Friday, October 4, 2013
FSA Weighs Suspending Investment Adviser Abraham
TOKYO (Nikkei)--The Financial Services Agency is considering plans to issue a business suspension order of up to six months against investment advisory firm Abraham Private Bank, The Nikkei learned Thursday.
The agency will conduct a hearing with Abraham officials as early as next week before making a decision.
On Thursday, the Securities and Exchange Surveillance Commission recommended administrative action against Abraham for Financial Instruments and Exchange Law violations, including sales of overseas investment funds without registering as a financial products dealer.
Abraham originally refuted the allegations but said later the same evening it would accept the securities watchdog's recommendations.
Investment advisory firms provide advice to investors about financial products in exchange for fees. But Abraham is believed to have pocketed sales commissions from fund asset managers, masking them as advertising fees, according to the SESC.
Furthermore, the sales commission income reached several times the total advisory fees Abraham received from investors, the SESC believes, underscoring a conflict of interest created between the advisory service and financial product sales.
Abraham also violated the law with false advertising, according to the watchdog. On its website, the advisory firm explained it does not receive sales commissions from financial institutions or asset managers, while ads touted higher returns than other companies.
In addition, Abraham is said to have improperly supplied extra profit to only certain investors, a practice prohibited by law. When an important client sought to have advisory fees dropped, Abraham is said to have waived more than 9 million yen, the SESC found.
This marks the 15th time that administrative action has been recommended in a case involving unregistered product sales since the Financial Instruments and Exchange Law was enacted in 2007.
(The Nikkei, Oct. 4 morning edition)