Financial Supervision Authority issues precept to SEB Ühispanga Fondid to stop misleading advertising
The Financial Supervision Authority issued a precept to AS SEB Ühispanga Fondid (SEB Ühispank Asset Management) to stop misleading advertising on the bank's website www.seb.ee and in media channels, including television. In an advertisement of SEB Ühispanga Fondid, a misleading statement invites clients to join SEB Ühispank's II-pillar mandatory pension funds or to switch pension funds.
The advertisement claims that every 100 kroons invested by a client in SEB Ühispank Pension Fund Progressive (SEB Ühispanga Progressiivne Pensionifond) in July 2002 has by now become 431 kroons. The Financial Supervision Authority considers it necessary to draw the attention of the public to the fact that the real rate of return of SEB Ühispank Pension Fund Progressive from July 2002 till today has been + 47.1%, which means a return of 147 kroons, not 431 kroons for every 100 kroons.
"The advertising message must be unambiguous. A management company should limit advertising to achievements arising from its own professional activities," Kaido Tropp, Member of the Management Board of the Financial Supervision Authority commented on the precept.
In advertisements concerning mandatory pension fund growth, SEB Ühispanga Fondid has added the 4% paid to the unit holder by the state to the 2% of the gross wages paid by the worker. The Financial Supervision Authority finds that counting and presenting amounts transferable under the Social Tax Act as part of mandatory pension fund growth is unjustified and misleading. This is a part of the national social policy, where the reception of amounts does not depend on the activities of the management company nor is inherent to one specific fund. Counting the 4% paid by the state as part of the fund?s rate of return is not justified, since it creates a false idea about the fund's history of success. The possible false idea is used to influence the behaviour of investors. According to the Financial Supervision Authority, it is not possible to understand from the advertisement of SEB Ühispanga Fondid that the amounts added to the II pillar from social tax have been counted as part of the rate of return of SEB Ühispank Pension Fund Progressive.
There is a footnote with additional information at the bottom of the advertisement of SEB Ühispank Pension Fund Progressive: "Data as of 01.09.2006. A subscriber to the pension system invests 2% of his or her gross wages into the pension fund, to which the state adds 4% from the individual's social tax. The fund's rate of return in the given period + 47,1% has been added to the amount".
The information given in the footnote is an independent piece of information on the arrangement of contributions to mandatory funded pension and it is not explicitly connected with the bases of calculating the pension fund's rate of return. In the case of a TV commercial, it is practically impossible to evaluate the cumulative effect of core and additional information presented in this way.