chapter a: interpretation [amendments: 1997 (amendment 2 ... · investment portfolio management...

The following translation is intended solely for the convenience of the reader. This translation has no legal status and although every effort has been made to ensure its accuracy, the ISA does not assume any responsibility whatsoever as to its accuracy and is not bound by its contents. Only the original Hebrew text is binding and reader is advised to consult the authoritative Hebrew text in all matters which may affect them.

Regulation of Investment Advising, Investment Marketing and Investment Portfolio Management Law, 19951

Chapter A: Interpretation

Definitions [Amendments: 1997 (Amendment 2), 2004, 2005 (Amendment 2), (Amendment 4), 2010, 2010 (Amendment 2), 2011)

1. In this statute – “Foreign stock exchange” – a stock exchange that has received authorization from the party that is empowered by law to grant such authorization, in the country in which the stock exchange operates.

1 Sefer HaHukkim (Book of Laws), 1539, 5755 (10.8.1995), p. 416. Amendments: Sefer HaHukkim (Book of Laws), 1599, 5756 (21.8.1996), p. 379; Sefer HaHukkim (Book of Laws), 1604, 5757 (18.12.1996), p. 10; Sefer HaHukkim (Book of Laws), 1614, 5757 (13.3.1997), (Amendment 2) p. 80; Sefer HaHukkim (Book of Laws), 1671, 5758 (30.6.1998), p. 250; Sefer HaHukkim (Book of Laws), 1823, 5762 (15.1.2002), p.98; Sefer HaHukkim (Book of Laws), 1955, 5764 (10.8.2004), p.498; Sefer HaHukkim (Book of Laws) 1965, 5765 (15.12.2004), p.41, (effective date- 14.3.2005, as specified in notice published in Yalkut Pirsumim (Publications Register) 5381, 2006, p. 2058); Sefer HaHukkim (Book of Laws), 2006, 5765 (22.6.2005), p. 504 (Amendment 2) (See effective date provisions and transition provisions in sections 24 and 25 of the Amendment, and the amendment thereof in Sefer HaHukkim (Book of Laws) 2229, 5770, p. 379) Sefer HaHukkim (Book of Laws), 2020, 5765 (8.8.2005), p. 745, (Amendment 3); Sefer HaHukkim (Book of Laws), 2024, 5765 (10.8.2005), p. 840 (including change of name) (Amendment 4) (See effective date provisions, transition provisions and temporary provisions in sections 8 and 9 of the Law to Increase Competition and Reduce Concentration and Conflicts of Interest in the Israel Capital Market (Legislative Amendments) – 2005); Sefer HaHukkim (Book of Laws), 2189, 5769 (16.11.2008), p. 75; Sefer HaHukkim (Book of Laws), 2204, 5769 (27.7.2009), p. 286, (Amendment 2); Sefer HaHukkim (Book of Laws), 2209, 5770 (16.2.2010), p. 370; Sefer HaHukkim (Book of Laws), 2232, 5770 (3.3.2010), p. 409, (Amendment 2); Sefer HaHukkim (Book of Laws), 2253, 5770 (27.7.2010), p. 618, (Amendment 3); Sefer HaHukkim (Book of Laws), 2274, 5771 (27.2.2011), p. 239; Sefer HaHukkim (Book of Laws), 2280, 5771 (10.3.2011), p. 380, (Amendment 2). Sefer HaHukkim (Book of Laws), 2320, 5771 (16.11.2011), p. 12.


Original Hebrew version provided by "Dinim Veod" - Legal database – Halachot Publishing

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“Foreign bank” – a corporation incorporated in a foreign country regarding which all of the following conditions are met: (1) it is engaged in activity which, if carried out in Israel, would require a banking license pursuant to the Banking (Licensing) Law; (2) it has received authorization, from the party that is empowered by law to grant such authorization, in the foreign country, to engage in activities described in paragraph (1), and is under the supervision of the party authorized for this purpose in that country; “Licensee” – a holder of an adviser’s license, a marketing license or a portfolio management license, which has been granted pursuant to this law; “Institutional body” – a management company, fund manager or insurer; “Immediate report” – (deleted). “Offense” – an offense under any of the laws listed below, other than an offense the penalty for which is a fine only: this law, the Provident Funds Control Law; the Pension Counseling and Marketing Law; the Securities Law, the Joint Investments Law; the Companies Ordinance; the Banking (Licensing) Law; the Banking Ordinance, 1941; the Banking (Customer Service) Law, 1981; the Insurance Business Control Law, 1981; the Currency Control Law, 1978; the Income Tax Ordinance; the Value Added Tax Law, 1975; the Customs Ordinance, 1991; the Trade Tariffs Law, 1991: the Prohibition of Money Laundering Law, 2000; or any other offense which due to its nature, severity or circumstances a person who has committed such an offense is not fit to be a licensee; “The ISA” – the Israel Securities Authority, which was established pursuant to the Securities Law; “Underwriting commitment” – as defined in the Securities Law – 1968; “Connection” of a person to a financial asset – any of the following:

(1) The financial asset is managed by such person or is offered or issued by such person;

(2) Such person, or another person acting on his behalf or in his name, is entitled, directly or indirectly, to a benefit - other than the reimbursement of a commission or distribution fee, as described in sections 17(b)(3) through (5) - which does not come from the purchaser or holder of the financial asset, in connection with performing a transaction involving the financial asset or in connection with the continued holding thereof; for the purpose of this definition the word “person” shall include a person controlling or controlled by one of the above, an office holder in any of these, a party employed by any of these, or a party that employs any of these.

“Stock exchange member” – as defined in section 50A of the Securities Law; “Company” – as defined in the Companies Ordinance;



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“Banking (Licensing) Law” – the Banking (Licensing) Law -1981; “Companies Law” – the Companies Law – 1999; “Pension Counseling and Marketing Law” – the Control of Financial Services (Pension Counseling and Marketing and Pension Clearing System) Law -2005; “Joint Investments Law” – the Joint Investments Trust Law - 1994; “Penal Code” – the Penal Code - 1977; “Securities Law” – the Securities Law - 1968; “Provident Funds Control Law” – the Control of Financial Services (Provident Funds) Law - 2005; “Underwriter” – a party that has made an underwriting commitment “Investment adviser” or “adviser” – a party engaged in investment advising; “Investment advising” – providing advice to others regarding the advisability of an investment, holding, purchase or sale of securities or financial assets; for this purpose, the word “advising” shall refer to either direct or indirect advising, including through publications, circulars, opinions, mail, facsimile transmission or by any other means, excluding publication by the State or by a corporation carrying out a statutory function, in the framework of its function; “Qualified client” – a client who was included among those listed in the First Schedule and regarding whom the conditions listed in the Schedule have been met, at the time the business relationship regarding the provision of services was established. ; “Insurer” and “insurance agent” – as defined in the Control of Financial Services Law (Insurance) -1981; “Structured product” – an investment, either in a deposit or in another form, the yield from which or the risk involved in which is determined by a formula based on changes in one or more of the following: (1) The index or a number of indices; (2) The price of a security or of a number of securities; (3) The price of a commodity or of a number of commodities; (4) The price of options or of futures contracts; (5) An interest rate or the differences between interest rates; (6) An exchange rate or the differences between exchange rates;



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The term “structured product” does not include an investment that unconditionally guarantees the repayment of the principal, with the changes resulting from paragraphs (1) or (2) below, if stipulated in the terms of the investment, and that unconditionally guarantees the payment described in sub-section (3) below, if so stipulated, provided that if a choice is given between two or more of the following, then the highest amount will be paid: (1) Index differentials, other than related to a securities index; (2) Currency exchange rate differentials; (3) Fixed or variable interest; The Minister of Finance, in consultation with the ISA, and with the approval of the Knesset Finance Committee, may establish that, notwithstanding the above, certain types of investments will be included in this definition or will be excluded therefrom; “Index products” – index linked notes, commodity certificates, or reverse certificates or covered warrants, as defined in the stock exchange by-laws, and any other index product as such is defined in the stock exchange by-laws, as specified by the Minister of Finance, in consultation with the ISA and with the approval of the Knesset Finance Committee. “Fund manager” – as defined in Section 4 of the Joint Investments Law; “Investment marketing agent” or “marketing agent” – a party engaged in marketing investments; “Investment portfolio manager” or “portfolio manager” – a party engaged in investment portfolio management; “Foreign service providers register” – as defined in Part C of Chapter B-1; “Blind trust” – investment portfolios that are managed for a client who is not entitled to issue instructions or directions regarding the purchase, holding or sale, on his behalf, of securities or financial assets; “Office Holder” – as defined in the Companies Law; “Investment portfolio management” – executing transactions at the portfolio manager’s discretion, for the accounts of others; “Securities”2 – as defined in Section 1 of the Securities Law, except for securities that are not listed for trading on the stock exchange and index products including government-issued securities and foreign securities. Or as determined by the Minister of Finance in consultation with the ISA and with the approval of the Knesset Finance Committee;

2 Regarding an investment adviser who properly held an interest in a company that issues exchange-traded notes prior to 1 June 2010, the words “index products” will not, through 10 August 2013, be considered to be part of the definitions of “securities” and “financial assets.”



