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bond-dealing scandal Davy bond-dealing scandal was not criminal, says Central Bank

Comments appear to negate earlier suggestions the Central Bank would engage with gardaí on the issue

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HQ: Davy stockbrokers in Dublin. Photo: Niall Carson/PA Wire

HQ: Davy stockbrokers in Dublin. Photo: Niall Carson/PA Wire

HQ: Davy stockbrokers in Dublin. Photo: Niall Carson/PA Wire

Breaches in relation to the Davy bond-dealing scandal that enriched 16 staff at the stockbroker at the expense of a client did not constitute criminal activity, the Central Bank has said.

In a letter to TD Róisín Shortall, the Central Bank's top regulatory enforcer Derville Rowland said her agency hit Davy with a record €4.13m fine and a reprimand for serious regulatory breaches, but said "those breaches are not designated as criminal offences under the MiFID regulations".

The letter, dated March 31, was published by the Central Bank yesterday.

The comments would appear to dismiss earlier suggestions that the Central Bank would engage with gardaí on the matter.

At a hearing last month, Derville Rowland, the Central Bank's Director General, Financial Conduct, told the Oireachtas Finance Committee she planned to take up the Davy case with gardaí and the Office of the Director of Corporate Enforcement (ODCE).

"But I absolutely intend to have a proactive discussion with a number of agencies about this, to sit down with them in the full facts of the information so that from their perspective they can consider this matter," she said last month.

However, in the letter written in reply to queries on the case from Social Democrat Party co-leader Ms Shortall, the Central Bank appears to dismiss the prospect of any criminal aspect to the Davy affair.

Ms Shortall asked: "Did the activity that these 16 people at Davy engaged in constitute criminal activity in 2014, and does that activity currently constitute criminal activity?"

Ms Rowland replied: "Davy admitted to four breaches of the MiFID regulations. Those breaches are not designated as criminal offences under the MiFID regulations.

"However, the breaches were very serious regulatory breaches and the public reprimand and financial sanction imposed reflect that."

Asked if the Central Bank had raised any issues with the ODCE, Ms Rowland said whether Davy executives and directors had complied with their responsibilities was a matter for it.

The Central Bank findings against Davy related specific- ally to breaches of regulation around control functions and policies rather than the controversial deal at the heart of the case.

Asked about the profits of that 2014 deal - where seller Patrick Kearney unwittingly sold Anglo Irish Bank bonds to Davy employees after going to the broker to find a buyer, only to later discover they were subsequently sold on for a higher price - Ms Rowland indicated that issue had been settled in court.

Ms Shortall asked: "What happened to the money that was made from the transaction involved?"

Ms Rowland replied: "The Central Bank's investigation concerned breaches of the MiFID regulations by Davy in relation to conflicts of interest, personal account dealing and provision of information to the compliance function.

"It is a matter of public record that the transaction that prompted the Central Bank's investigation was the subject of civil proceed- ings between Davy and its client.

"It has been widely reported that those proceedings were settled between the parties."


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