Davy plans ‘golden handcuffs’ bonus to hold onto staffdavy

Seeks to prevent exodus of portfolio managers before sale

The offices of Davy stockbrokers in Dublin. Niall Carson/PA Wire

John Mulligan Twitter Email

April 29 2021 02:30 AM

Embattled Davy Stockbrokers is sizing up a ‘golden handcuffs’ bonus mechanism in a bid to prevent an exodus of portfolio managers after their annual bonus is paid and before a sale of the firm is sealed, the Irish Independent understands.

It comes amid fresh turmoil for the firm as a new legal action is launched against the stockbroker by a former client who fell foul of Davy’s actions in a bond sale that is at the centre of the controversy that has enveloped the firm.

It’s believed Davy’s portfolio managers are due bonuses in June. There’s about 45 of them working at the scandal-hit firm, which employs about 700 people.

They handle accounts for a wide range of clients, from charities to wealthy individuals.

The stockbroker has told prospective buyers that it made a €70m profit last year and that it has €16.5bn of assets under management. It pays about 40pc of profits as bonuses, meaning roughly €28m could be dished out to staff in respect of 2020.

Davy was plunged into crisis in recent weeks after it was severely rebuked and fined by the Central Bank for a 2014 deal that saw that a golden circle of top brass at the firm buy Anglo Irish Bank bonds whose sale, by a Davy client, was being handled by the firm.

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The client, Northern Ireland developer Patrick Kearney, had not been made aware that a consortium of 16 Davy staff – dubbed ‘The O’Connell Partnership’ – were the buyers of the bonds he was selling. The Davy staff did not tell the firm’s own compliance officers of the deal either.

Last month, the Central Bank slapped Davy with a €4.13m fine for breaching market rules in relation to the transaction.

“Davy prioritised facilitating an opportunity for the consortium to make personal financial gain over ensuring that it was complying with its regulatory obligations,” the Central Bank said.

Davy had initially approached the Central Bank in 2014 in an effort to explain the transaction – but only after it had been made public.

“At that stage, Davy failed to disclose the full extent of the wrongdoing,” said the Central Bank. “This lack of candour was treated as an aggravating factor in this case.”

Mr Kearney has now launched a new legal action against Davy and also targeted The O’Connell Partnership. Davy said the matter was previously subject to a “full and final settlement” and will defend the case.

Bank of Ireland is among the potential suitors for Davy.