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“Foreign securities” – securities that are listed for trading on a stock exchange which is not in Israel, or on a regulated market which is not in Israel; “Financial assets” – units, as defined in the Joint Investments Law, shares or units in a fund which is registered outside of Israel, options, futures contracts, structured products, index products and supplementary training funds. Or as determined by the Minister of Finance, in consultation with the ISA and with the approval of the Knesset Finance Committee; “Transaction” – a transaction involving securities or financial assets; “Companies Ordinance” – the Companies Ordinance (New Version) – 1983; “Investment marketing” – advising others regarding the advisability of an investment, holding, purchase or sale of securities or financial assets, if the party providing the advice has a connection to the financial asset; for this purpose the term “advising” shall be as defined in the definition of “investment advising”; “Services” – all or some of the following: investment advising, investment marketing or investment portfolio management; “Licensed corporation” – a corporation holding a license granted pursuant to this law; “Affiliated corporation” – a corporation which is affiliated to another is a corporation regarding which any one of the following conditions is met: (1) It controls the other corporation; (2) It is controlled by the other corporation; (3) Another person has control of such affiliated corporation and the licensed

corporation;

“Savings scheme” – a savings scheme which has received the approval of the Minister of Finance and of the Knesset Finance Committee pursuant to the Encouragement of Savings, Income Tax Discounts and Loan Guarantees Law – 1956; “Index linked notes” – (deleted); “Stock exchange by-laws” – as defined in Section 46 of the Securities Law; “Bank”, “foreign bank” and “Banking Corporation” – as defined in the Banking (Licensing) Law; “Management Company” and “advanced training fund” – as defined in the Provident Funds Control Law;



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“Family member,” “principal shareholder,” “equity,” “misleading item,” “control,” “stock exchange,” “holding” and “purchase” – as defined in section 1 of the Securities Law; “Option,” “futures contract” – as defined in section 164(b) of the Joint Investments Law; “Partnership,” and “limited partner” – as defined in the Partnership Ordinance [New Version] – 1975.

Chapter B: Licensing Requirement

Licensing requirement [Amended 2005 (Amendment 4), 2010]

2. (a) Investment advising may only be engaged in by a licensed adviser; an individual holding an adviser's license may engage in investment advising as an individual or as the employee of a company that holds an adviser’s license, or as the employee of a licensed portfolio manager company which is also engaged in advising, or as an employee of or partner in a partnership that holds an adviser’s license.

(b) A person shall not engage in portfolio management unless he is a licensed

portfolio manager, and if the person is an individual, he holds a license and works for a licensed investment portfolio manager company.

(b1) A person shall not engage in investment marketing unless he is a licensed

marketing agent; an individual who is a licensed marketing agent may engage in investment marketing either as an individual or as the employee of a licensed marketing agent company, or as an employee of a licensed portfolio management company which engages in marketing, or as an employee of or partner in a licensed marketing agent partnership.

(b2) Notwithstanding the provisions of sub-section (b1), an institutional body, even if

it does not have a marketing license, may engage in the investment marketing with respect to financial assets that it manages or which it has offered or issued and with respect to these only, and all persons engaged in investment marketing in the name of such an institutional body will be required to be licensed marketing agents. If the institutional body is a fund manager – all such persons will be required to be either a licensed marketing agent or a licensed portfolio manager. The provisions of Chapters C and of Chapters E through I that are applicable to a licensed marketing agent will apply to an institutional body which is engaged in investment marketing pursuant to this sub-section.

(c) Notwithstanding the provisions of sub-sections (a) and (b1), a licensed portfolio

manager may also engage either in investment advising or in investment marketing, but not in both; however, if the licensed portfolio manager is an affiliated corporation of an institutional body or of a licensed marketing agent, it



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may not engage in investment advising. The provisions of this law that are applicable to a licensed investment adviser will apply to a licensed portfolio manager who engages in investment advising other than in the context of portfolio management. The provisions of this law that are applicable to a licensed marketing agent will apply to a licensed portfolio manager who engages in investment marketing.

(d) The provisions of sub-sections (a) through (b1) will not serve to prevent –

(1) a party serving as an intern prior to receiving a license pursuant to this law from working under the supervision of a licensee in a manner and under conditions to be established in the regulations, provided that such party does not provide investment advice or engage in investment marketing or manage investment portfolios;

(2) a party who is not a licensee from working for a licensee, provided that such a person does not provide investment advice or engage in investment marketing or manage investment portfolios;

(3) a party who is a licensee as defined in the Pension Counseling and Marketing

Law from engaging in pension counseling or pension marketing, whichever is relevant, as defined in the said law, with respect to a pension product as defined in that law, which is also a financial asset.

Occupations that do not require a license [Amended: 1997 (Amendment 2), 2005 (Amendment 2), 2010]

3. (a) The following occupations do not require a license pursuant to this law:

(1) (Deleted);

(2) (Deleted);

(3) Investment advising or investment portfolio management for no more than five clients during the course of a calendar year, by an individual who does not engage in investment advising or investment portfolio management in the framework of a licensed corporation or a banking corporation;

(4) Investment advising through the media;

(5) Investment advising or investment marketing which the person

provides by virtue of his membership in an investment committee or a board of directors of a corporation, and which is provided only to that corporation in the course of carrying out his function as a member of the committee or board of directors, whichever is relevant;



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(6) Management of a corporation’s investment portfolios, by a party doing

so as part of carrying out his function in that corporation or in a corporation which is affiliated with that corporation.

(7) Investment advising or investment portfolio management for a family

member;

(8) Investment advising by a corporation whose main occupation is the appraisal of corporations, provided that it does not engage in other investment advising or in portfolio management;

(9) Investment advising or investment portfolio management by an

accountant, attorney or tax adviser, when such activities accompany a service provided to a client within the field of their respective professions;

(10) Investment portfolio management by a party that has been appointed

by a court order or by the order of a competent tribunal to act with respect to the assets of another party, in the course of carrying out such duties;

(11) Investment advising, investment marketing or investment portfolio

management, for a qualified client.

(a1) Notwithstanding the provisions of paragraph (3) of sub-section (a), a party

who, without having a license pursuant to this law, engages in investment advising or investment portfolio management as described in that paragraph –

(1) will be subject to the provisions of Chapters C or D, whichever is

relevant, as if such party did have a license;

(2) will notify the client to whom he provides investment advice or on behalf of whom he manages an investment portfolio, prior to entering into a business relationship with such client, that he is not a licensee, and if he was a licensee in the past, he will also indicate the circumstances due to which he ceased to be a licensee, and will also indicate in such notice whether he carries the insurance required of a licensee pursuant to the provisions of this law;

(a2) Notwithstanding the provisions of paragraph (11) of sub-section (a), a

party which is engaged in investment advising, investment marketing or investment portfolio management as described in that paragraph, without having a license pursuant to this law –



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(1) will be subject to the provisions of Chapter C, excluding sections 12,

13, 14, 16 and 18, as if such party did have a license – and with respect to a party who is engaged in investment portfolio management, such party will be subject to the provisions of Chapter D as well, excluding section 24; the Minister of Finance, in consultation with the ISA and with the approval of the Knesset Finance Committee, may establish an exemption from further provisions regarding all or some of the said services, which are provided with respect to all qualified clients or with respect to a particular category of such clients;

(2) will notify the client to whom he provides services, prior to his entering into a business relationship with the client, that he is not a licensee, and if was a licensee in the past, he will also indicate the circumstances due to which he ceased to be a licensee, and will also indicate in such notice whether he carries the insurance required of a licensee pursuant to the provisions of this law;

(a3) Notwithstanding the provisions of paragraph (5) of sub-section (a), a party

which is engaged in investment marketing as stated in that paragraph, without having a license pursuant to this law, will notify the investment committee or the board of directors, whichever is relevant, of his connection to the financial asset and of the nature and details of that connection.

(b) Notwithstanding the provisions of sub-section (a), investment advising

which is provided through the media, either by a licensee or by a party that is not a licensee, will include a notice from the party providing the advice as to whether or not he has a personal interest in the matter, and a notice that the advice provided does not serve as a substitute for advice which takes into consideration the details and special needs of any person.

(c) The provisions of sections 12, 13, 14, 16, 18, 24 and 25, whichever are

relevant, will not apply to investment advising, investment marketing or investment portfolio management carried out by a licensee for a qualified client; the Minister of Finance, in consultation with the ISA and with the approval of the Knesset Finance Committee, may establish an exemption from additional provisions regarding all or some of the said services, which are provided with respect to all qualified clients or with respect to a particular category of such clients;

Offer to provide services (Amended 2010)

3a. No offer may be made for the provision of services unless the service is provided by a party holding an appropriate license pursuant to this law, or by a party who is entitled to provide such service even without a license, pursuant to the provisions of sections 3 or 9



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or Chapter B-1; in this subsection the term “making of an offer” shall refer to the making of an offer either directly or indirectly, including through advertising, circulars, opinions, by mail, facsimile, telephone, or in any other manner.

Activity which is prohibited for a licensee [Amended 1997 (Amendment 2), 2005 (Amendment 2), (Amendment 4), 2010, 2010 (Amendment 2)]

4. (a) An individual licensee shall not hold or purchase securities or units - as such are defined in the Joint Investments Law - for himself.

(b) An individual who is an investment portfolio manager may not manage investment portfolios for a member of his family or for a corporation of which either he or a member of his family is a controlling shareholder.

