Watchdog summons Leumi chiefs to explain Psagot fundraising
The Israel Securities Authority summoned Bank Leumi chief executive Galia Maor and chairman Eitan Raff to explain the extraordinarily high amounts that the mutual fund Psagot Madadim 120 Corporation raised on its day of launch - a startling NIS 1.7B.
The Israel Securities Authority summoned Bank Leumi chief executive Galia Maor and chairman Eitan Raff to explain the extraordinarily high amounts that the mutual fund Psagot Madadim 120 Corporation raised on its day of launch - a startling NIS 1.7 billion.
A senior Bank Leumi executive said after yesterday's discussion that Terry had no complaint against the bank and the conversation was not a warning.
"The bank found no fault in the marketing of the fund and Terry made no demand to change anything. We believe the consultancy law is important and seek to review procedures to act in the best interests of the client."
But ISA chairman Moshe Terry told the Bank Leumi chiefs that if any breach of the consultancy laws had occurred, he would not hesitate to respond with all the means at his disposal.
Bank Leumi deputy CEO Yona Fogel said the bank's top executives had met with the ISA chairman in the course of the watchdog's investigation of Psagot Madadim 120.
"The bank also investigated the matter and found that the reason for the fund's success [raising money] lay in the kind of fund it is, and its investments, which suited the period in which the fund was launched. The bank examined itself again and again in compliance with the consultancy law and found that the procedures had been proper."
Bank Leumi holds itself faultless in this respect, Fogel said, and will continue to comply with the law.
In the meeting with Maor and Raff, Terry said the extraordinary events surrounding Psagot Madadim 120 could not be ignored. Maor and Raff presented Terry with documents that they claimed indicated the good judgment of investors choosing the fund.
Psagot Madadim 120 was launched in mid-June, and broke the fundraising record in Israel's mutual fund industry. It specializes in CPI-linked Galil bonds. When news of its fundraising hit the press, some experts said it would have to buy over NIS 2 billion worth of Galil bonds to meet the terms of its prospectus.
The experts also cast doubt on the wisdom of investing in Psagot Madadim 120, saying Galil yields were past their peak and shekel deposits would generate more. Terry told the Bank Leumi chiefs to make every effort possible to ensure the bank clerks are aware of the consultancy law's restrictions.
Bank Leumi believes the conversation is the end of the matter because if the Securities Authority had any suspicions against the bank, it would not have summoned Maor and Raff for an open discussion. But the bank refused to say if it plans any changes in future procedures.
The authority also declined to explain its behavior in the matter or say if it believes the bank violated the law or if yesterday's conversation was its last planned action on the matter.