Davy review to look forensically at staff trading
Review to assess controls and governance aimed at preventing conflicts of interest
Davy has asked Alvarez & Marsal, an international professional services firm, to carry out a “forensic assessment” of staff trading over the past seven years.
Davy has asked Alvarez & Marsal, an international professional services firm, to look forensically at staff trading over the past seven years as part of a review of matters arising from a Central Bank investigation into a bond trade that has seen the firm spiral into crisis over the past two weeks.
The work will be led by Paul Sharma, managing director with Alvarez & Marsal Financial Services in London and head of the regulatory practice, and will be conducted by a London-based team. Alvarez & Marsal has had no known prior connection with Davy, the firm said on Tuesday evening.
“The review will include a forensic assessment, the scope of which will be determined by Alvarez & Marsal, of relevant staff trading from 2014 to 2021 and of any other relevant activity,” Davy said.
“It will also assess the adequacy of enhanced compliance, controls and governance designed to prevent conflicts of interest.”
The board, led by chairman John Corrigan, has “committed to sharing the findings of the independent review”, it said. While it is understood that this is a pledge to make the findings public, it is not yet clear how long the review will take or whether the entire final report will be published.
Davy has been in turmoil since the Central Bank announced it had fined the firm €4.1 million earlier this month. It related to a case where 16 Davy staff, including former chief executive Brian McKiernan and former deputy chairman Kyran McLaughlin, secretly bought at a knockdown price an Anglo Irish Bank bond that the firm was given the job of selling for Northern Ireland property developer Patrick Kearney.
He was not told by Davy that it had sold the bond on to a group of its own staff, who wanted to make a profit. Davy’s own compliance team was also kept in the dark.
The fallout has seen Mr McKiernan, Mr McLaughlin and Davy’s former head of bonds Barry Nangle, who was also involved in the trade, step down, while the firm was dropped last week as primary dealer of Irish Government debt, resulting in it closing its bond desk.
The board, led by chairman John Corrigan, subsequently decided last Thursday to put the business up for sale as it raced to contain the crisis. Bernard Byrne, a former AIB chief executive, who joined Davy two years ago as deputy chief executive, was named group interim chief executive in the wake of the exits.
The firm committed two weeks ago to hiring an outside firm to carry out an independent review of matters arising from the Central Bank investigation.
“This is a move designed to do nothing more than buy time to smooth any sale of the damaged company and an attempt to assuage the concerns of potential bidders,” said Ged Nash, finance spokesman for the Labour Party. “I am more interested in the Central Bank’s next steps and those of other State agencies.”
Central Bank director general of financial conduct Derville Rowland told the Oireachtas finance committee last week that the regulator’s long investigation had caused a “day of reckoning” for the State’s largest stockbroking firm, whose lawyers had consistently challenged the process.
However, she said that her staff had found nothing to suspect any criminal activity, which would have obliged the bank, by law, to make reports to An Garda Síochána and the Office of the Director of Corporate Enforcement.
The official declined to comment on whether the regulator would take action against individuals.
“Any investigation instigated by Davy will lack credibility,” said Pearse Doherty, finance spokesman with Sinn Féin. “It is our view that this should be carried out by the Central Bank. The interim CEO should also clarify his knowledge of the role of Davy’s attempts to frustrate the work of the Central Bank.”