(c) The prohibition described in sub-sections (a) or (b) will not apply to the

following:

(1) Securities issued by the State; (2) Securities issued by a corporation employing the licensee or his spouse

(referred to hereinafter in this sub-section and in sub-sections (2a) and (2b) as “the licensee”) or which were issued by a corporation controlling such a corporation and which were offered to the licensee within the framework of an employee benefit plan pursuant to section 15(b)(1) or (2) of the Securities Law, provided that the licensee places them in a blind trust within seven days from the date of their purchase, and if there are restrictions that are imposed on the sale of the securities pursuant to section 15C(a)(1) of the Securities Law –within seven days from the date on which the restrictions period established pursuant to that section terminates. If, after the purchase of securities as described in this section, the licensee holds only the said securities, either alone or together with securities as described in paragraphs (1), (2a), (2b), (3), (4), (6) or (7), the licensee will not be required to place them in a blind trust, and the provisions of section 52I (b) of the Securities Law, will apply to the sale of such securities mutatis mutandi.

(2a) Securities of a corporation held by a licensee at the time of the initial public offering, and for the purpose of this paragraph-

(a) The provisions of paragraph (2) will apply, mutatis mutandi, to the

placement of the securities, as stated, in a blind trust; if the licensee holds such securities other than in a blind trust, the provisions of section 15 will apply to advising or executing a transaction with respect to the said securities;

(b) Notwithstanding the provisions of sub-paragraph (a), if the licensee is an interested party and an employee or an interested party and an



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office holder in the said corporation, he is not required to place the securities in a blind trust and may execute transactions on his own behalf regarding the said securities; in such a case, the licensee may not give advice and may not execute transactions on behalf of his clients regarding the securities of the said corporation, and he must notify all his clients immediately of the fact that he is an interested party in the said corporation and that he is prohibited from advising or executing any transactions on their behalf with respect to such securities.

(c) The provisions of this paragraph will apply with respect to the holding

of securities in a single corporation only, or in a corporation affiliated with such a corporation;

(2b) Securities of a corporation that were held by a licensee prior to his having

obtained a license, provided that the licensee had, within seven days from the date of his having received the license, placed the securities in a blind trust, and if restrictions apply to the sale of the securities pursuant to section 15c(a) of the Securities Law – such securities must have been placed in a blind trust within seven days from the date on which the restrictions period established pursuant to that section terminated. If the licensee is an interested party and employee or an interested party and office holder in the said corporation, he is not required to place the securities in a blind trust and may execute transactions on his own behalf regarding the said securities; in such a case, the licensee may not provide advice and may not execute transactions on behalf of his clients regarding the securities of the said corporation, and he must notify all his clients immediately regarding the fact that he is an interested party in the said corporation and that he is prohibited from providing advice or from executing transactions on their behalf with respect to such securities. The provisions of this paragraph will apply with respect to the holding of securities in a single corporation only, or in a corporation affiliated with the corporation.

(3) Units in an open fund` nevertheless, the provisions of this paragraph shall

not apply to the purchase of units in an open fund by a licensee who is one of the parties listed below, if after the said purchase of the units he holds no more than twenty-five percent of the total units in the fund at the end of the day preceding the date of the purchase: (1) A controlling shareholder of the fund manager;

(2) A director, member of the investment committee or employee of the

fund manager or of a company that controls the fund manager or which is controlled by such a company;



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(3a) Shares or units in a fund which is registered outside of Israel; (4) Investments in supplementary training funds; (5) Securities purchased by a trustee of a blind trust, and which are held for an

individual licensee by such a trustee; (6) Foreign securities issued by a corporation whose securities are not listed

for trading on a stock exchange, and the value of whose securities are listed for trading is higher than the New Israeli Shekel equivalent of two hundred million United States dollars, or than a different amount which has been determined by the Minister of Finance in an order, at the recommendation of the ISA or in consultation with it, and with the approval of the Knesset Finance Committee; for this purpose -

“Foreign securities” – does not include shares or units of a fund which is registered outside of Israel; “Value listed for trading” – the amount of foreign securities listed for trading, issued by the corporation in the place in which they have been purchased, multiplied by the price set for such securities at the end of the trading day preceding the trading day on which they were purchased;

(7) Index products.

Application for a license [Amended 2005 (Amendment 4)]

5. (a) A party wishing to engage in investment portfolio management, investment marketing or investment advising must submit an application to the ISA to receive an appropriate license.

(b) - In an application to receive a license as described in sub-section (a), the

applicant shall include details, documents and reports as decided by the Minister of Finance in consultation with the ISA.

(c) The ISA may require additional details, documents or reports from the applicant,

if it appears to be necessary for the purpose of reaching a decision concerning the application.

The ISA’s decision concerning an application

6. The ISA will grant a license to the applicant if it decides that such action is appropriate; if the ISA decides that a license should hold certain conditions or that it should not be granted, it will notify the applicant of its reasons for the decision and will give the applicant an opportunity to bring his claims regarding the decision before the ISA, prior to its issuance.



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Conditions for granting an adviser’s license or a marketing license [Amended 2002, 2005 (Amendment 2), 2005 (Amendment 3), (Amendment 4), 2010, 2010 (Amendment 2), 2011]

7. (a) The ISA shall grant an adviser’s license or a marketing license, accordingly, to an individual applicant, if the applicant is found to meet the following conditions: (1) He is an adult;

(2) He is an Israeli resident or has proved that although he is not an Israeli

resident, he is able to comply with all the provisions established in this law, and that they can be enforced with respect to him;

(3) He has not been convicted of an offense;

(4) He has passed the required examinations, the topics and procedures of which are specified in the regulations;

(5) He has completed an internship for a period and in accordance with

procedures as specified in the regulations;

(6) (Deleted). (b) The ISA will grant an adviser’s or marketing license, whichever is relevant, to an

applicant which is a partnership, if it finds that the partnership meets the following conditions:

(1) The partners are licensees;

(2) The partnership has undertaken that anyone who engages in investment

advising or investment marketing, whichever is relevant, in its name, will be an employee of the partnership or a partner thereof, and will hold an appropriate license, or that at least one employee or partner will be a holder of an appropriate license and the other parties acting in its name will be foreign service providers who are authorized to engage in investment advising or investment marketing pursuant to the provisions of Section 10B;

(3) The partnership is in compliance with the insurance conditions and amounts

specified in the regulations;

(4) The partnership has undertaken that it will not allow anyone to serve as an office holder in the partnership whom the partnership knows to have been convicted of an offense, or whom it knows to be prohibited from serving as an office holder because of enforcement measures described in section 52DDD of the Securities Law, which were imposed on such person pursuant to Chapter 8-D of the Securities Law, pursuant to Chapter 7-B of this Law, or



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pursuant to Chapter 10-A of the Joint Investments Law – for the period of time during which such prohibition applies;

(c) The ISA will grant an adviser or marketing license, whichever is relevant, to an applicant which is a company, if it finds that the company meets the following conditions:

(1) The company has undertaken that anyone who engages in investment advising

or investment marketing, as relevant, in its name, will be an employee of the company and will hold an appropriate license, or that at least one employee will be a holder of an appropriate license and the other parties acting in its name will be foreign service providers who are authorized to engage in investment advising or investment marketing pursuant to the provisions of Section 10b;

(2) The company has undertaken that no person will be allowed to serve as an office holder in the company whom the company knows to have been convicted of an offense or whom it knows to be prohibited from serving as an office holder because of enforcement measures described in section 52DDD of the Securities Law which were imposed on such person pursuant to Chapter 8-D of the Securities Law, pursuant to Chapter 7-B of this Law, or pursuant to Chapter 10-A of the Joint Investments Law – for the period of time during which such prohibition applies;

(3) The company has capital in an amount not less than the amount prescribed in

the regulations;

(4) The company has insurance ,or bank guarantees, or a deposit or securities, in the amounts, rates and conditions specified in the regulations;

(5) The company does not engage in underwriting. (c1) The ISA will not grant an adviser’s license to an applicant, even if the applicant

complies with the conditions listed in subsections (a) through (c), if the applicant is one of the following:

(1) A licensed marketing agent or an institutional body; (2) A pension counselor as defined in the Pension Counseling and Marketing

Law; (3) An insurance agent; (4) A party that controls or holds more than ten percent of any type of the means

of control in any of those listed in paragraphs (1) through (3); (5) A party which is controlled by any of those listed in paragraphs (1) through

(4), however. a banking corporation which is controlled by a party that controls an institutional body or by a party which holds more than ten percent of any type of the means of control in an institutional body may engage in



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investment advising, subject to the conditions established by the ISA Chairman for the prevention of a conflicts of interest when providing advice, provided that such banking corporation will be prohibited from engaging in investment advising relating to financial assets to which the said institutional body has a connection;

(6) An office holder or a person who is employed by one of those listed in paragraphs (1) through (5);

(c2) The ISA will not grant a marketing license to an applicant, even if the applicant

complies with the conditions listed in subsections (a) through (c), if the applicant is one of the following:

(1) A licensed adviser; (2) A banking corporation, other than a bank or a foreign bank as described in

section 27i of the Banking (Registration) Law; (3) A pension counselor as defined in the Pension Counseling and Marketing

Law; (4) A party that controls any of those listed in paragraphs (1) through (3); (5) A party that is controlled by any of those listed in paragraphs (1) through (4); (6) An office holder or a person who is employed by any of those listed in

paragraphs (1) through (5);

(d) The ISA may refuse to grant an applicant an adviser’s license or a marketing license, whichever is relevant, if it believes that there are circumstances of any type whatsoever due to which it is not suitable for the applicant to serve as a licensed adviser or a licensed marketing agent considering the occupation’s requirements, and if the applicant is a corporation – it may refuse to grant such a license if such circumstances are found to exist with regard to any of the following: (1) A controlling shareholder of the applicant;

(2) An office holder in the applicant or a controlling shareholder of the applicant.

