Sale of fund units in SEB Liquidity Fund misleading
SEB Varahaldus decided to revalue the investment portfolio of SEB Liquidity Fund, as a result of which the net value of a fund unit declined from EEK 100 to EEK 86.95. The revaluation of fund units did not accord with client expectations, since SEB Liquidity Fund had been presented to clients throughout the years as an entirely risk-free investment option and an alternative to a deposit.
"The fact that investing involves risks is normal. In selling financial products, however, there ought not to occur misleading selling. For a bank, it is a statutory obligation, in addition to potential profit to be gained, to provide clients with an overview of risks associated with an investment," Raul Malmstein, chairman of the management board of the Financial Supervision Authority, said.
The Financial Supervision Authority has established that SEB Pank has in marketing SEB Liquidity Fund repeatedly and systemically emphasised the profit to be gained, without at the same time pointing out the risks. SEB Pank presented clients with inaccurate and incomplete information both during investment consultation and in its sales and marketing materials. The fact that a unit in the liquidity fund bears an investment risk had been omitted in the advertising materials. On several occasions it had been noted of a unit that the value of the unit could not decrease, that its value would be always EEK 100 and that the preservation of the money paid in would be guaranteed 100%. Based on the terms and conditions of the fund, however, SEB Liquidity Fund is not a guaranteed fund.
By distributing incorrect information, SEB Pank provided an inaccurate and incomplete overview of the risks involved in the fund. For the said misdemeanour, a legal person may be penalised with a fine of up to EEK 500 000. Considering that SEB Pank and AS SEB Varahaldus facilitated in every way the detection of the breach, they have understood their breach, voluntarily compensated for the loss and publicly apologised to investors, the Authority decided to penalise AS SEB Pank with a fine of EEK 300 000.
One segment in the supervision proceedings by the Financial Supervision Authority also touches on the potential unequal treatment of clients in the distribution of information prior to the disclosure of important information concerning the price of a unit in SEB Liquidity Fund. In this respect, the Authority continues its investigation of the activity of SEB Pank and SEB Varahaldus.