Meath credit union withdraws complaint against Davy
A CO MEATH Credit Union has withdrawn its complaint to the Financial Services Ombudsman over investments provided by Davy Stockbrokers, even though the ombudsman Joe Meade found in its favour last year.
Enfield Credit Union has instead decided to accept a new investment product offered by Davy, which is aimed at covering the losses incurred by up to 149 credit unions from investment bonds bought from the stockbrokers before the collapse in global markets.
The credit unions affected have until today to tell Davy whether they accept the compromise deal negotiated between the company and the Irish League of Credit Unions in May.
The decision by Enfield to drop its case with the ombudsman, who had ordered Davy to buy back at face value €500,000 of bonds it sold to the credit union, may encourage others to back the deal.
Under the terms of the agreement, Davy will place €35 million in an "investment instrument" with a leading Irish financial institution with a view to earning enough money over a period of up to 10 years to cover the losses which have been incurred to date by credit unions.
The credit unions bought €180 million worth of bonds from Davy over the past four years.
These have lost up to 40 per cent of their value, leaving many of the institutions nursing heavy losses.
Davy insists it did nothing wrong, but up to five credit unions took legal action, alleging misselling of the bonds.
Under the deal originally negotiated, Davy had the right to buy back the bonds at any time. If the markets recover, it could recoup the €35 million.
In subsequent talks, however, it has agreed to share the proceeds of any recovery over €25 million.
This concession appears to have encouraged greater support for the deal. A spokesman for Davy said yesterday a "critical mass" of support had already been reached even before today's deadline.
In a short statement issued in response to queries from The Irish Times, Davy last night announced that Enfield was accepting its enhanced proposal and was withdrawing its complaint to the ombudsman.
It said both parties were pleased that the matter was "drawing to a close".
Last week, the High Court reserved judgment on a challenge taken by Davy stockbrokers against the ombudsman's decision in the Enfield case.
Despite the credit union's decision to withdraw the complaint, Mr Justice Peter Charleton is expected to give his judgment in this case as planned at the end of the month.
Mr Meade declined to comment on Enfield Credit Union's volte face on the matter, but said he was awaiting the judgment of the High Court.