Monday 19 February 2018

Stockbroker will not appeal over 'neglect' case

Charlie Weston Personal Finance Editor

THE largest stockbroker in the State has refused to say if anyone in the firm has been disciplined after it had a multi-million award made against it for "deliberate neglect" of a vulnerable orphan.

Davy Stockbrokers was ordered by the High Court to make a €2m payment to a young man with intellectual difficulties when he lost part of his inheritance after being advised to put money into high-risk investments.

The spokesman refused to say if anyone in the stockbroker firm had been disciplined as a result of the practices exposed in the case.

"This judgment was only handed down yesterday so it would be premature to make any knee-jerk decisions in advance of reviewing the judgment more fully," the spokesman said.

And Davy has decided not to appeal the huge award made against it.

Davy Stockbrokers had the option of having a stay put on the €2m award made against it on Wednesday over its investment advice to a young man with intellectual difficulties seeking to invest his inheritance.

But the firm has decided not to seek the stay pending an appeal, and will not appeal the case, a spokesman for Davy confirmed.

Bank of Ireland had provided a loan to the vulnerable man of €2.8m, some of which was used to buy risky investments on his behalf by Davy, but has refused to comment on the case.

Davy was the financial adviser to the young man between 2005 and 2007.

Bank of Ireland announced the sale of Davy to its management in November 2006.

The Central Bank said it was precluded under law from commenting on individual firms, when asked if sanctions would be taken against Davy.

Judge Peter Charleton ordered Davy Stockbrokers to pay back more than €2m to their client, who showed "alarming degrees of impairment", because he has intellectual difficulties following two childhood strokes.

The court heard that Davy encouraged the man, then aged 20, to invest €1.75m borrowed from Bank of Ireland on the back of a €5m property inheritance.

The money was then invested in financial investments called contracts for difference or (CFDs). These risky investments, which magnify gains and losses, left him facing potential losses of a staggering €30m at one stage.


Now aged 28 and with an address in south Dublin, the court heard how the young man lost his mother and father when he was aged 12 and 17 respectively and experienced developmental difficulties.

A medical report described him as "significantly impaired" in looking after his financial affairs, the court heard.

Davy was paid to exercise care but demonstrated an insufficient level of care throughout its relationship with the client and failed to provide the service paid for, the judge found.

This amounted to "deliberate neglect".

Examples included Davy having the man sign blank forms and, unknown to him, treating him as a "gold star" client with an "aggressive" attitude to risk. Davy insisted it no longer offers CFDs to its clients, and has since tightened up its regulatory processes.

"A series of regulatory changes have already occurred since 2008 and Davy has been to the fore in implementing these," a spokesman confirmed yesterday.

Irish Independent

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