ISA Issues Draft Rules on Licensing Exemptions for Payment Services

Recently, the Israel Securities Authority (ISA) published draft rules regulating entities’ notice of exemption from the obligation to obtain a license to provide payment or payment initiation services.

The Regulation of Payment Services and Payment Initiation Law came into effect in June 2024, which obligates payment service-providers to obtain a license from the ISA, while the Regulation of Payment Services and Payment Initiation Regulations (Exemption from the Licensing Obligation) of 2024 (“the Exemption Regulations”) grant an exemption from the licensing obligation to entities who meet several criteria, inter alia, low volumes of activity.

The purposes of the draft rules is to regulate how entities that are exempt from the licensing obligation must submit notice to the ISA. These rules focus primarily on practical and technical requirements and do not impose heavy costs or new obligations beyond those already prescribed in the law.

Highlights of the draft rules

1. Obligation to report to the ISA: exempt entities will be obligated to submit an orderly notice containing basic details, such as the company’s name, contact details, the type of payment services being provided and an affidavit certifying compliance with the conditions prescribed in the Exemption Regulations.
2. Obligation to update details: exempt entities will be obligated to report any changes to their details to the ISA.
3. Supervision and ensuring compliance with the law: the purposes of the draft rules are to enable the ISA to supervise activities in the payment services market, to prevent statutory violations and to encourage competition in the payment services market.

Exempt entities must report to the ISA using a designated form that will be published on the ISA’s website.

In light of the publication of the draft rules, we recommend that entities providing payment services should examine the applicability of the Exemption Regulations to their activities and, if they are eligible for one of the exemptions, they should prepare to submit their notices to the ISA.

Effective date of the rules: the rules are expected to come into effect within 7 days of their publication in the Official Gazette. Entities that provided payment services prior to the publication of the rules will be obligated to submit notice within 30 days of the publication date of the rules in the Official Gazette.

Comments on the draft rules: Comments and responses to the draft rules may be submitted until February 2, 2025.