(d1) (Deleted.)

(e) Regulations regarding sub-sections (a)(4) and (5), (b)(3) and (c)(3) and (4),

whether general or with respect to certain types of applicants, will be enacted by the Minister of Finance in consultation with the ISA and with the approval of the Knesset Finance Committee.

(f) The Minister of Finance, at the recommendation of the ISA or in consultation

with it, and with the approval of the Knesset Finance Committee, may specify cases in which an applicant will be exempt from either the internship or examination requirement, or from both of them.



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Exemption from the internship and examination requirements upon the conversion of an adviser’s or marketing license [Amended 2005 (Amendment 4)] 7A. An individual licensed adviser who waives his adviser’s license and wishes to obtain a

marketing license, and an individual licensed marketing agent who waives his marketing license and wishes to obtain an adviser’s license, will be exempt from the internship and examination requirements pursuant to sections 7(a)(4) and (5), for the purpose of obtaining the desired license.

Conditions for granting a portfolio manager’s license [Amended 1997 (Amendment 2), 2002, 2005 (Amendment 2), (Amendment 3), (Amendment 4), 2010, 2010 (Amendment 2), 2011 (Amendment 2)]

8. (a) The ISA will grant a portfolio manager’s license to an individual applicant, if the applicant is found to meet the following conditions:

(1) He is an adult;

(2) He is an Israeli resident or has proved that although he is not an Israeli

resident, he is able to comply with all the provisions established in this law and that they can be enforced with respect to him;

(3) He has not been convicted of an offense;

(4) He has passed the required examinations, the topics and procedures of which are specified in the regulations;

(5) He has completed an internship for a period and in accordance with

procedures as specified in the regulations;

(6) (Deleted);

(b) The ISA will grant a portfolio manager’s license to an applicant that is a

company, if it finds that the company meets the following conditions:

(1) The company is not engaged in underwriting and is engaged only in investment portfolio management, investment advising, investment marketing, or in pension counseling or pension marketing as defined in the Pension Counseling and Marketing Law, or in the execution of transactions on the stock exchange, and in the execution of accompanying transactions required for such; for this purpose, the term “accompanying transactions” – will include investment in all types of either Israeli or foreign currency deposits, and investment in savings schemes that have been approved by the Minister of Finance and the Knesset Finance Committee pursuant to the Encouragement of Savings (Income Tax Reductions, Guarantee of State Loans) Law, 1956;



17

(2) The company has undertaken that anyone who engages in portfolio

management, investment advising or investment marketing in its name will be an employee of the company who holds an appropriate license, or that at least one employee be a licensed portfolio manager, and the other parties that are so engaged in its name will be foreign service providers who are authorized to engage in investment portfolio management, investment advising or investment marketing pursuant to the provisions of Section 10b;

(3) The company has undertaken that no person will serve as an office holder

whom the company knows to have been convicted of an offense or whom it knows to be prohibited from serving as an office holder because of enforcement measures described in section 52EEE of the Securities Law which were imposed on such person pursuant to chapter 8-D of the Securities Law, pursuant to Chapter 7-B of this Law, or pursuant to Chapter 10-A of the Joint Investments Law – for the period of time during which such prohibition applies, ;

(4) The company has capital in an amount not less than the amount prescribed in

the regulations;

(5) The company has insurance or bank guarantees, or a deposit or securities in the amounts, rates and conditions specified in the regulations;

(c) The ISA may refuse to grant an applicant a portfolio manager’s license if it

believes that there are circumstances of any type whatsoever due to which it is not suitable for the applicant to serve as a licensed adviser or a licensed marketing agent considering the occupation’s requirements, and if the applicant is a corporation – it may refuse to grant such a license if such circumstances are found to exist with regard to any of the following: (1) A controlling shareholder of the applicant for a license; (2) An office holder in the applicant or a controlling shareholder of the applicant

for a license. (c1) (Deleted); (d) Regulations regarding sub-sections (a)(4) and (5), (b)(4) and (5), either general or

with respect to certain types of applicants, will be enacted by the Minister of Finance in consultation with the ISA and with the approval of the Knesset Finance Committee.

(e) The Minister of Finance, at the recommendation of the ISA or in consultation

with it, and with the approval of the Knesset Finance Committee, may specify cases in which an applicant will be exempt from either the internship or examination requirements, or from both of them.



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Granting a license in special cases [Amended 2005 (No 2)]

8A. The ISA may grant a license pursuant to this law to an applicant who is an individual,

even if the applicant does not meet one of the conditions listed in section 7(a)(4) or (5) or in 8(a)(4) or (5), whichever is relevant, if the ISA is convinced that due to special reasons the applicant can be seen as being qualified to receive a license, as stated, taking into consideration the applicant’s education and professional experience.

Activity of a banking corporation [Amended 2005 (No 2), (Amendment 4), 2010]

9. (a) A banking corporation may not engage in portfolio management. (b) A bank, and any other banking corporation which is authorized to do so pursuant

to the Banking (Licensing) Law (), may engage in investment advising without obtaining a license pursuant to this law, provided that none of the conditions listed in section 7(c1) apply to them other than the condition in paragraph (4) of that section relating to the holding by such bank or banking corporation of more than ten percent of any type of the means of control in an institutional body which is an insurer, or relating to such bank or banking corporation controlling an insurance agent in accordance with the provisions of section 11(b)(2) of the Banking (Licensing) Law; however, those engaging in investment advising on behalf of the bank or banking corporation, whichever is relevant, must be one of the following:

(1) Employees of the bank or banking corporation, who are licensed advisers; (2) Employees of the bank or banking corporation who are authorized to engage

in investment advising without a license pursuant to the provisions of section 3(a)(4) or (11);

(3) Foreign service providers who are authorized to engage in investment advising pursuant to the provisions of Section 10b.

(b1) A bank or a foreign bank as described in section 27I of the Banking (Licensing) Law may engage in investment marketing, provided that they have obtained a license pursuant to section 7, and the provisions of the law applying to a licensed marketing agent will apply to them, and those engaged in investment marketing on their behalf must be one of the following:

(1) Employees of the bank or foreign bank, who are licensed marketing agents; (2) Employees of the bank or foreign bank who are authorized to engage in

investment marketing without a license pursuant to the provisions of section 3(a)(11);

(3) Foreign service providers who are authorized to engage in investment marketing pursuant to the provisions of Section 10b.

(b2) The ISA may instruct a bank or foreign bank as described in sub-section (b1) that

all or some of the provisions that are applicable to a banking corporation pursuant



19

to this law will apply to it, instead of all or some of the provisions in that sub-section.

(c) The provisions of Chapter C and of section 25(b) that apply to a licensed adviser

will also apply to investment advising carried out by a bank or other banking corporation as described in sub-section (b).

(c1) A banking corporation, as defined in section 7(c2)(2), may not engage in

investment marketing; however, such a banking corporation and its employees who are licensed advisers or who are authorized to engage in investment advising without a license pursuant to the provisions of section 3(a)(11) may engage in investment marketing regarding structured products, options or futures contracts that are issued by the banking corporation, even if they are not licensed marketing agents, and the provisions of Chapter C and section 25(b1) that apply to licensed marketing agents will apply to such activity engaged in by them. The Minister of Finance, in consultation with the ISA and with the approval of the Knesset Finance Committee, may specify cases in which a banking corporation will be exempt from certain provisions of Chapter C or of section 25(b1).

(d) No person may serve as an office holder in a licensed corporation which is

affiliated with a banking corporation, if he also serves as an office holder or employee in the banking corporation or in another corporation which is affiliated with the banking corporation; for this purpose, the term “employee” refers to an employee who is employed by the banking corporation or by a corporation which is affiliated with it, including an employee who is on leave without pay.

(e) The Supervisor of Banks may exempt a person from the application of all or some

of the provisions of sub-section (d), if the capital of the banking corporation to which the licensed corporation is affiliated is less than an amount established by the Supervisor and published in the Official Gazette.

(f) Notwithstanding the provisions of section 2(c), a licensed portfolio management

corporation which is an affiliated corporation of a banking corporation as defined in section 7(c2)(2), may not engage in investment marketing other than as stated in sub-section (c1).

Revocation or suspension of a license [Amended 2002, 2005 (Amendment 2), (Amendment 3), (Amendment 4), 2010, 2010 (Amendment 2), 2011 (Amendment 2)]

10. (a) The ISA may revoke a license after the licensee has been given an opportunity to explain his actions, if any one of the following is true with respect to the licensee: (1) The license was granted on the basis of false information;

(2) One of the conditions for granting the license is no longer being met with

respect to the licensee;



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(3) The licensee has violated any of the conditions of the license;

(4) A court has determined that the licensee has violated a provision of this law or

of any other law relating to securities;

(5) The licensee has been declared bankrupt and has not yet been absolved as described in section 62 of the Bankruptcy Ordinance or has been declared to be legally incompetent. If the licensee is a corporation – the license may be revoked if an order of temporary dissolution has been issued against it or if an asset receiver has been appointed for it or if the corporation has decided to dissolve voluntarily.

(a1) (1) The ISA may revoke the license of a licensed corporation, after the licensee has been given an opportunity to explain its actions, if the ISA finds that circumstances listed in paragraph (4) which indicate that it is not appropriate for the licensee to serve as such (hereinafter – defective trustworthiness) are present; the presence of such circumstances will be examined regarding the following:

(a) The licensee;

(b) A controlling shareholder of the licensee;

(c) An office holder in either of those listed in sub-paragraphs (a) or (b).

