Donohoe to brief Cabinet on Davy scandal
FSU says €4m fine not sufficient deterrent given lack of transparency about what happened
The Minister for Finance Paschal Donohoe will update Cabinet on the Davy scandal on Tuesday. Photograph: Julien Behal.
The meeting comes as the National Treasury Management Agency (NTMA) on Monday withdrew Davy’s ability to act as a primary dealer of Irish Government bonds, as the State’s largest stockbrokerage deals with the fallout from the scandal.
Sinn Féin finance spokesman Pearse Doherty who had earlier called on the NTMA and Government to “cut its ties” with the broker, which he said had been “caught out red-handed”, welcomed the move.
Davy said on Monday evening that it has closed its bond desk, resulting in four redundancies, as it raced to contain a growing crisis triggered by a €4.1 million Central Bank fine and rebuke over breaches of market rules in relation to a 2014 bond deal.
The brokerage said that, following the move, none of the 16 individuals involved in the controversial trade are working for the firm.
The Irish Times reported over the weekend that the individuals involved in the 2014 trade that led to the record regulatory fine and rebuke last week for breach of market rules, are estimated to own at least a third of a business that is estimated to be worth about €400 million.
Mr Harris said the continuing ownership of shares in the company by top management who have resigned over their roles in the affair “does not sit well with me at all”.
Speaking on RTÉ’s Today with Claire Byrne he said, “I can fully understand why people would feel uncomfortable with the idea of people having significant shareholdings and therefore significant influence over an institution in which there has been a major issue.”
“What happened in Davy has sadly given us an insight into the bad old days that we all hoped were behind us, I think it has rightly repulsed people and I think it has shaken confidence at a time when we all need confidence in everything to do with our financial services,” Mr Harris said.
Mr Harris noted that the Central Bank has significant powers “in terms of pursuing individuals” after finding a company guilty of wrongdoing “and I certainly would hope to see very, very robust investigations into this”.
“I fully agree the Government needs to be seen to take a very strong stance in relation to this and what I’m indicating to you today is that the Minister for Finance will update Cabinet tomorrow following engagement between the NTMA and his department that’s ongoing today,” Mr Harris said.
Earlier, Financial Services Union general secretary John O’Connell called for a thorough, independent review of the operation of stockbroker Davy.
Speaking on RTÉ’s Morning Ireland, he said the record fine imposed on the company by the Central Bank was not sufficient deterrent given the lack of transparency about what had happened.
And he also said the regulator needed to explain why the investigation into the company over an incident seven years ago was only coming to a conclusion now.
And the union leader also questioned Davy’s continued involvement in handling bond sales for the State. The Government had to answer that question, Mr O’Connell said, and that the public was looking to the Government to lead and to show that when there was “wrongdoing”, there were consequences.
There was a reputational issue for the entire sector, he said. That needed to be addressed and investigated further. He said there were concerns about the culture within the sector and why no one had spoken out.
Mr O’Connell said there was a need to “get to the heart of it” quickly and for those responsible to take accountability for what they had done. The fact that compliance controls had been so easily circumvented shows the sector was not capable of policing itself, he said.