Police investigation examines role of Italy’s ‘promotori finanziari’

Italian sales of financial products have long been dominated by a powerful breed of financial consultants known as “promotori finanziari”.

Each Italian bank has a group of promotori attached to it. But what has often been called into question is the loyalty of the agents to the bank and the control which the bank can exercise over its salesmen.

The ambiguity of this relationship has been highlighted in an ongoing criminal investigation of more than 100 promotori, some of whom are suspected of promoting Swiss-registered products not authorised for distribution in Italy.

Eighty-one of the 106 financial consultants under investigation are so-called “private bankers” or tied agents of Banca Fideuram. They work exclusively for Banca Fideuram and cannot promote financial or insurance products for any other parties.

The criminal investigation branch of the “Guardia di Finanza” said it had uncovered an illegal system for the collection and management of large amounts of money, which came to be transferred abroad through intermediaries “and in particular, financial

consultants of one of the largest national financial groups”.

But Banca Fideuram said the Italian police probe did not involve any allegation of transferring funds abroad “as far as Banca Fideuram people are concerned”.

Fideuram task force

The Prosecutor’s Office of Florence is conducting 196 “perquisizioni” or searches for evidence in 12 Italian regions. The amount of money involved in the investigation is reported to be several million euros.

Owned by Gruppo Sanpaolo IMI, the Banca Fideuram organisation, includes subsidiary brokerage and private banking businesses in France, Luxembourg and Switzerland and an investment management operation in Ireland.

Fideuram said the allegations concerning the private bankers “are all about the alleged complicity in unauthorised financial services offers in Italy, with the exception of one private banker who is suspected of laundering money derived from alleged tax evasion by third parties.”

Five employees of Fideuram Bank (Suisse) are also under investigation. Fideuram Bank (Suisse)(FBS) is fully owned by Fideuram Bank (Luxembourg) and operates completely independently of Banca Fideuram in Italy. FBS does not have its own private banker network and only direct employees of FBS are responsible for promoting its investment services.

The Swiss subsidiary’s contribution to the Banca Fideuram group’s E58.59bn of total assets under management was a modest E700m at the end of December 2003.

Banca Fideuram explained: “The alleged complicity concerns the unauthorised offer of investment services by Fideuram Bank (Suisse), a party not permitted to operate in Italy. In this regard, it is important to stress that the activity of Banca Fideuram and its private bankers on behalf of foreign subsidiaries is exclusively focused on information and presentation of services.”

The Italian financial police said its investigations included a probe into money laundering and irregular lending practices. But allegations of money laundering and usury are said to

Concern people outside Banca

Fideuram. The bank confirmed its “strong will” to co-operate with the police investigation and has already set up a specific task force “to investigate facts rapidly and with maximum rigour”.

Intense scrutiny

Fideuram spokeswoman Stefania Pensabene said the Guardia di Finanza was just at the beginning of its investigation and any allegations of wrong-doing had yet to be proven.

She said that in 2001, the Prosecutor’s Office of Florence started investigating 20 financial consultants working for ING Bank in Italy for similar alleged financial misconduct. After an inquiry, not one single indictment had been filed so far, she said.

Ms Pensabene added that many early media reports had been inaccurate. She claimed the media had exaggerated or hyped up allegations of financial services abuse as a result of the intense scrutiny the financial affairs of Italian companies were coming under in the aftermath of the Cirio and Parmalat scandals.

“Many media wrongly reported that the accusations involving Banca Fideuram private bankers were about money laundering and usury,” said Ms Pensabene.

She also stressed the investigators were looking at the activities of the

promotori, not those of the bank.

“Banca Fideuram is in no way involved in the investigation, as the investigating authorities have clearly stated. We trust that the investigation set forth by the Prosecutor’s Office of Florence will shed light as soon as possible on the situation, limiting the impact on our solid reputation.”

Role of the ‘promotori’

At the end of February 2004, the Banca Fideuram group had 4517 private bankers (3391 in the Fideuram network and 1126 in the Sanpaolo Invest network), of which 4445 were registered financial consultants. All private bankers are based in Italy.

These private bankers sell the bank’s Italian proprietary products such as Fideuram Moenete and Imi 2000 and Luxembourg-based in-house umbrella funds including Fonditalia, Interfund and ISF New Economy. Investment management for proprietary funds is carried out both at Fideuram Bank (Luxembourg) and at Fideuram Asset Management in Dublin, Ireland.

But there has also been a vigorous nod towards the open archtitecture movement. Around 10 per cent (5.82bn) of total clients’ assets are currently invested in third party products such as funds, insurance products and discretionary accounts.

These are sold purely by the SanPaolo Invest network, which distributes investment funds for Crédit Agricole, Credit Suisse, Goldman Sachs, JPMorgan Fleming, Pictet,

Sanpaolo IMI Asset Management, Sanpaolo IMI Wealth Management and Symphonia. Discretionary accounts are also distributed by Sanpaolo Invest for Invesco, Symphonia and Sanpaolo IMI Asset Management.

Banca Fideuram refused to divulge commission levels earned by its tied agents, but its website promises “competitive remuneration”, claiming the average portfolio handled by a Fideuram private banker is five times greater than the median E3.6m private client portfolio handled by Italian competitors.