A SECOND credit union has made complaints about advice on investments provided to it by stock- broking firm J&E Davy.

E-Services and Communications Credit Union Ltd of Dawson Street, Dublin, claims that, acting on advice from Davy received in 2004, it had invested some €12.9 million in various bonds.

That investment has now reduced in value to some €7.7 million. It alleges its loss is "entirely the responsibility" of Davy.

In proceedings admitted to the Commercial Court yesterday by Mr Justice Peter Kelly, the credit union claims it had instructed Davy that the firm's advice should, at a minimum, ensure that the credit union's funds were only invested in bonds which guaranteed the capital sums being invested and in investment instruments which were authorised by the Trustee (Authorised Investments) Order, 1998.

It claims it also made clear to Davy that its funds should only be invested in investment instruments which had a fixed maturity date entitling the credit union to the return of the original capital sums invested by it at the fixed future maturity date.

In those circumstances, and relying on the "professed expertise" of Davy, the credit union claims it invested a total sum of €12.99 million in seven different bonds between June 2004 and April 2005, including Nordea Bank bond, Jyske Bank perpetual bond and Oko Bank perpetual bond.

After making those investments, the credit union claims it discovered that the bonds did not guarantee the capital sums invested, did not have a fixed date of maturity and, in the case of two bonds - the Oko Bank perpetual bond and Axa perpetual bond - were not investments authorised by the 1998 trustee order.

The credit union claims its investment has reduced in value to €7.7 million and it has no prospect of recovering the original capital sums invested at any future date because the banks which issued the bonds in which the funds are invested have complete discretion as to when the funds are to be released from the bonds.

It claims the banks will only exercise that discretion if the value of the bonds is equal to, or greater than, the original capital sums invested in the bonds.

In its action, E-Services claims Davy is entirely responsible for its losses, has acted in breach of contract and negligently, and must compensate the credit union. Davy had refused to do so and the credit union says it had no alternative but to bring the legal action.

• In earlier and separate proceedings, yet to be heard, Davy is challenging a decision by the Financial Services Ombudsman of January 21st last upholding a complaint by Enfield Credit Union over the firm's advice on three bank bonds which fell in value.

Ombudsman Joe Meade ruled that the bonds were unsuitable investments for credit unions and directed Davy to pay Enfield Credit Union €500,000 in exchange for the bonds and refund all fees and commissions.

The credit union said it had made an investment of €500,000 in the three bonds between September 2004 and April 2005 and the value of the investments in July 2007 was €422,959. The perpetual bonds were issued by three banks - Nordea Bank, Jyske Bank and Oko Bank.

Rejecting the complaints, Davy chief executive Tony Garry has argued that the credit union fully understood the nature of the bonds and did not rely exclusively on Davy for investment advice, and that the bonds' fall in value was not due to their characteristics but to the general unpre-cedented deterioration in the credit markets.

He also argued that the Irish League of Credit Union had adopted the position that perpetual bonds were suitable investments for credit unions.