An audit conducted by The Israel Securities Authority on Israel Discount Bank’s (TASE: DSCT) sales of structure products has found failings in both the bank’s application of the Practice of Investment Consultancy and Investment Portfolio Management Regulation Law (5745-1995), and its procedures and monitoring of activity of its investment advisers. The information was disclosed in the bank’s second quarter financial report, published last Thursday.
Discount Bank reported that in January and February, the authority conducted an audit of its structure products. The audit encompassed various service systems and a number of investment advisors were monitored during the course of the review.
In response Discount Bank said that the review was a “routine audit that the Securities Authority conducts from time to time. The findings were forwarded to the bank in June, and were therefore included in the second quarter financial report.” A similar audit was also conducted at Mizrahi Tefahot Bank (TASE:MZTF).
Following the audit, it was agreed that Discount Bank would draw up a plan to improve its investment consultancy operations, enforce work procedures and boost supervision in cooperation with the Securities Authority. The bank has prepared a comprehensive plan to upgrade its consultancy operations, including supervision of advisers’ activity, further training for advisers, and measures to ensure compliance with legal requirements and bank procedures.
The Securities Authority has been focusing over the past year on structure products, since these are complex products that are not understood by average customers but are nevertheless distributed through the regular channels, i.e. investment advisers. These products did not require the provision, by law, of investment advice until June 2005.
Published by Globes [online], Israel business news - www.globes.co.il - on September 3, 2006
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