ISA Proposes Stock Exchange Reporting in English
Israeli law currently prescribes that the reports of reporting companies in Israel must be in the Hebrew language. The only exception is dual-listed companies and high-tech companies.
However, other major markets throughout the world, such as Singapore, Hong Kong, Frankfurt Germany, India, etc., allow reporting in English instead of the country’s official language, even if English is not the investors’ native language.
With an eye to these other major markets, the Israel Securities Authority (ISA) has promulgated draft regulations for public comment that enable all reporting companies in Israel to publish their reports in English.
These regulations intend to afford the Israeli market greater access to the international arena. According to the ISA’s announcement, it appears that allowing companies traded in Israel to report in English will align the Israeli market with the common practice in international markets. It will also afford the Israeli capital market greater access to foreign companies and international investors. This way, foreign companies, who customarily avoid entering a market operating in an unfamiliar language, may grow interested in the Tel Aviv Stock Exchange.
Furthermore, private Israeli companies navigating toward a global horizon will see an Israeli capital market connected to the outside world at the level of language. This will thus enable them to begin trading and reporting in the language needed for their continued growth in the international capital market.
On the other hand, the shift of listed companies to reporting in English is a development with a material impact on the holders of their securities. The ISA staff conversed with various sources in the Israeli capital market and learned that a shift to reporting in English may also have negative implications. These include the need to make adjustments with the various entities involved in preparing or reading reports. Such experts would have to invest resources to acquire expertise and know-how they don’t necessarily have today. Furthermore, there is some concern of abuse of the permission to report in a language that is not the native language of Israeli investors. For instance, companies may hide material information or try to obfuscate it in complex or convoluted descriptions.
Therefore, it is proposed that allowing companies to publicize reports in English be voluntary and occur in the following manner:
- New companies (issuing IPOs) – The disclosure in the prospectus about the company’s reporting language, and the success of the IPO, will constitute the necessary investor approval and acceptance of the company’s reporting language.
- Listed companies – Such companies will not be able to decide unilaterally on changing the reporting language. Instead, such a change will be contingent upon the approval of the company’s board of directors and the approval of class meetings of every class of security of the company by a majority that does not include the company’s controlling shareholders.
As stated, at issue is draft regulations published for public comments. If approved, the regulations are also still contingent upon the enactment of the necessary legislative amendments, as well as preparations at the ISA. These include adjusting manpower to include personnel capable of working in an English-language work environment and translating laws and ISA staff position papers into English.
Consequently, enactment of the regulations, though likely, may take quite some time.
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