Davy Stockbrokers

Davy is Ireland's largest stockbroker, wealth manager and financial advisor and has offices in Dublin, Belfast, Cork, Galway and London. Davy offer a range of services to private clients, small businesses, corporations and institutional investors.

Current Overview

Employing over 420 people, Davy is an independent company owned by management and staff.^[1] Company operations are centered around four interrelated business areas – Capital Markets, Corporate Finance, Private Clients and Research.

Capital Markets business offers clients services relating to the Irish equity market and European building materials, airline and gaming sectors, with a parallel offering in the international debt and currency markets. Activities are split into Institutional Equity Sales and Trading, Debt & Specialist Finance, Money Broking and Corporate Broking.

Corporate Finance business works with domestic and overseas companies, to provide a range of integrated corporate finance services.

Private Clients business works with individuals, charities and companies to meet their wealth management needs through financial planning, investment management and asset selection.

Research business provides analysis ^[2] across a range of sectors to help clients make more informed investment decisions.

As the leading broker in the Irish market, Davy accounted for approximately 40 per cent of all dealings in Irish equities on the Irish Stock Exchange in 2009 and is the only domestically based primary dealer in Irish Government Bonds and acts as arranger on most Irish corporate bond issues. Its acts as broker to 9 of the top 10 companies listed on the Irish Stock Exchange and 15 out of the 24 companies listed on the ESM (Ireland’s equivalent of AIM). Davy is also responsible for circa 70 per cent of funds raised on the Irish Stock Exchange.^[3] Ireland has two large (one of which is Davy), and half a dozen medium-sized brokerages. According to its 2009 Summary Financial Statement, the company had net current assets of €123.2m at the end of 2009 with shareholders' funds of €135.6m. ^[4]

History

James and Eugene Davy were raised in Rathmines^[5] and James, on the advice of his UCD economics professor, decided to enter stockbroking after graduating with a degree in Economics, while Eugene graduated with a Law degree.

In 1926, a few years after Irish independence, James Davy became a member of the Dublin Stock Exchange and was soon joined by his brother Eugene to establish J&E Davy, with its first office located on Westmoreland Street. At the time, Irish stockbroking was dominated by brokers who trained in London and lacked a more specific Irish perspective. The bulk of business consisted of buying and selling major British-quoted shares for private clients. It was in this environment that J&E Davy set about building up a stockbroking business. Over the next two decades the two brothers gradually built up the company by tapping into the slowly emerging Catholic middle class, (the majority of its competitors being run by Protestants).^[6] It was also helped by Eugene Davy's contact's obtained through playing rugby, being capped 34 times for Ireland, acting as manager of the national team, and eventually becoming President of the IRFU.

Their respective sons Brian and Joseph began to take control of the broker in the 1960s.^[7] In 1988 Bank of Ireland acquired a majority stake in Davy and increased that to 90% in 1992. In 2006, it became independent again following a management and staff buy-out of the company with loans provided by Anglo Irish Bank for €316 million, a figure acknowledged to reflect top of market conditions. In August 2010 Davy opened its first overseas office in London.

Controversy

In 1992, Davy made a political donation of £5,000 to Bertie Ahern, which ended in his personal account at Irish Life & Permanent plc.^[8][9][10]

The next year the firm was the subject of an Irish Stock Exchange inquiry over the handling of the floatation of Greencore plc, the recently privatised Irish Sugar Company. The then Taoiseach, Albert Reynolds did not hold back in his criticism "you employ professional people to do the job...it was not done in a professional manner." The Managing Partner resigned.

Davy admitted that its representatives in 1999 devised a Liechtenstein based tax evasion scheme uncovered by the public service broadcaster, RTE.^[11][12][13]

In a high profile 2005 insider dealer case, the chief executive of Fyffes plc whose shares were the subject of the illicit trading said that he was "set up" by Davy and misled by a presentation to investors by Davy on behalf of his company. He also told the High Court he believed there was an arrangement between Davy and the party found responsible by the courts of insider dealing for the purpose of selling the shares they held in his company.^[14]

Two reports of an investigation into the "wholly inappropriate sale of perpectual bonds" by Davy to credit unions failed to involve any of the credit unions affected, leaving them "in the dark and powerless to add any value to the findings of this investigation”. The Irish Stock Exchange, who has Davy as one of its largest shareholders, and the Central Bank of Ireland then declined to give them access to the reports. The Chairman of one the Credit Union's who suffered large losses told his members ‘‘The failure to publish the reports is to place the complaints process in a shroud of secrecy. Such a failure of openness, transparency and fairness can only serve to undermine confidence in the complaints process, forcing those with grievances into the courts. Such a course of action is not in the interest of any of the stakeholders.”^[15]

The broker attracted adverse criticism for continually writing glowing reports about its largest client and former owner Bank of Ireland by always setting price targets about the current market price. In February 2008 with the price at €9.59 it wrote "A low risk balance sheet and cheap valuation provide a safe place to hide...This is a low risk bank." 13 months later the price was at €0.12.^[16]

Davy invested on behalf of its clients €411 million to purchase the Irish Glass Bottle Site, in Ringsend, Dublin, in 2006, wrote off €452.8 million in its 2008 financial year. The 25-acre site, which is the company’s sole asset, was given a valuation of €50 million in the accounts.^[17][18]