(2) A panel may cancel or stipulate conditions for the license of an individual

licensee, if circumstances listed in paragraph (4) which indicate a defect in the licensee’s trustworthiness are present and the provisions of sections 52SS through 52YY of the Securities Law will apply, mutatis mutandi, to the license cancellation or stipulation process; for this purpose, the term “panel” shall mean a committee, as defined in section 38F.

(3) Notwithstanding the provisions of paragraph (1), the ISA may order that

the panel will also render a decision – in the context of a process such as is described in paragraph (2) – concerning the cancellation or stipulation of the license of a licensed corporation in whose name the individual licensee acts, if it finds that that the circumstances listed in paragraph (4) which indicate a defect both in the said individual licensee’s trustworthiness, and a defect in the trustworthiness of the corporation in whose name the individual acts.

(4) The ISA will establish a list of circumstances that indicate a defect in the

trustworthiness of a licensee or of an office holder in the licensee or of a licensee’s controlling shareholder; the list will be published on the ISA’s



21

website and will go into effect 30 days from the date of its publication, although an amendment of the list will not apply to a proceeding pursuant to this section which is pending; a notice of the list’s publication or of any amendment thereof and of the date of its entry into effect will be published in Reshumot.

(b) An individual licensee who has ceased to engage in the occupation which is the

subject of the license may ask the ISA, in writing, to have his license cancelled or suspended for a requested period of time; a licensed corporation which has ceased to engage in the occupation which is the subject of the license may ask the ISA, in writing, that its license be cancelled.

(c) (Repealed). (c1) The ISA will suspend the license of an individual licensee who is not insured as

required pursuant to the provisions of section 20c, until the required insurance is arranged.

(d) (Repealed). (e) A notice of the revocation or suspension of a license shall be published, either by

the ISA or by the licensee, as instructed by the ISA. (f) (Repealed). (g) If a party’s license has been revoked and the cause of the revocation has been

corrected, the party may ask the ISA to renew the license; the provisions of sections 7 and 8 shall apply to such renewal of the license, mutatis mutandi.

Chapter B-1: Investment Advising, Investment Marketing and Investment Portfolio

Management by a Foreign Service Provider

Part A: Definitions

Definitions (Amended 2010)

10A.3 In this Chapter – “Foreign permit” - a permit to provide services, in a foreign country, according to

the law of that country;

3 Chapter B-1 (sections 10a through 10i) will enter into effect on the day that Regulations enacted pursuant to section 10h of the law enter into effect.



22

“Foreign individual” - an individual who is not an Israeli resident, who holds a Foreign Permit;

“Foreign service provider” - a foreign individual or a foreign corporation; “Foreign corporation” - a corporation regarding which all of the following are true:

(1) It was incorporated outside of Israel; (2) The controlling party is not a resident of Israel; for this purpose the joint

holding of securities or the joint purchase thereof together with others =- shall not be considered holding with an Israeli resident;

(3) It holds a foreign permit; (4) Its activity pursuant to the foreign permit is generally carried out outside of

Israel; “Licensed corporation” - includes a bank or another banking corporation which is

authorized to engage in investment advising or in investment marketing pursuant to the Banking (Licensing) Law.

Part B: Providing services by a foreign service provider in the framework of a

licensed corporation

Providing services by a foreign service provider, in the framework of a licensed corporation (Amended 2010)

10B. (a) Notwithstanding the provisions of section 2, a foreign service provider may engage in the provision of services to the clients of a licensed corporation, even without a license pursuant to this law, if the following conditions are met, and subject to the provisions of this chapter:

(1) The foreign service provider and the licensed corporation have

entered into a written agreement for such provision of services;

(2) The foreign permit held by the foreign service provider allows the foreign service provider, to engage in the provision of services as stated in the country in which the permit was granted, and if the foreign service provider is a licensed corporation - also those employed in its name for the provision of the said services, hold such a foreign permit;

(3) The licensed corporation is authorized to provide the services to its clients on its own, pursuant to the provisions of this law;

(4) The foreign service provider and the licensed corporation are listed in the foreign service providers register, pursuant to the provisions of Part C.



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(b) Notwithstanding the provisions of sub-section (a), if the licensed

corporation is a foreign bank, the provisions of sections 10c, 10e and 10f will apply, even when the service is provided to a party who is not one of the licensed corporation’s clients, provided that they are clients of a bank that controls the licensed corporation or of a bank that is controlled by the licensed corporation or by a bank that controls it, in the foreign country, and in these sections, the phrase “client of the licensed corporation” shall mean, , “a client, as described in section 10b(b)”; in this sub-section, the phrase “foreign bank” shall mean a bank in a foreign country which has a license to act as a foreign bank in Israel, pursuant to the Banking (Licensing) Law.

The application of certain provisions to a registered foreign service provider (Amended 2010)

10C. The provisions of Chapter C, excluding section 13, as well as the provisions of

Chapter D and section 25, will apply to a foreign service provider regarding whom the conditions listed in section 10b are met (in this Part – a registered foreign service provider), mutatis mutandi, as if the foreign service provider were a licensee.

An agreement between a licensed corporation and its client (Amended 2010)

10D. in an agreement between a licensed corporation and its client, the licensed

corporation shall indicate explicitly, in addition to the provisions of section 13, the services regarding which it has entered into an agreement with a registered foreign service provider as stated in section 10b, and which will be provided by the foreign service provider pursuant to the provisions of this chapter, and the financial assets and securities regarding which the services will be provided as stated.

A licensed corporation’s civil liability for the acts of a foreign service provider (Amended 2010)

10E. Without derogating from the foreign service provider’s liability, the licensed corporation will bear civil liability for the acts of the foreign service provider with whom it has entered into an agreement for the purpose of providing services to its clients, and the provisions of this law will apply, for this purpose, to the licensed corporation as if it had provided the services to its clients by itself; for this purpose, the word “act” will include an omission.



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A licensed corporation’s duty to supervise the foreign service provider’s acts (Amended 2010, 2011)

10F. (a) A licensed corporation must supervise and do all that can be done in order to prevent the violation of the provisions listed below, by the foreign service provider with whom it has contracted for the provision of services to its clients:

(1) The provisions of section 10B;

(2) The provisions of Chapter C, excluding section 13, as well as the

provisions of Chapter D and section 25, as applied to the foreign service provider in section 10C;

(b) If the foreign service provider violates any of the provisions listed in sub-

section (a), there will be a presumption that the licensed corporation has violated its duty pursuant to the said sub-section, and it shall be subject to the penalties listed below, as relevant, unless it can prove that it did all that it could do in order to fulfill its said duty:

(1) With regard to a violation of the provisions of section 10b, as stated in

sub-section (a)(1) – a penalty as described in section 39(a);

(2) With regard to a violation of a provision listed in sub-section (a)(2) – enforcement measures pursuant to Chapter 7-B or a penalty pursuant to Chapter 8, whichever is relevant, which could have been imposed on the licensed corporation if it had violated the provision itself;

Notice to the ISA and to clients of the conclusion of a foreign service provider’s activity (Amended 2010)

10G. Should any one of the conditions listed in section 10b cease to be fulfilled, the licensed corporation will immediately notify the ISA and its clients that the activity of the foreign service provider in the framework of the licensed corporation has ended; the provisions of sections 27(f) and 27A will apply to a notice delivered pursuant to this section.

Part C: Foreign Service Providers Register

(Amended 2010)

Registration in the foreign service providers register (Amended 2010)

10H. (a) A foreign service provider and a licensed corporation who wish to be registered in the foreign service providers register pursuant to the provisions of Part B will submit an application to the ISA to be so registered; an application made pursuant to this section will include the foreign service



25

provider’s address in Israel for the purpose of serving court papers and will have the documents and confirmations proving the fulfillment of all the conditions established in section 10B attached to it, including, inter alia, the foreign permit and the agreement between the foreign service provider and the licensed corporation.

(b) The Minister of Finance, at the recommendation of the ISA or in consultation

with it, may establish provisions regarding the management of the foreign service providers register and regarding the manner of registration therein, including the details to be included in an application pursuant to sub-section (a) and the confirmations and documents to be attached to it.

(c) The ISA will register the foreign service provider, if it finds that the

conditions listed in section 10b are met with respect to the foreign service provider or the licensed corporation; the foreign service providers register will be available for review by the public and will be published on the ISA’s website.

(3) Registration in the foreign service providers register of a foreign service

provider or a licensed corporation will not constitute authentication of the details appearing in the register, or proof of the fact that the foreign service provider or the licensed corporation, whichever is relevant, is in compliance with the requirements in this law.

Removal from the foreign service providers register (Amended 2010)

10I. If the ISA finds that one of the conditions listed in section 10b is no longer

fulfilled with respect to either a foreign service provider or a licensed corporation who is registered in the foreign service providers register, it may delete such foreign service provider or licensed corporation from the foreign service providers register.

Chapter C: The Fiduciary Duty and Duty of Care of an

Investment Adviser, Investment Marketing Agent and a Portfolio Manager Fiduciary duties [Amended 2005 (Amendment 2)]

11. (a) A licensee will act for the benefit of the licensee’s clients, faithfully and diligently, and will not favor his personal interests or those of another over the benefit of his clients, and will not favor the interest of one client over that of another.

(b) A client’s consent, whether in advance, in writing or verbally, whether with

respect to a specific transaction or with respect to a type of transactions, will not exempt the licensee from the duties imposed on the him in this chapter, unless this law expressly provides otherwise.



