Davy’s CEO steps down after bond deal revelations

The chief executive of Ireland’s largest stockbroker has stepped down as the fallout continued over revelations that a group of the firm’s staff and executives sought to profit from a bond deal by covertly taking the opposite side of a client’s trade.

Davy Group said on Saturday that it had accepted with immediate effect the resignations of chief executive Brian McKiernan, head of bonds Barry Nangle and non-executive director Kyran McLaughlin “subsequent to the recent settlement agreement between Davy and the Central Bank of Ireland”.

Ireland’s central bank last Tuesday fined Davy €4.1m after finding that 16 of its staff, including some senior executives, sought to profit by secretly taking the opposite side of a client’s bond deal in 2014. The central bank criticised the stockbroker’s “weak internal control framework” for not managing conflicts of interest and personal account dealing.

Opposition members of parliament have called on the government to cut Davy from the roster of market participants authorised as a primary dealer of Ireland’s government bonds in response to the scandal. The treasury described the findings of the central bank investigation as “very serious” but has so far not cut ties.

After Saturday’s resignations, Davy will be led on an interim basis by Bernard Byrne, its current deputy CEO who joined the firm in late 2018 after a five-year stint as chief executive of Ireland’s biggest bank AIB.

“As we reflect on the Central Bank investigation our priority now is to restore trust in the integrity and robustness of our control environment and culture, and to ensure we provide our clients with the standard of service and protection that I know our people are committed to,” Davy’s chairman John Corrigan said in a statement on Saturday.

Davy’s board will now be entirely comprised of directors who were appointed after 2014. Davy said board consideration of the Central Bank investigation’s findings was “ongoing”.

Ireland’s central bank was scathing in its assessment of Davy’s failures, with its Director of Enforcement and Anti-Money Laundering, Seána Cunningham describing how Davy’s controls were “easily sidestepped”.

The central bank was criticised for not publicly naming, or individually censuring, the staff members involved. Some have been named in Irish media.

After initially staying quiet on the fine, Davy said on Wednesday that it “deeply regrets the shortcomings that emerged from the Central Bank of Ireland’s investigation and apologises unreservedly and unequivocally that these failures occurred”.