UPDATE 1-Ireland's Davy Stockbrokers puts itself up for sale

(Updates with background on fine, report of interest from Bank of Ireland)

DUBLIN, March 11 (Reuters) - Ireland’s Davy Stockbrokers, which is grappling with the fallout from a record central bank fine, has decided to put itself up for sale, the firm said on Thursday.

Ireland’s largest stockbroker, Davy was fined last week after an inquiry into 16 of its staff who the regulator alleged sought to profit in 2014 by taking the opposite side of a bond deal with a client, without telling the client or compliance officials.

Davy closed its bond desk on Monday after it was dropped as a primary dealer in Irish government bonds and the central bank said on Tuesday it remained under close regulatory scrutiny following the 4.1 million euros ($4.9 million) fine.

“The Board of J&E Davy has decided to pursue a sale of the Group,” it said in a statement, adding that Rothschild & Co had been appointed as financial adviser to manage the process.

The Irish Times reported on Wednesday that Bank of Ireland , the country’s largest bank by assets, had made an “exploratory approach” to Davy.

Spokesmen for both Bank of Ireland and Davy declined to comment on the newspaper report.

The 16 Davy staff members accused by the central bank of breaching market rules included then-Chief Executive Brian McKiernan, who quit on Saturday alongside two other senior executives.

Irish government ministers have raised concerns, however, that McKiernan and others involved still retain a large stake in the business. Davy is an independent company wholly owned by management, staff and former employees.

Allied Irish Banks last week bought one of Davy’s main rivals, Goodbody Stockbrokers, a leading Irish provider of wealth management, corporate finance and capital markets services.

Davy is also the country’s largest wealth manager, with around 8.5 billion euros of assets under management, and is a corporate broker for some of the largest firms listed on the Irish stock exchange. (Reporting by Conor Humphries; Editing by Leslie Adler and Peter Cooney)