Bank seeking Bloxham partner

The Central Bank will seek to interview the financial partner of Bloxham Stockbrokers over the coming days about the alleged financial irregularities that have led to the closure of the State’s oldest stockbroking firm.

Bloxham, the third-largest stockbroking firm, ceased operations yesterday at the direction of the Central Bank after accounting irregularities were uncovered last week leading to an investigation by the regulator.

The stockbroking firm said its financial partner was immediately suspended. This followed the discovery last week that income at the firm had been overstated for several years, dating back to 2007.

The Central Bank will seek to question accountant Tadhg Gunnell (36), who joined Bloxham in 2000 and became financial partner of the firm in 2005, about the reporting and accounting of the firm's income.

Calls to Mr Gunnell's home in Dublin were not returned.

Initial investigations have revealed that the income was overstated in four of the last five years. No client funds are involved in the irregularities or are affected.

"The Central Bank will continue its own investigation into the financial irregularities," the bank said.

The discovery has wiped out the capital reserves held by Bloxham to protect the clients and creditors of the firm. The stockbroker had to hold at least €5.8 million in reserve under rules set by the Central Bank, which regulates stockbrokers, to hold a broker licence.

Bloxham was directed by the Central Bank to cease all activities at 5pm last Friday after the firm informed the regulator of the irregularities the previous evening.

The "internal issues" were discovered for the first time last week on foot of an inquiry from the Central Bank, the stockbroker said. "The remaining partners in the firm, who were unaware of these issues, have asked a firm of forensic accountants to verify the position and assist in further investigations," the firm said.

Bloxham had to find the required capital or a buyer by the time markets opened yesterday.

A deal was reached with rival firm Davy after frantic negotiations over the weekend. Davy agreed to buy Bloxham's asset management business and complete its purchase of the firm's private client business, a transaction that had been agreed in March. Bloxham had €540 million in private client accounts belonging to 17,000 customers and managed a further €700 million of assets, which will now transfer to Davy.

"All client funds are completely intact and safe," the firm said. "These funds will be unaffected by the transfer."

Davy is paying about €6 million for the two businesses, which is likely to go towards Bloxham's large debts built up in the expansion of the firm in recent years.

Any financial shortfall left will have to be paid by the seven individual partners, including Mr Gunnell, as the unlimited status of the partnership leaves them personally liable. An eighth partner, the insurance company FBD, owns 12 per cent of the stockbroking firm.

Bloxham is facing costly legal actions in London over claims of more than €20 million from investors in European bonds that were virtually wiped out in value.

The remaining parts of Bloxham's business which are not being taken over by Davy – the institutional equities and bonds businesses – will be wound down.

About 25 of Bloxham's staff are moving to Davy with the firm's managing partner Pramit Ghose, who is well-known in investment circles, and two other partners, Niall Tinney and Paddy Finnegan. The remaining 30-40 staff at the firm, based in the IFSC in Dublin, are being laid off.

Bloxham, which dates back more than 150 years, is one of the seven owners of the Irish Stock Exchange but its membership of the market was suspended yesterday after it ceased trading. Accountancy firm Deloitte, which audited Bloxham and where Mr Gunnell worked for three years before joining the broker, had no comment on the irregularities.

Minister for Enterprise Richard Bruton expressed surprise at what had been uncovered at Bloxham.

"Further questions will have to be directed to the Central Bank as to what has happened here and how it can be prevented," he said.