The former Friends First employee who admitted misleading a client has resigned from a property investment company established by the financial services group, writes Barry O'Halloran.
Arley Ltd, a property investment vehicle set up by Friends First almost five years ago, said yesterday that Stephen Donnelly has resigned from its board.
The board was due to discuss a proposal to dismiss Mr Donnelly at a meeting next month. However, he anticipated the move yesterday by voluntarily resigning.
Friends First set up Arley as a vehicle for private clients to invest in UK properties. The clients themselves own the properties which were selected and administered by Friends First.
The properties are due to be sold and the company wound up over the coming months.
Two years ago, Mr Donnelly admitted misleading a client to whom he sold two five-year with profits bonds in 1997 and 2002.
He was working for Friends First in 1997 when he sold the first bond to a Jersey-based trust structure. By 2002, when the first policy matured, he had become an independent investment intermediary.
He sold the second policy to the same client that year. Mr Donnelly promised the client, Cork businessman John O'Mahony, a 40 per cent return, while Friends First had only agreed to a 28 per cent return.
Following a complaint from Mr O'Mahony in February 2005, Friends First carried out its own investigation and ended its relationship with Mr Donnelly's company, MIS Financial Services, the following April.
Mr O'Mahony maintains that he lost €585,000 as a result of his dealings with Mr Donnelly. He has threatened to take legal action but has not yet done so. Friends First says it is satisfied that he suffered no loss as a result.
Last year the Irish Financial Services Regulatory Authority banned Mr Donnelly from involvement in the management of a regulated financial services provider for five years and declared that he had failed to act honestly and fairly in his dealings with Mr O'Mahony.
Friends First has been criticised for allowing Mr Donnelly to remain on the Arley board after he admitted misleading Mr O'Mahony and had been disqualified by the regulator.
The financial institution has pointed out that the company is owned by its investors in a private capacity.