Enfield Credit Union agreed to accept a €35 million offer from Davy to credit unions affected by the sale of investment bonds to settle its claim against the stockbroking firm that it claimed Davy mis-sold to them. The terms secured by Enfield’s advisers also applied to all the credit unions who are nursing losses of about €75 million on the €183 million worth of bonds Davy sold to them.^[19][20] Around 100 credit unions suffered a second round of losses because the bond that Davy acquired to compensate them for the earlier losses itself crashed in value.^[21]

Hundreds of clients of Davy, including former Anglo Irish Bank chairman Sean FitzPatrick. built up a 15pc stake in the American educational publisher, EMPG, as they participated in two equity-raisings—totalling more than $400m. The investors lost all of their money and the broker wrote to its clients apologising for not communicating more about their losses.^[22]

In 2010 the Central Bank of Ireland forced the broker to inform the effected clients of two adverse findings against them as an instrument sold "was not compliant with the Trustees (Authorised Investments) Order at the time of its sale as it was not listed on a recognised Stock Exchange’’ and ‘‘Davy had dealt as principal in the purchase and sale of the bond and was in breach of the rules of the Irish Stock Exchange by not disclosing this fact on its contract note’’ to the investors. The effected parties, who lost many millions, were said to be reviewing their legal options.^[23]

References

1. ^ http://davy.ie/TopLevel?page=aboutdavy
2. ^ http://www.davy.ie/Generic?page=davysnewsresearch
3. ^ http://www.davy.ie/content/pubarticles/Summary%20Financial%20Statement.pdf
4. ^ http://davy.ie/content/pubarticles/Summary%20Financial%20Statement.pdf
5. ^ "Residents of a house 29 in Terenure Road (Rathmines & Rathgar West, Dublin)". National Archives: Census of Ireland 1911. National Archives of Ireland. 1911. http://www.census.nationalarchives.ie/pages/1911/Dublin/Rathmines___Rathgar_West/Terenure_Road/65277/. Retrieved 2010-09-25. 
6. ^ "Anglo-Irish - Wikipedia, the free encyclopedia". En.wikipedia.org. http://en.wikipedia.org/wiki/Anglo-Irish. Retrieved 2010-09-25. 
7. ^ "About Davy - History". Davy Stockbrokers. http://www.davy.ie/Generic?page=history. Retrieved 2010-09-25. 
8. ^ Connolly, Shaun (2008-02-22). "FG brands Ahern ‘tax dodger’ after revelation". Irish Examiner. http://www.examiner.ie/story/Ireland/ojojsngboj/rss2/. Retrieved 2010-09-25. 
9. ^ "Davy's made £5,000 donation in 1992". The Irish Times. 2007-12-22. http://www.irishtimes.com/newspaper/ireland/2007/1222/1197997213124.html. Retrieved 2010-09-25. 
10. ^ "Comment: Investors told that BoI funds are not the best option". Sunday Business Post. 2008-02-24. http://archives.tcm.ie/businesspost/2008/02/24/story30643.asp. Retrieved 2010-09-25. 
11. ^ "Stockbrockers' managing director confirms meeting Moriarty lawyers". RTÉ News. 1999-11-21. http://www.rte.ie/news/1999/1121/moriarty.html. Retrieved 2010-09-25. 
12. ^ "When a wife turns whistle-blower". Irish Independent. 1999-11-28. http://www.independent.ie/national-news/when-a-wife-turns-whistleblower-521560.html. Retrieved 2010-09-25. 
13. ^ Flynn, Gerald (1999-11-25). "Court file led to probe on McLaughlin". Irish Independent. http://www.independent.ie/national-news/court-file-led-to-probe-on-mclaughlin-391635.html. Retrieved 2010-09-25. 
14. ^ "Fyffes was misled, McCann tells court". RTÉ. 2005-01-11. http://www.rte.ie/news/2005/0111/fyffes-business.html. Retrieved 2010-09-25. 
15. ^ http://archives.tcm.ie/businesspost/2009/07/19/story43178.asp
16. ^ Ross Shane, The Bankers, Page 146, Penguin Ireland 2009, ISBN 978-0-141-04444-6
17. ^ "€453m written off by Glass Bottle site owners in 2008". The Irish Times. 2010-06-10. http://www.irishtimes.com/newspaper/finance/2010/0610/1224272193935.html. Retrieved 2010-09-25. 
18. ^ Yates, Ivan (2010-01-22). "A whole generation of taxpayers will pay for our NAMA ‘glitterati’". Irish Examiner. http://www.examiner.ie/opinion/columnists/ivan-yates/a-whole-generation-of-taxpayers-will-pay-for-our-nama-glitterati-110227.html. Retrieved 2010-09-25. 
19. ^ http://archives.tcm.ie/businesspost/2008/07/20/story34522.asp
20. ^ http://www.independent.ie/business/irish/not-an-average-joe-1378570.html
21. ^ http://www.sbpost.ie/news/ireland/credit-union-fury-over-20m-loss-on-irish-life--permanent-bond-56741.html
22. ^ Quinn, Eamon (2010-04-11). "Stockbroker apologises to EMPG investors". Irish Tribune. http://www.tribune.ie/business/news/article/2010/apr/11/stockbroker-apologises-to-empg-investors/. Retrieved 2010-09-25. 
23. ^ http://www.sbpost.ie/news/davy-forced-to-inform-credit-unions-of-adverse-findings-52866.html

External links

• Official website