Important Updates on Israeli Money Market Reform

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

Final Directive on Investment Advice or Marketing for 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. The key revisions incorporated in the final directive, compared with the draft published in July, are as follows:

• The draft directive required service providers to money market mutual funds to define their target customer groups. This obligation was eliminated from the final directive.
• The final directive adds an obligation: service providers must clarify to customers that the expected return reported by the fund manager will be communicated immediately before each fixed date and therefore relates solely to that date.
• The draft directive stated that service providers must explain to customers that their holdings of fund units are automatically renewed until they issue redemption instructions. The final directive clarifies that this explanation must be explicit, emphasizing the importance the ISA attributes to it.
• Disclosure of conflicts of interest: The provisions of the draft rules on conflicts of interest were incorporated into 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 other entities also manage money market mutual funds. 
• Quarterly report to the ISA: The final directive makes specific changes to the information to be included in the quarterly report to the ISA. The principal change is that service providers are now required to report the number of referrals they make to a particular person. 
• The ISA published a revised draft regarding the obligation to notify it of an intention to engage in investment advice or marketing in relation to a money market mutual fund. No material changes have been made to this draft, which has not yet been finalized.

Click here for our previous article on this topic or to read more updates in the field of financial regulation.