26

Adjusting the service to the client’s needs [Amended 2005 (Amendment 4)]

12. A licensee will, to the extent possible, adjust the advice or the marketing services which he provides to his clients, or the type of transactions that the licensee carries out on their behalf, to the needs and instructions of each client, after clarifying with the client the purposes of the investment, the client’s financial condition – including the client’s securities and financial assets – and the other circumstances the knowledge of which would be required for this purpose, all to the extent that the client agrees to provide information regarding these.

Written agreement [Amended 1998, 2005 (Amendment 2) (Amendment 4)]

13. (a) The licensee shall enter into a written agreement with the client and provide him with a copy thereof, prior to commencing the provision of the service.

(b) The agreement will include the items required for the purpose of the

contractual relationship, including the following items:

(1) The client’s identifying details and information; (2) The client’s needs and instructions as specified in section 12; (3) The wage and reimbursement of expenses for which the client will be

charged and the manner in which they will be calculated; (4) A provision which states that the client may cancel the contractual

relationship with the licensee at any time; (5) A provision which indicates whether or not advice or marketing services

may be provided over the telephone; (6) A provision which states that the client is aware that the duty of

confidentiality that is imposed on the licensee is subject to his obligation to provide information as required by law;

(7) Regarding a licensee who is a stock exchange member – a provision which states that the client is aware that, , the agreement is subject to a stock exchange member’s duties in accordance with the stock exchange rules, in accordance with the Securities Law;

(8) (Deleted).

(c) An agreement between a portfolio manager and a client will also include the following:

(1) A power of attorney which specifies the scope of the authority and

discretion granted to the portfolio manager, including an indication of whether the investment portfolio will be managed as a blind trust or otherwise;

(2) Whether the manager will be permitted to obtain credit for the client and the conditions thereof, or the absence of such a possibility.

(3) Provisions regarding the types of securities and financial assets which will be included in the investment portfolio and the percentage of each



27

type in relation to the portfolio’s value, or a provision indicating that these will be determined at the portfolio manager’s discretion;

(4) A provision authorizing the manager to purchase securities, options or future contracts at a higher price than the known stock market price at the time of the purchase, as well as the authority to sell them at a lower price than the known market price at the time of the sale, or a provision specifying that the manager has no authority to make such purchase or sales;

(5) Regarding a portfolio manager which is a corporation that is affiliated with an institutional body or a marketing agent, and regarding a portfolio manager that is engaged in investment marketing – the agreement shall include the details which are required to be brought to the client's attention pursuant to section 16a(a).

(c1) An agreement between a marketing agent and a client will also include the

details which are required to be brought to the client's attention pursuant to section 16a(a).

(d) The details specified in sub-section (b)(1) and (2) will be updated any time

the client gives notice of a change in them, and a copy of the updated document will be given to the client; if the client does not given notice of any such change for a period of one year, the licensee will initiate the updating of the details.

(e) Any stipulation in an agreement which exempts a licensee from a liability

which is imposed on him pursuant to this law or to any other law, with regard to the manner in which he is to carry out his function, or which restricts his said liability, will be void.

(f) The Minister of Finance, in consultation with the ISA and with the approval

of the Knesset Finance Committee, may establish provisions regarding the manner in which the agreement between a licensee and a client should be made, its form and the how it will be delivered to the client, and regarding additional items which are to be included in such an agreement – in general, or with regard to particular types of agreements, and he may specify types of agreements in which the inclusion of particular items listed in sub-sections (b) or (c) will not be required.

Proper disclosure [Amended 2005 (Amendment 4)]

14. (a) An investment adviser or investment marketing agent will make proper disclosure to a client of matters that are of material importance with respect to the advice or marketing which he provides and to the proposed transaction.

(b) Without derogating from the generality of the provisions of sub-section (a),

the Minister of Finance may, in consultation with the ISA, specify the



28

matters which will be considered to be of material importance with respect to advising or marketing or to a transaction, and rules regarding the manner in which such proper disclosure should be made.

Conflict of interests [Amended 2005 (Amendment 2)]

15. (a) If a licensee becomes aware of a conflict of interest between either himself or the licensed corporation in which he works or is a partner, and the client, with regard to either the provision of service to the client in general or with regard to a particular transaction, the licensee must notify the client, either in writing or by telephone, in a conversation which will be noted by the licensee, of the existence of a conflict of interest. The licensee must refrain from carrying out any transaction which involves a conflict of interest, unless the client has agreed to it in advance, in writing or by telephone, in a conversation concerning such transaction and which will be noted by the licensee. The Minister of Finance, in consultation with the ISA and with the approval of the Knesset Finance Committee, may establish which details are to be included in the records described in this section, and the manner in which they are to be made, retained and delivered to the client.

(b) Without derogating from the generality of the provisions of sub-section (a),

the Minister of Finance, in consultation with the ISA, may specify the particular circumstances that will be considered to be a conflict of interest.

Prohibition of preferential treatment (Amended 2010)

16. (a) When providing investment advice or managing investment portfolios, a licensee may not prefer the licensee’s own securities or financial assets or those of a corporation affiliated to the corporation in which he works or is a partner, because of the said affiliation.

(b) A portfolio manager shall not order, on behalf of a client, any securities for which a corporation to which the manager is affiliated or a corporation which is affiliated with the corporation in which he works, served as an underwriter for the offering thereof, unless the client has agreed to it in advance and in writing; the portfolio manager will report to the client of such an order within 30 days from the date on which it was placed.

(c) A portfolio manager may not purchase on behalf of a client, securities for

which, a corporation to which the manager is affiliated or a corporation which is affiliated with the corporation in which he works, served as an underwriter for the offering thereof, within three months from the date on which the underwriting commitment was fulfilled, if on the said date the underwriter had retained securities that he had purchased in the framework of the underwriting commitment, unless the client has agreed to such in advance and in writing, with regard to a specific transaction. If more than three



29

months but less than six months have passed from the date on which the underwriting commitment was fulfilled, the portfolio manager may purchase such securities on behalf of a client, if the client has agreed in advance to such in writing. The portfolio manager will report to the client of a purchase as described in this subsection within 30 days of the date on which it was carried out. In this subsection, the term “the date on which the underwriting commitment was fulfilled” shall mean a date as described below, whichever is relevant;

(1) If the underwriter’s commitment was to purchase securities that were

offered pursuant to a prospectus, in the event that the public did not purchase them – the date of the completion of the sale to the public in the context of which the underwriter had purchased the said securities;

(2) If the underwriter’s commitment was to purchase securities that were offered pursuant to a prospectus in order to sell them to the public – the date of the completion of the sale of the said securities, to the public by the underwriter.;

(d) A purchase as described in sub-sections (b) and (c) shall be carried out on the

stock exchange or at a price not exceeding the known stock exchange rate on the date of the purchase.

Proper disclosure, conflict of interest and preferential treatment in investment marketing [Amended: 2005 (Amendment 4), 2010)

16A. (a) Without derogating from the generality of the provisions of section 14, the following provisions will also apply to an investment marketing agent, a portfolio manager which is a corporation affiliated with an institutional body or with a marketing agent, and a portfolio manager who is engaged in investment marketing:

(1) each of them will inform their clients, wherever they conduct their

business and in any other location ordered by the ISA Chairman, in a clear and noticeable sign or in another manner as ordered by the ISA Chairman, of the fact that they are engaged in investment marketing and not in investment advising, or regarding the fact that they are affiliated with an institutional body or marketing agent, whichever is relevant, and will also indicate which institutional bodies have a connection to their financial assets;

(2) each of them will disclose to each client, in language that the client can understand, orally and in a written document to be given to the client prior to the entry into a contractual relationship with him, and will publish on their website the information indicated in paragraph (1), the connection the they have with the financial assets and the significance



30

thereof; and the fact that they have preferred these financial assets; the Minister of Finance, in consultation with the ISA and with the approval of the Knesset Finance Committee, may establish rules regarding the specification that is to be provided in the document and in the publication on the website pursuant to this paragraph with respect to a connection which consists of a benefit as stated in paragraph (2) of the definition of a connection, including the type of benefit, its scope and the manner in which it is calculated.

(b) Notwithstanding the provisions of sections 11(a) and 16(a), a marketing

agent, portfolio manager which is a corporation affiliated with an institutional body or with a marketing agent and a portfolio manager which is engaged in investment marketing, may – in the context of their involvement in investment marketing or investment portfolio management, whichever is relevant – prefer a financial asset to which they have a connection over a different financial asset which is similar in terms of the suitability of such financial asset for the client, and to which the marketing agent or portfolio manager has no connection, provided that they have complied with all the disclosure requirements vis-à-vis the client as described sub-section (a).

(c) The connection between a marketing agent or a portfolio manager and a

financial asset will not be considered to be a conflict of interests between such marketing agent or portfolio manager and the client, for the purpose of section 15.

(d) An investment marketing agent who acts through the media will include a

notice as to whether he has a personal interest in the matter or not, and a notice that such investment marketing does not serve as a substitute for marketing which takes into consideration the details and special needs of the particular person.

Prohibition against incentives (Amended 2005 (Amendment 4)]

17. (a) A licensee, or another party acting on the licensee’s behalf or for the licensee, may not receive any benefit, directly or indirectly, in connection with investment advising, investment marketing, execution of a transaction or non-execution of a transaction, other than the wage and reimbursement of expenses from the client, as specified in their agreement according to section 13(b)(3).

