Client updates / Capital Markets

The Bank of Israel is proposing to regulate the provision of services to licensed cryptocurrency service-providers so that banks will not be able to sweepingly refuse to provide service and will have to formulate a risk management policy.

For the first time, companies providing virtual currency services will be required to comply with Israeli anti-money laundering provisions. This follows an amendment to the Prohibition of Money Laundering Order that recently came into effect. The amendment will apply to financial asset service providers obligated to hold a license under the Control of Financial Services Law.

While Israel’s banks are in no hurry to accept the blockchain industry and are avidly trying to keep their distance from cryptocurrencies, this is not the case elsewhere.

Recently, the major global securities, derivatives and financial trade associations sent a joint letter to the Bank for International Settlements (BIS), which develops banking supervision standards and criteria, to adopt regulation that will enable their involvement in the crypto asset sector.

Dozens of motions were filed in recent weeks to certify class actions against some of the most well-known and leading publicly traded companies and reporting corporations in Israel. These motions to certify class actions are similar in nature (apart from the different defendants) and most were filed by the same plaintiffs-petitioners and through the same attorneys.

A wave of IPOs continues to flood the market, prompting the Israel Securities Authority to publish a new staff position paper discussing three key topics.

The Tel Aviv District Court recently handed down a ruling in the Ceragon Networks case. The ruling states that dual-listed companies may face exposure to lawsuits based on the liability rules under Israeli law.

Over the past year, raising capital through SPACs has become a hot trend on Wall Street. The Israel Securities Authority recently published the conditions and principles for SPACs to launch IPOs.

In light of global capital market investors’ growing interest in the topic of responsible investments, the Israel Securities Authority recently published a proposed outline for corporate responsibility and ESG risk disclosures.

In recent weeks, the Israeli Ministry of Justice published a memorandum proposing an amendment to the Companies Law, focusing on the corporate governance regime in public companies without a controlling shareholder.

The Tel Aviv District Court (Economic Department) has restored certainty to directors in relation to the profit test for dividend distributions. The court ruled that the profit test is a retroactive technical test, unless the directors are aware of a major event that could materially change the company’s accounting position.

The Israel Securities Authority recently established guidelines on when a cryptographic currency (token) is considered a security. The ISA determined that Kirobo tokens meet the definition of a security. This is primarily because the The Israel Securities believes investors would intend to purchase the tokens for financial purposes. In addition, these investors would anticipate their holdings to go up in value.

The Israel Securities Authority (ISA) has announced that, temporarily, it will not initiate or recommend taking enforcement measures against corporations licensed in portfolio management, investment advising, and investment marketing that have not fulfilled professional liability insurance requirements.

With the goal of expanding the public’s investment options, the Israel Securities Authority published a first draft of a document for public comments on the core characteristics of two new financial products: alternative mutual funds of the hedge fund type and hedged mutual funds of funds.

The Israel Securities Authority recently published a staff position on situations it believes indicate fraudulent securities trading and which justify opening a criminal investigation.

The Israel Securities Authority will soon require public companies to disclose details about independent committees tasked with overseeing transactions with controlling shareholders. The staff position was put together due to the increased need for supervision and oversight of decision-making processes in transactions between public companies and their controlling shareholders.

For the first time, the Israel Securities Authority has published Sentencing Guidelines for Administrative Procedures which contain the considerations guiding its determination of sanctions for individual violators and corporations in an administrative procedure.

The Israeli Securities Authority has announced that distribution entities now may be liable for the contents of a prospectus. In a staff position paper published in late July, the ISA changed the rules of the game in the underwriting field by determining that a distributor, or an entity associated with a distributor, that purchases securities during an issuance and sells them within a short period of time (six months or less) shall be viewed by the ISA as an underwriter and shall be liable for the prospectus.

The Israel Securities Authority announced a new relief for public companies regarding directors’ and officers’ liability insurance. This relief will enable companies to include in remuneration policies only the scope of the insurance coverage, without the other parameters required to date.

Although Israel is a world leader in the fintech field, companies operating in this area face many regulatory challenges. A newly published legal memorandum aims to enable the creation of a “sandbox”, with inspiration from various programs already implemented in Japan, Australia, and Singapore. The goal is to establish a unique experimental environment, a “regulatory sandbox,” where regulatory relief is granted to companies who choose to participate in the program.

As part of a broad change led by the Ministry of Finance to increase competition in the banking and financial services market, a memorandum for the Provision of Financial Information Services Law was recently published for public comments.