, a partner and Bloxham’s head of institutional equities, as outlined in an affidavit to the High Court in the firm’s successful application to appoint a provisional liquidator yesterday.
The appointment of Kieran Wallace of KPMG as liquidator marks the end of a stockbroker that can trace its history back to the 1840s.
Dempsey’s affidavit sets out how matters came to a head last week when the Central Bank was forced to act on accounting irregularities uncovered at the firm and to direct the broker to cease operations ahead of the sale of two of the firm’s four businesses – the private clients and asset management divisions – to rival firm Davy.
Dempsey, one of three partners not moving to Davy with the sale of the two businesses, is one of seven unlimited partners at Bloxham who face personal liability for any shortfall at the firm.
Only the partners’ account of events has emerged. Calls to Gunnell have not been returned. Contact with The Irish Times by someone close to him suggests that he won’t be commenting.
Late on the afternoon of Wednesday, May 23rd, Gunnell – an accountant and Bloxham’s finance and compliance partner since 2005 – dropped a bombshell on the firm’s other partners.
Until then they believed that the firm had adequate capital to meet the Central Bank’s threshold of €5.6 million needed to ensure that they met the regulatory conditions of their stockbroking licence.
Gunnell’s disclosure would reveal a capital hole of €5.3 million in the firm’s balance sheet. For a firm that made a profit for its partners of €2.4 million in 2010 on revenues of €25.8 million after expenses of €23.4 million, this is far from an insignificant sum.
It is even more significant considering that the firm is facing claims for damages of €20.5 million from investors arising from litigation next month in London involving US investment bank Morgan Stanley over the sale of the controversial Saturn bonds to about 155 retail investors in 2005.