Davy stockbrokers "need only look in the mirror" to find the cause of its current difficulties, the Central Bank's Derville Rowland has said.
Ms Rowland, who heads the Central Bank’s financial misconduct unit, said the regulator’s enforcement investigation, reprimand and €4.1 million fine of Davy had sparked “very serious consequences for the firm”.
It found that the State’s largest stockbroker had breached a number of regulations in relation to a 2014 bond transaction where a group of 16 staff sought to make a profit without telling the client for whom it was acting.
“When the firm asks itself how things went so catastrophically wrong, it need only look in the mirror,” Ms Rowland told an event hosted by the Banking and Payments Federation of Ireland (BPFI), the umbrella group for the financial industry here.
She noted, however, that the investigation was “into a transaction carried out by a small number of individuals within the firm, not all staff.”
Davy continues to deal with the fallout from the controversy, which has resulted in a string of high-profile resignations and the company being put up for sale.
In her speech, Ms Rowland said consumer and investor protection begins with the firms themselves.
“Firms must have effective cultures and set the right standards,” she said. “Many firms meet those standards and put their expertise to good use for their customers. But others, of course, don’t,” Ms Rowland said.
She warned that the Central Bank would not hesitate to act in cases of misconduct as the Davy episode showed.
“And where misconduct arises, the Central Bank will take action with the aim of ensuring that the best interests of consumers and investors are protected and that markets operate in a fair, orderly and transparent manner,” she said.
In her address, Ms Rowland outlined the Central Bank’s priorities for consumers and investors, including a review of the current Consumer Protection Code, a focus on insurance issues including differential pricing and business interruption cover, and distressed debt.
“Distressed debt remains a key priority for the Central Bank, and our focus is to ensure lenders have suitable supports in place to help borrowers in arrears,” she said.
Ms Rowland also announced the launch of a consultation on the standard financial statement (SFS) – a form stating the monthly financial incomings and outgoings, which distressed borrowers are typically asked to fill out.
Consumer advocate groups complain that the document is too cumbersome and difficult to complete.
Arrears supports
“Central to our approach on distressed debt is working with and listening closely to borrower representatives to ensure that our supervisory and policy responses continue to evolve,” Ms Rowland said.
“From their experience and feedback, it is clear that borrowers sometimes find the SFS, used to gather financial information from those experiencing financial distress, to be a challenging document to complete,” she said.
“We brought together a working group of stakeholders with experience in assisting borrowers in distress to listen and address these challenges.
“The outcome of this work is that today we will issue a public consultation on changes to the SFS developed on foot of the detailed feedback, input and suggestions from the working group.”