(b) The provisions of sub-section (a) will not apply regarding the following:

(1) Investment advising, investment marketing, and the execution of a transaction or ` abstention from executing a transaction, by a licensee, with respect to securities issued by the licensee or by a party that is controlled by the licensee;



31

(2) Investment marketing, the execution of a transaction or abstention from

executing a transaction, by a licensed marketing agent, with respect to financial assets to which such licensee has a connection;

(3) The receipt of reimbursement for the commission on purchase or sale by a portfolio manager, from a stock exchange member, for the execution of a transaction or a group of transactions which the particular transaction is a part of, provided that the client for whom the transaction was executed has agreed in advance and in writing to such reimbursement, and to its rate;

(4) The receipt of a distribution commission by a party other than a

marketing agent, from a fund manager, for the execution of a transaction, provided that the client for whom the transaction was executed has agreed in advance and in writing to the receipt of the commission and to its rate, and that the distribution commission is in accordance with the provisions of section 82(c) of the Joint Investments Law;

(5) The receipt of commission by an investment adviser which has been paid

by a management company, pursuant to the provisions of section 32(e)(2) of the Provident Funds Control Law, for the execution of a transaction in a supplementary training fund provided that the client for whom the transaction was executed has agreed in advance and in writing to the receipt of the commission and to its rate, and that the rate of the commission is not dependent on the identity of the management company from whom the commission is received.

(c) A licensed adviser or a licensee which is a banking corporation engaged in

investment marketing, may not give a benefit to any of its employees, branches or divisions in connection with investment advising, investment marketing, the execution or abstention from executing a transaction, whichever is relevant, if such benefit is determined after taking into consideration the identity of the entity which has issued the securities that are the subject of the advice, marketing or transaction, or the identity of the entity that has a connection to the financial assets that are the subject of the advising, marketing or transaction.

(d) The calculation of the wage and reimbursement of expenses for which the

client will be charged for the investment advising shall be independent of the identity of the entity issuing the securities or of the financial assets to which he has a connection, regarding which the advice was provided, and shall be independent of the client’s payment to the said entity.



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(e) In this section, “licensee” shall also include a party controlling the licensee, or a party which is controlled by either of these, and an office holder in any of them or an individual who is employed by any of them.

Prohibition of investment advising and the execution of a transaction regarding certain financial assets [Amended: 2005 (Amendment 4), 2010]

17A. An investment adviser, or a party that is engaged in investment advising on his behalf, will not provide advice and will not execute any transaction with respect to a financial asset to which an institutional body, holding ten percent or more of any kind of means of control in the investment adviser, has a connection; for this purpose, the term “institutional body” includes a party that controls an institutional body or is controlled by either of them.

Restrictions regarding investment advisers entering into irregular agreements [Amended: 2005 (Amendment 4))

17B. (a) An investment adviser may not enter into an agreement with an institutional body if the agreement is to provide services that are not in the course of an investment adviser’s ordinary business, or is not in accordance with market conditions, or can have a significant impact on the investment adviser’s profitability, assets or liabilities (referred to hereinafter in this section as- an irregular agreement), unless the ISA Chairman has approved such in advance and in writing. If the investment adviser is a banking corporation, the Supervisor of Banks must approve such an agreement as well.

(b) The receipt of consideration by an investment adviser from an institutional

body, pursuant to an agreement for the provision of services which is not an irregular agreement or pursuant to an irregular agreement which was approved in accordance with the provisions of sub-section (a) will be deemed to be an activity consistent with an investment adviser’s duties pursuant to sections 11 and 15.

(c) In this section, the terms “institutional body” and “investment adviser”

will also refer to a corporation which is affiliated with either of these. Prohibition against the issuance of exchange-traded notes by an investment adviser [Amended: 2005 (Amendment 4), 2010 (Amendment 2)]

17C.4 (Deleted.)

4 An investment adviser who properly had holdings in a company that issued exchange-traded notes prior to 1 June 2010 will continue to be subject to the language of the former section 17c of the law (“Notwithstanding the provisions of any relevant law, an investment adviser or a corporation with which the adviser is affiliated will not issue exchange-traded notes”), through 10 August 2013.



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Special risks [Amended: 2005 (Amendment 2), (Amendment 4)]

18. (a) An investment adviser or investment marketing agent, whichever is relevant, will, if a transaction involves a special risk, inform the client of the nature of the risk.

(b) A portfolio manager may not execute a transaction involving a special risk on

behalf of a client unless the client has approved the particular transaction or all transactions involving the same type of risk, in advance and in writing.

(c) Without derogating from the generality of the provisions of sub-sections (a)

and (b), the transactions listed below will be considered to be transactions the execution of which involves a special risk:

(1) A transaction involving a security for which the prospectus indicates that

an investment in the security involves a special risk, for the first two years following the date of the prospectus, unless the risk so indicated is no longer present;

(2) A transaction which involves a short sale transaction, as defined in section 63 of the Joint Investments Law, and the lending of securities for the purpose of executing such a transaction;

(3) A transaction involving a futures contract, option or structured product;

(4) Any other transaction that is determined to be such for this purpose by

the Minister of Finance, in consultation with the ISA and with the approval of the Knesset Finance Committee.

Duty of confidentiality [Amended: 2005 (Amendment 4)]

19. (a) Subject to the provisions of any law or agreement in which the client has expressly waived the duty of confidentiality with respect to a person indicated in the agreement, the licensee will maintain confidentiality regarding any information of which the client has made the licensee aware, including with regard to documents that were transferred to the licensee and the content thereof and any other detail relating to the transactions regarding which the licensee engaged in advising or marketing vis-à-vis the client or which the licensee has executed in the client’s account.

(b) The provisions of the Protection of Privacy Law -1981 will apply to the duty

of confidentiality established in this section, even if the offended party is a corporation.



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Duty of care

20. In conducting his business, a licensee shall, act with care and with a level of skill with which a reasonable licensee would act under similar circumstances, and will use all reasonable measures to secure the interests of his clients.

Prohibition against advertisement of institutional bodies by an investment adviser [Amended: 2005 (Amendment 4)]

20A. an investment adviser will not advertise in the media, in a circular, by mail, electronic mail or facsimile transmission, on the Internet or through any other means, that the adviser engages in investment advising with relation to financial assets to which a particular institutional body has a connection.

Restrictions on the use of the word advising by an investment marketing agent [Amended: 2005 (Amendment 4), 2010]

20B. an investment marketing agent, a portfolio manager which is a corporation affiliated with an institutional body or with a marketing agent, and a portfolio manager engaged in investment marketing shall not use the word “advising” or any word derived therefrom, in either the name by which the marketing agent or manager conducts business or in any of their advertisements.

Licensee’s duty to comply with conditions regarding insurance, equity, a bank guarantee, deposit and securities [Amended: 2010 (Amendment 2), 2011]

20C. (a) A licensed corporation will not engage in the occupation which is the subject of the license without being in compliance with the conditions and the amounts established regarding insurance, equity, a bank guarantee, a deposit or securities, pursuant to section 7(b)(3) or (c)(3) or (4) or pursuant to section 8(b)(4) or (5), whichever is relevant.

(b) An individual licensee will not engage in the occupation which is the subject of the license without being in compliance with the conditions, the amounts and the percentages prescribed by the Minister of Finance in consultation with the ISA and with the approval of the Knesset Finance Committee concerning insurance covering the licensee’s liability for negligent acts or omissions vis-à-vis a client.

Prohibition on additional occupations [Amended 2011(Amendment 2)]

20D. (a) A licensed corporation may not engage in underwriting. (b) A licensed portfolio manager corporation may not engage in any

additional occupation other than those listed in section 8(b)(1).



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Liability of an individual licensee

21. Employment by a corporation will not detract from the application of the provisions of this law to an individual licensee acting in the name of the corporation.

Chapter D: Special Rules Regarding a Portfolio Manager’s Manner of Conduct Separate holding and management of the client’s assets [Amended: 2005 (Amendment 2)]

22. A portfolio manager – (1) Will hold clients’ securities and financial assets separately from the portfolio

manager’s own;

(2) Will hold each clients' securities and financial assets separately, and will make decisions regarding the execution of transactions for each client separately, and will maintain separate records regarding the funds, securities and financial assets for each client; however, a portfolio manager may execute transactions for clients through a collective order;

(3) Will manage a cash account, a securities and financial assets account for the manager’s clients at either a banking corporation, a bank outside of Israel, with a stock exchange member or with a party that is authorized according to the law in the country in which such party operates, to manage a cash account, securities or financial assets account;

(4) Execute transactions for clients separately from those that are executed for the manager’s own account;

(5) Will credit and charge clients’ accounts on the day the transactions are executed.

Prohibition on using the client’s funds

23. (a) A portfolio manager may not use a client’s funds, securities or financial assets other than for the purpose of executing transactions for such client and in accordance with the agreement entered into with such client and with the power of attorney received from such client.

(b) A portfolio manager may not execute a transaction with a client and may not

receive any benefit from a clients' asset, unless the client has given his consent in advance and in writing to the particular transaction or to the particular benefit.



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Compensation and expenses

24. A portfolio manager will not condition his wage on the profit that the client received from a transaction or from the number of transactions that were executed for the client.

Chapter D-1: Corporate Governance

24A. In this Chapter – “Financial Body” – each of the following: provident fund or managing company,

as defined in the Provident Funds Control Law, insurer, Licensed corporation, fund manager or underwriter as defined in the Securities Law, with the exception of a company that controls a large portfolio management company and a company controlled by such a company; “External Director” and “Relative” – as these are defined in the Companies Law; “Large Portfolio Management Company”, “Group” and “Total Assets under management” – as these are defined in the First Schedule A.

