Davy's fined €4m by Central Bank

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A scorpion wants to cross a river but cannot swim, so it asks a frog to carry it across. The frog hesitates, afraid that the scorpion might sting, but the scorpion argues that if it did that, they would both drown. The frog considers this argument sensible and agrees to transport the scorpion. The frog lets the scorpion climb on its back and then begins to swim. Midway across the river, the scorpion stings the frog anyway, dooming them both. The dying frog asks the scorpion why it stung despite knowing the consequence, to which the scorpion replies: "I couldn't help it. It's in my nature."

Perhaps we shouldn't expect anything different........
 
Brendan Burgess said:
The Transaction involved an off-market transfer.2 Following instructions, Davy transferred the bonds internally from the Client’s account to the Consortium’s account on System B. A payment was made by Davy, from Davy funds, on behalf of the Committee. This was repaid by the Committee later the same day. Three weeks later the Consortium sold a large tranche of the bonds to a fund manager. In the weeks prior to that sale, certain Consortium members engaged with interested buyers to provide a Davy “house view” on the value of the bonds. In so doing, the Consortium members drew no distinction between whether they were acting in a professional capacity (i.e. as broker) or personal capacity, as the seller of the bonds.


During the course of that engagement, the Committee member misled Davy Compliance by not providing relevant information in relation to the type of transaction contemplated – the most glaring omission being a failure to tell Davy Compliance that it was a personal transaction involving a group of Davy employees
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This is all framed as a compliance failure by Davy, which it undoubtedly was. This is what the Central Bank does. It is a supervisor that primarily looks at systems, not an investigator that looks at individual actions.

There is another way of describing what went on here. I am not going to do so because I don't want to defame anyone, but it's pretty clear if you read between the lines.
 
“The Central Bank determined the appropriate fine to be €5,900,000, which was reduced by 30% to €4,130,000 in accordance with the settlement discount scheme provided for in the Central Bank’s Administrative Sanctions Procedure”

why did they get 30pc discount given “lack of candour” “misleading information” etc? I had thought the discount was given if they were cooperative and saved the CBI time and money. Maybe they did in the end.
 
Now that the Central Bank has finished its work, will An Garda Síochána be investigating ?
 
cremeegg said:
Now that the Central Bank has finished its work, will An Garda Síochána be investigating ?
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It took place in 2014. Davy settled in 2016 with the client.

CBI is only 5 years later producing a report which could be prejudicial to any criminal prosecution.

Could it be that AGS (and maybe DPP) have decided no prosecution is feasible? It's plausible that this is how long it took and the CBI have had the findings on ice for that time.
 
Zebedee said:
“The Central Bank determined the appropriate fine to be €5,900,000, which was reduced by 30% to €4,130,000 in accordance with the settlement discount scheme provided for in the Central Bank’s Administrative Sanctions Procedure”

why did they get 30pc discount given “lack of candour” “misleading information” etc? I had thought the discount was given if they were cooperative and saved the CBI time and money. Maybe they did in the end.
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Prompt payment discount. They probably wrote the Central Bank a cheque right away.

cremeegg said:
Now that the Central Bank has finished its work, will An Garda Síochána be investigating ?
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They won't be investigating. The client sued them in court and the Central Bank have fined them.

I don't even know what law, if any, was broken.

MrEarl said:
I'm just amazed that no one has had to walk the plank, over this.
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This is coming from the very top, with the chief exec involved in it. There is a culture in Davy to make money at every opportunity.

The 4 non exec board members are carrying out an investigation. It will be interesting if they found anymore staff transactions on "System B"
 
Interesting to read that Brian McKiernan, Davy's boss, who was also centrally involved in the infamous transaction, revised the wording of an email to staff yesterday. In the first version, he wrote "While there are no findings of actual conflict of interest or customer loss ..". That clause was dropped in the second version: "There were significant shortcomings in how the transaction was conducted, particularly in the context of the policies and controls relating to the management of potential conflicts of interest". Was the change of wording due to CBI intervention?
 
Wollie said:
Interesting to read that Brian McKiernan, Davy's boss, who was also centrally involved in the infamous transaction, revised the wording of an email to staff yesterday. In the first version, he wrote "While there are no findings of actual conflict of interest or customer loss ..". That clause was dropped in the second version: "There were significant shortcomings in how the transaction was conducted, particularly in the context of the policies and controls relating to the management of potential conflicts of interest". Was the change of wording due to CBI intervention?
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The initial wording shows just how well the €4 million lesson was actually learned. :rolleyes: Still trying to convince the troops that nothing wrong was done and by extension, it's okay to do this sort of thing.

I seriously doubt that he simply had a change of heart and decided to change the e-mail text himself. Does Ireland have a road to Damascus for him to walk down? More likely that he has a mole in his organisation.
 
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There is more detail in the Currency from Tom Lyons it seems.

Behind a hard paywall though.

Driven by money: how the “Davy 16” was assembled and how the Anglo bonds deal was pulled off​

Within hours of agreeing to sell his Anglo bonds, Patrick Kearney knew something was wrong. But it was too late. Driven by personal gain, a group of 16 people at Davy had secretly pulled off a financial coup. But who were they, and how did the deal come together?​

 
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The fine seems very light to me.

Appian were fined around €450k for having systems and processes that left them open to a cyberfraud.

My understanding is that Davy have €80-100m sitting in cash and might make €25m a year.
 
People made lots of money on those bonds.

With a par value of 100, lots of bank bonds were changing hands for far less than that.

Davy seemed to pay around 20 for these when there was a buyer at 30.

So lots of money to be made, especially when the State in effect redeemed some at 100.
 
Wollie said:
Interesting to read that Brian McKiernan, Davy's boss, who was also centrally involved in the infamous transaction, revised the wording of an email to staff yesterday. In the first version, he wrote "While there are no findings of actual conflict of interest or customer loss ..". That clause was dropped in the second version: "There were significant shortcomings in how the transaction was conducted, particularly in the context of the policies and controls relating to the management of potential conflicts of interest". Was the change of wording due to CBI intervention?
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Yes
 
More detail from Joe Brennan:

Remaining junior Anglo bondholders, including whoever ultimately owned the notes at the centre of the O’Connell Partnership trade, were made whole at the end of 2019 as IBRC’s liquidation generated higher proceeds than had been expected when the plug was pulled in early 2013.

Sources say that some of the 16 continued to hold the Anglo bonds for some years after the 2014 trade. A spokesman for Davy declined to say whether any still held bonds when IBRC’s liquidators effectively took them out at par value
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That looks like a 5x profit if they held to maturity!

Sure, there was risk involved, but it seems that the guys who sold out after a week still made 50%.
 
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