Important updates on the Israeli money market reform

The Israel Securities Authority has published several additional revisions to the Israeli money market reform since the Knesset approved legislative amendments designed to promote competition in the money market, and since the draft directives and rules were published approximately two months ago. The money market reform relates to money market mutual funds, deposits and government bonds (short-term loans maturing in no more than one year).

Final directive regarding investment advice or marketing in relation to money market mutual funds

The ISA has published a final directive regarding investment advice or marketing in relation to money market mutual funds, which will come into effect on October 3, 2024. Following are the key revisions incorporated in the final directive (as opposed to the draft published in July):

• Ÿ The draft directive obligated service-providers to money market mutual funds to define the group of customers constituting their target audiences for receiving services. This obligation was eliminated from the final directive.
• Ÿ The final directive adds an obligation: service-providers must clarify to customers that the expected return being reported by the fund manager will be transferred immediately prior to each fixed date and therefore, relates solely to that date.
• Ÿ The draft directive stated that service-providers must explain to customers that their holdings of fund units are automatically renewed until such time as they issue redemption instructions. The final directive clarifies that this explanation should be explicit, emphasizing the importance that the ISA attributes to this explanation to the customer.
• Ÿ The obligation to disclose conflicts of interest: the provisions of the draft rules on conflicts of interest were incorporated in the final directive. The final directive imposes an additional obligation on service-providers engaging in investment marketing (as opposed to investment advice) – they must inform customers that there are other entities managing money market mutual funds. 
• ŸQuarterly report to the ISA: the final directive made specific changes in the information to be included in the quarterly report to the ISA. The principle change is that service-providers are now obligated to report information on the number of referral they make to a particular person. 
• In addition, the ISA published a revised draft regarding the obligation to notify the ISA of intentions to engage in investment advice or marketing in relation to a money market mutual fund. No material changes have been made in this draft, which is still merely a draft.

Click here for our previous article on this topic, or to read more updates in the field of Financial Regulation.