Davy name ‘helped give failed scheme legitimacy’
The now collapsed Dolphin property scheme was made available to investors via Davy Stockbrokers’ trading platform, the Sunday Independent has learned.
The €1bn German property scheme run by Dolphin is now the subject of ongoing fraud investigations in Germany and has left Irish investors out of pocket by more than €100m.
Documents prepared by Dolphin’s Cork office, and seen by the Sunday Independent, outline in detail the procedures to accept funds from clients of intermediaries using the Davy Select trading platform.
Dolphin loan notes were not offered or promoted by Davy to its own clients and the amounts which went through Davy were small.
The documents name individual Davy employees as contacts for the Dolphin transactions.
They described how “Davys client [sic] will go through Wealth Options”, adding that investments coming via this route “can have both pension and cash cases too”.
Dolphin International Group, in whose Cork office the documents were prepared, was voluntarily liquidated in October 2019 and the administration of the Dolphin operation in Ireland was taken over by Naas-based Wealth Options Trustees Ltd.
The unregulated Dolphin investments were sold to 1,800 Irish people through a network of independent financial brokers around the country.
Transactions on the Davy platform by brokers putting their clients’ money into the unregulated Dolphin loan note scheme accounted for up to €1m and the stockbroking firm did not charge commission and earned a small amount – less than 1pc – of platform fees on these transactions, the last of which took place in 2016.
Davy allowed execution-only transactions on its platform in respect of the Dolphin investment where investors had been independently advised by a financial adviser who had conducted a suitability review, it is understood.
Dolphin investments were done on a “reverse enquiry basis” from independent brokers and their clients with no advice on the investment provided by Davy, it is understood.
Dolphin investors were required by Davy to sign an indemnity and were directly contacted by a Davy Select dealer and read a “Complex Instrument Warning”, it is understood.
But three separate well-informed and experienced financial and investment sources all said that, nevertheless, the availability – via investment intermediaries – of the Dolphin product on the trading platform of the country’s pre-eminent stockbroking firm may have provided comfort to investors.
“The fact that this was on a Davy platform would have helped to give this scheme a legitimacy in the minds of potential investors that it might not have had otherwise,” said one source. Brand reputation would have played a part in investment decisions, said another.