Davy Stockbrokers advised 139 credit unions to buy €149 million worth of investment products which were the subject of a complaint from a Co Meath credit union that was upheld by the Financial Services Ombudsman.
In an unprecedented move yesterday, ombudsman Joe Meade published his ruling against Davy over advice given on three bank bonds sold to Enfield Credit Union that fell in value.
Last month, Mr Meade directed the broker to buy back the credit union's investments in the three perpetual bonds for €500,000, the price paid for them.
Perpetual bonds are usually issued by banks and pay a set interest rate that is determined by how the rate, or coupon, compares with market interest rates.
According to Mr Meade's ruling, Davy said in a submission to Mr Meade last month that investments totalling €149 million - or 81 per cent of the value of the three bonds sold by the broker between April 2004 and June 2005 - were to credit unions.
Davy said the value of the credit union's €500,000 investment, which was made between September 2004 and April 2005, had fallen to €333,000 by the end of last year, while income received totalled €63,744.
Mr Meade decided to publish the ruling after Davy launched its challenge to the Financial Services Ombudsman's ruling in the High Court last Friday.
The broker is seeking to overturn the ruling and is also challenging the constitutionality of his powers.
"If the court finds that this office is unconstitutional, then what the Oireachtas has put in place amounts to naught," said Mr Meade. "They are perfectly entitled to take their case but I will vigorously defend it."
A spokesman for Davy declined to comment while its case was before the court.
The firm has argued that the credit union fully understood the nature of the bonds, that it had not relied exclusively on Davy for advice and that the bonds fell in value because of the deterioration in the credit markets.
Mr Meade said he had not received complaints from any other credit unions about the bonds but that he would decide any future complaints on an individual basis. "I could uphold some or I could reject some. I have only got one complaint."
