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Gabriella Ravid, CEO of the Psagot-Ofek, the country's largest fund management company, has been told by the Israel Securities Authority that she must leave her job.

Psagot-Ofek, which is owned by Bank Leumi, was sold six months ago to York Capital Management. The authority has conditioned the sale on Ravid and her deputy, Danny Zilbiger, not continuing to hold their positions.

This is a severe shock for the capital markets, since Ravid is considered the most dominant and successful CEO in the market today. The success of Psagot-Ofek, which has become the country's biggest fund, is mainly attributed to her.

One can assume that Ravid's presence was also a factor in York's decision to buy Psagot-Ofek six months ago. Now, Bank Leumi is concerned York will pull out of the deal once it becomes clear that Ravid will not be managing the group.

The authority told York that Ravid and her deputy would not be able to carry on managing the group because of an investigation which it has been running for the past three years concerning suspicions of consultancy violations at the bank.

Recently, the State Prosecutor's Office has decided to indict Ravid, Zilbiger, and others. The indictments are currently on hold pending hearings.

The investigation at Bank Leumi began after the Psagot fund-raised NIS 1.7 billion in one day in the summer of 2003, almost all of it from Bank Leumi branches.

The securities authority warned the bank that the extraordinary raising of funds appeared to violate consultancy laws, which oblige the banks' consultants to give objective advice. Despite this, two months later the Leumi Pia fund raised NIS 700 million in one day, mostly from Leumi clients.

Following this the securities authority opened an investigation, which turned up suspicions that Leumi advisers received illicit perks from the Leumi mutual funds, in exchange for which they they purchased the funds for the bank's customers. Bank Leumi refused to respond to this report.