Client updates / Capital Markets

After the Markets in Crypto-Assets Regulation (MiCA) entered into force in June 2024, a significant step took place last July with the publication of the European Banking Authority (EBA) final Travel Rule guidance.

The Israel Securities Authority recently published a draft of a new directive for payment companies and holders of basic initiation licenses or approvals regarding reporting to the Authority. According to the Draft, payment companies and holders of basic initiation licenses or approvals are required to submit annual, semi-annual, quarterly, and immediate reports on various topics, such as audited or reviewed financial data, operational data, compliance with capital requirements, technological measures, corporate governance, compliance etcetera.

This year, the Israeli Capital Market, Insurance and Savings Authority issued a series of new and revised circulars regarding proper management and corporate responsibility by financial service providers.

Following the Financial Action Task Force’s announcements, the Israel Money Laundering and Terror Financing Prohibition Authority published a list of countries and jurisdictions at high risk of money laundering, terror financing, and proliferation financing.

A new trend that offers potential traders trading experience is challenging regulations and raising complex legal questions about the existence of a “trading platform” and the need for an investment advice or portfolio management license.

The Israel Securities Authority is tightening enforcement on companies, especially in the cryptographic assets sector, and is scrutinizing companies’ anti-money laundering procedures and policies and their implementation.

Under MiCA, a critical aspect for non-EU crypto firms is the reverse solicitation exemption. This rule allows firms from outside the EU to offer crypto-asset services to EU clients without needing MiCA authorization.

In a paradoxical twist, the Israel Securities Authority also monitors unsupervised entities, to prevent them from exceeding their operational parameters without a license. Consequently, the ISA possesses the power to request documents and information from these entities, emphasizing the importance of responding honestly and comprehensively to such demands.

Small and medium-sized corporations are a central part of the Israeli economy’s growth engine and are considered major contributors to employment growth. The Israel Securities Authority is seeking to assist these businesses in diversifying their funding sources.

The new rules will require managers of large hedge funds to disclose additional information about their activities and strategies and provide more detail about their investments, including the countries and industries in which they are invested, leverage exposures, and more. As expected, fund managers are objecting, arguing that the new requirements will lead to superfluous information overload.

The United States, the European Union, and other countries have been imposing economic sanctions on Israel for quite some time. The recent sanctions imposed on Israeli settlers suspected or convicted of committing violence against Palestinians may be a harbinger of a broad regime of sanctions that may affect business activities in Israel.

The SEC approval has aroused considerable excitement, especially among people in the crypto and bitcoin industry. However, these are approvals of specific applications and not across-the-board approvals, and the SEC still considers this an unstable sector requiring investors to remain cautious.

The Israel Securities Authority imposes supervisory obligations on foreign brokers with regard to the activities of their marketers in Israel.

The SEC is taking a regulation by enforcement stance toward NFTs and is creating legal uncertainty in the field. Will the Israel Securities Authority follow suit?

The Israel Securities Authority has announced several reliefs due to Operation Swords of Iron, mainly the postponement and extension of deadlines.

Commercial information or intentions disclosed in public companies’ public statements might expose them to investigations or sanctions by the Israel Competition Authority. The tension between the reporting obligation and the desire to maintain a competitive market will be resolved only through clear guidelines issued by the regulatory authorities.

The Israeli Privacy Protection Authority recently published a draft directive that imposes the responsibility for fulfilling certain obligations on the board of directors, including the obligation to appoint an officer responsible for compliance with the Privacy Protection Regulations

After considering public comments, the Israel Securities Authority is promulgating a revised draft bill seeking to regulate the field of digital assets.

Regulation by enforcement is designing tests to ascertain which cryptographic assets fall under the definition of “security” in the wake of the XRP crypto token court ruling.

The number of companies with a decentralized ownership structure, i.e., with no controlling shareholder, has been rising in recent years, as has their share of the capital traded on the Tel Aviv Stock Exchange. The recently proposed amendment to the Israeli Companies Law aims to revise the corporate governance regulations specifically applicable to such companies.