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Taoiseach Micheál Martin has told Dáil that the behavior at the Davy securities brokerage was “unacceptable”.
He said the fine imposed on the company by the central bank would have an “impact on behavior” and added that “we will see what can be done to discourage behavior.”
Meanwhile, Davy CEO Brian McKiernan has issued an updated internal memo to staff in response to the fine imposed on the firm by the Central Bank yesterday for breaches of market rules on conflicts of interest.
In yesterday’s memo, Brian McKiernan noted that “there were no findings of actual conflict of interest or loss of customers, there were significant deficiencies in the way the transaction was conducted, particularly in the context of policies and controls related to the management of possible conflicts of interest. “
Today’s memo removes the reference to “no finding of actual conflict of interest or loss of customers.”
In a statement to RTÉ News yesterday in response to Davy’s first internal memo, the Central Bank said: “There is no distinction between an actual conflict of interest and a potential conflict of interest in MiFID (Markets in Financial Instruments Regulations).
“The scope of the company’s obligations and the severity of the breach of those obligations remains the same regardless,” the central bank added.
The National Treasury Management Agency has issued a statement in response to the fine imposed on Davy yesterday by the Central Bank.
“The NTMA takes note of the central bank’s serious findings on this matter. The NTNA is monitoring the situation closely and awaits the company’s response to the central bank’s findings,” the statement read.
The finance minister said he does not know whether any of the individuals at the center of a controversy at Davy’s brokerages were sanctioned because they are unaware of the exact details that underpinned the central bank investigation.
The Central Bank yesterday fined Davy 4.13 million euros for violating market rules in relation to a transaction involving the broker’s own staff.
It was the largest fine of its kind ever imposed on a runner in Ireland.
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The central bank said its investigation into Davy identified “serious problems” that required “the imposition of a significant financial penalty.” The transaction in question took place in November 2014.
The central bank said a “consortium” of 16 Davy employees, including a group of senior executives, bought what is understood to have been unlisted corporate bonds from a client at an agreed price.
But the client was not informed that the consortium consisted of Davy employees.
Speaking on RTÉ’s Morning Ireland, Donohoe said the Davy research demonstrated the value of having a strong framework for dealing with behavioral lapses.
Donohoe said the Central Bank report detailed a level of behavior at Davy that did not meet expected standards and that it would be appropriate for the company to issue a public statement.
The Minister said that the National Treasury Management Agency would decide whether the state would continue to send business to Davy’s brokers and he has no doubt that the NTMA will carefully monitor this situation.
Meanwhile, the Labor spokesman for Finance, Public Spending and Reform said Davy’s brokers should make a public statement following his fine for violating market rules.
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Ged Nash said the details of the violations were “quite extraordinary” and highlighted serious problems of conflict of interest and the kind of culture that can be created in an organization.
He added that the Finance Minister has talked for three or four years about introducing the senior executive liability regime, but this has not yet been advanced.
This, he said, is important to ensure good behavior is promoted and encouraged.
Additional reporting by David Murphy
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