Why would an adviser recommend that a client sell government bonds from one series and soon advise that he buy almost identical ones? The Israel Securities Authority says Bank Hapoalim did this merely to increase commission income.
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The securities authority audited 100 client-adviser consultations at Hapoalim. Clients were often advised to perform multiple transactions that had no rationale other than drumming up fees for the bank. The authority said many recommendations did not appear to benefit the client and were not explained well.
The bank, for its part, says these events occurred four years ago and the technical flaws have been fixed.
The authority notes that consultations often were not documented, as required by law. It cites directives pressuring advisers to hold eight consultations per day.
The report states that a lack of documentation prevents quality control over consulting services offered. The authority reports 108 flaws; in 97 of those cases, the bank could not give a satisfactory response to disprove the findings.
The audit was performed from February to May 2010 and included cases in which the adviser suggested selling a particular security only to propose buying it back a few days later. The auditor did not receive a satisfactory explanation for such advice, which produced hefty commissions for both buying and selling.
In one case, the advice was to buy a particular stock in expectation of rising interest rates, followed by advice two months later to sell the stock in expectation of rising interest rates.