Securities watchdog passes file on Leumi to State Prosecution
The Israel Securities Authority (ISA) has given its file on how Bank Leumi allegedly bought off "impartial" financial advisors to the State Prosecution.
The ISA investigation probed alleged pressure exerted by Leumi mutual fund companies Pia and Psagot on the bank's investment advisors to promote the companies' funds, instead of providing unbiased investment advice. Pia and Psagot allegedly gave the investment advisors special incentives - such as free vacations and short trips - to encourage them to market their funds above others.
The authority's attention was first roused last year when a new Psagot fund managed to raise NIS 1.7 billion from Leumi bank customers within one day. ISA head Moshe Terry summoned Leumi's senior executives, chairman Eitan Raff and CEO Galia Maor, to his office for questioning. However, even after this meeting, Leumi still managed to raise suspiciously large sums for others of its new mutual funds. At the end of 2004, ISA investigators raided the offices of Pia and Psagot, which manage more than NIS 20 billion in funds. Two weeks later, they also raided Bank Leumi offices in Nes Tziona.