2014-02-25
National Audit Office: people are not always adequately informed about potential investment risks
Not all people have and can have special investment knowledge to be able to independently evaluate the information provided by the insured about the insurance of deposits and liabilities to investors, to make the right decisions on the investment of funds, and to understand the risks of potential consequences. The obligation to inform depositors and investors about the insurance of deposits and liabilities to investors has been imposed on the insured - banks, credit unions and other undertakings providing investment services, meanwhile the state company Deposit and Investment Insurance checks how this information is provided. The National Audit Office conducted an audit to evaluate whether the measures of inspection of the insured applied by the company Deposit and Investment Insurance ensure provision of adequate and comprehensive information to depositors and investors.
"The evaluation of the performance of the state company Deposit and Investment Insurance showed that the current legislation does not govern the ways, form and measures to be used by the insured for informing depositors and investors about the insurance of deposits and liabilities to investors. Therefore, the company does not always ensure that the insured provide clear and understandable information to people. On the other hand, the lack of legal regulation determines that is not always possible to establish whether the information is provided in a proper manner,” said Auditor General Giedrė Švedienė summing up the audit results.
The internal documents of the company Deposit and Investment Insurance do not determine either what measures of information should be checked and how they should be evaluated and do not specify when and what ways and measures of information are deemed to be appropriate so that after conducting an inspection the staff of this state company could be able to conclude on how the insured provide information to depositors and investors.
The analysis of the information provided on the websites of the insured revealed that information about the insurance of deposits and liabilities to investors was not always provided, or misleading and/or incomplete information was provided even after the inspection conducted by the company Deposit and Investment Insurance.
The company Deposit and Investment Insurance has prepared guidance leaflets and stickers for the insured. The audit found that not all of the insured were using these measures. Out of 32 institutions visited in Vilnius city (18 banks and their branches, 7 credit unions, and 7 brokerage and management companies), 19 insurance holders did not have any of the recommended measures in client service places, 8 insurance holders did not have all the measures, and the remaining 5 had all recommended measures.
It should be noted that the obligation to inform depositors and investors about the insurance of deposits and liabilities to investors was laid down in the Law on Insurance of Deposits and Liabilities to Investors twelve years ago. However, the Ministry of Finance, as the institution exercising the rights and duties of the owner of the state company Deposit and Investment Insurance and as the institution coordinating the implementation of the system of insurance of deposits and liabilities to investors, has not taken any steps during this period to ensure that legislation regulates the ways, measures and form to be used by the insured for informing depositors and investors about the insurance of deposits and liabilities to investors.
With a view to ensuring provision of clearer and more comprehensive information to depositors and investors, the National Audit Office recommended to the Ministry of Finance to lay down requirements for the insured in legislation, specifying the ways, form and measures to be used for informing depositors and investors. One of the ways of providing information which is currently under discussion in the European Union, namely, provision of information with an acknowledgement of receipt, could also be applied to Lithuania.