24B. (a) At least five directors shall serve in a board of directors of a large portfolio management company: with regard to the appointment of external directors, the same rules that apply to a company whose securities have been offered to the public according to a Prospectus and are held by the public, will apply to a large portfolio management company and the provisions of Section 239 through 249 of the Companies Law concerning the appointment of external directors shall apply mutatis mutandis unless determined otherwise under this Law. (b) A large portfolio management company shall appoint the external directors after the audit committee has checked and confirmed that they meet the qualification conditions determined in Section 240 of the Companies Law, but without derogating from the provisions of Subsection (a), the provisions of this Subsection shall not apply to the appointments of the first external directors in the company. (c) The number of directors of a large portfolio management company who also serve as directors of another financial body shall not exceed a third of the total number. (d) A director of a large portfolio management company shall not serve as a director in more than two additional financial bodies simultaneously except in circumstances permitted by the Minister of Finance in regulations. (e) The number of directors who work for a large portfolio management company or are employed by one shall not exceed a third of the total number.



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(f) In appointing the directors of a large portfolio management company the composition of the board of directors shall be determined so as to enable the board of directors to carry out its duties.

24C. (a) The board of directors of a large portfolio management company shall select one of its members to serve as chairman of the board of directors. (b) The chief executive officer of a large portfolio management company or anyone subordinate to the chief executive officer, either directly or indirectly, or the chief executive officer's relative, shall not serve as the chairman of the board of directors. (c) The powers of the chief executive officer or the powers vested in anyone subordinate to the chief executive officer shall not be given, directly or indirectly, to the chairman of the board of directors of a large portfolio management company or to his relative; the chairman of the board of directors shall not serve as any other office bearer in the company, apart from as a member of a committee of the board of directors that is not an audit committee as stated in Section 24H(d)

24D. The Minister of Finance may determine qualification conditions for the board of directors and for the members of committees that a large portfolio management company must appoint under this Chapter, provisions to ensure the efficiency of the internal controls and internal enforcement plan and their proper functioning, including provisions concerning the obligation to appoint office bearers to be responsible for said internal controls and plan and their qualification conditions, and provisions to ensure the efficient management of risks.

24E. (a) Meeting of the board of directors of a large portfolio management company shall be held at least once every three months. (b) A majority of directors shall be a legal quorum at board of directors’ meeting, provided that all the following conditions are met:

(1) An external director is present at the meeting; (2) The number of directors serving as directors of more than one financial body, present at the meeting, shall not exceed one third of those present.

(c) Minutes shall be kept of all board of directors’ meetings in which shall be recorded the names of those present, the main points of discussion and the resolutions passed. (d) If an external director is absent from four consecutive board of directors’ meetings, his appointment shall lapse.



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24F. The duties of the board of directors of a large portfolio management company shall be inter alia: (1) To appoint a chief executive officer, to supervise his performance, and to examine the way the board of directors’ decisions are executed by the chief executive officer; (2) To approve the internal controls and the internal enforcement plan, and to ensure that the company has the tools to enable monitoring of the implementation of the investment policy in accordance with the client’s instructions and needs; (3) To appoint an internal auditor as proposed by the audit committee and to approve his work plan on the recommendation of the audit committee and to discuss his findings and ways of correcting the shortcomings he has found; (4) To approve the work procedures the company is obliged to institute in provisions under this Law; (5) To discuss the company’s compliance with the conditions of the license as determined in Section 8; (6) To discuss any matter of material importance to the company’s operations or its supervision and control;

24G. The board of directors of a large portfolio management company may not delegate its powers under paragraphs (1) through (5) of Section 24F.

24H. (a) The board of directors of a large portfolio management company shall appoint an audit committee from among its members (in this Law – audit committee). (b) The duties of the audit committee shall be:

(1) To propose to the board of directors a candidate for the post of internal auditor pursuant to Section 24F(3), to discuss the work plan proposed by the internal auditor and to submit its recommendations on the plan to the board of directors; (2) To take note of shortcomings in the company’s operations through the internal auditor and other control and supervisory organs, and to propose ways of correcting them to the board of directors; (3) To check the company’s internal controls and the internal auditor’s performance, and whether he has at his disposal the resources and tools he needs to perform his duties; (4) To confirm that the external directors meet the qualification



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conditions determined in Section 240 of the Companies Law as stated in Section 24B(b).

(c) The number of members of the audit committee shall not be less than three, all the external directors shall be members of the audit committee and they shall constitute a majority of its members; the committee chairman shall be an external director. (d) The chairman of the company’s board of directors and any director employed by the company or who provides it with services on a permanent basis, and the controlling shareholder or his relative shall not be members of the audit committee. (e) The internal auditor shall receive notices when meetings of the audit committee are to be held and will be entitled to participate in them. (f) The internal auditor may ask the audit committee’s chairman to convene the audit committee to discuss a topic he will give details of in his request, and the chairman of the audit committee shall convene the committee within a reasonable time from the date of the request, he considers there is a reason to do so. (g) At least once a year the audit committee shall hold a meeting solely with the internal auditor; (h) Meeting of the audit committee shall be held at least once every three months. (i) A legal quorum at a meeting of the audit committee is at least three members, one of whom is an external director. (j) Minutes shall be kept of meetings of the audit committee in which shall be recorded the names of those present, the main points of discussion and the resolutions passed.; the minutes shall be available for inspection by any director of the company.

24I. (a) The provisions of Sections 3(a), 4(b), 8, 9, 10, and 12 of the Internal Audit Law, 5752-1992,5 shall apply mutatis mutandis to the internal auditor appointed under Section 24F(3). (b) The internal auditor shall examine inter alia the soundness of the company’s operations from the aspect of compliance with the law’s provisions, correct business procedure, and the procedures determined by the company’s

5 Sefer 2320, 19 Cheshvan 5772, 16.11.2011.



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board of directors under this Law. (c) The internal auditor shall report his findings to the chairman of the board of directors, the audit committee and the chief executive officer.

24J. The provisions of this Chapter shall not apply to a large portfolio management company in the first six months of its becoming a large portfolio management company.

24K. The Minister of Finance may, as proposed by the Authority or in consultation with it, with the agreement of the Minister of Justice and the approval of the Knesset Finance Committee, modify the First Schedule A.

Chapter E: Record-keeping and reporting Recording of actions

25. (a) A portfolio manager will maintain records of each transaction executed for a client.

(b) A licensee will maintain records of each instance of providing advice to a

client. (b1) An investment marketing agent will maintain records of each instance of

marketing carried out vis-à-vis a client. (c) The provisions of sub-section (b) and (b1) will also apply to instances of

providing advice or marketing which did not lead to the execution of a transaction.

(d) A licensee will maintain the records described in this section for a period of

seven years. (e) The Minister of Finance, in consultation with the ISA and with the approval

of the Knesset Finance Committee, may specify the details that are to be included in the records described in this section as well as the manner in which they are to be made, retained and delivered to the client.

Reporting to a client [Amended: 2005 (Amendment 2), 2010]



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26. (a) A portfolio manager will, at least once every three months, provide the client with a detailed statement regarding the composition of the client’s investment portfolio, his cash account and his direct or indirect charges for the portfolio managers' wages and expenses, including payment to any person controlling the portfolio manager or who is controlled by the portfolio manager or to a company controlled by such a person. The manager will attach to the statement a specification of the transactions executed for the client during the period since the date of the previous statement, with special notation of the transactions the execution of which involved special risk, and of any credit transactions, if such were executed.

(b) A portfolio manager who manages a blind trust for a client will report to a

client in the form and at the dates and in accordance with the conditions described in the agreement between them; such a client may give all or some of the consents required pursuant to this law in advance and in writing.

(c) A portfolio manager will, at the client’s request, provide the client with

additional details at any time, either regarding the condition of the client’s investment portfolio or cash account, or regarding a particular transaction; however, the portfolio manager may choose not to do so if the manager determines that the client’s request is unreasonable.

(c1) A licensee will notify the client of any change in the address of his place of

business, within seven days from the date on which the licensee began to conduct business as a licensee at that address.

(d) Statements provided pursuant to this section may not include any misleading

details.

Reporting to the ISA [Amended: 2005 (Amendment 4), 2010, 2010 (Amendment 2), 2011 (Amendment 2)]

27. (a) A licensee will file a report with the ISA once each year regarding compliance with the insurance requirements and the scope thereof, and if the licensee is a corporation, the report must include an accountant’s confirmation regarding the fulfillment of the minimal capital requirements pursuant to this law.

(b) If the total of all the securities held by a portfolio manager which is a

licensed corporation, including those that are held in clients’ portfolios, is equal to five percent or more of a particular corporation’s issued share capital, or if such securities provide five percent or more of the voting power within a particular corporation, the portfolio manager will report it immediately to the ISA and to the stock exchange, and will also submit a report if the total of the securities so held cease to amount to such a percentage as described in the first part of this sub-section.



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(c) A licensee must report immediately to the ISA should any of the conditions

for the granting of a license cease to be fulfilled, and if the licensee is an individual, the licensee must also report immediately even if he is not insured as required by the provisions of section 20C, or if any condition arises for which the ISA is entitled to revoke or suspend his license and with respect to a determination of trustworthiness as described in section 10(a1), the licensee must notify the ISA of the occurrence of any of the following, in Israel or abroad:

(1) A conviction for an offense; (2) The filing of an indictment or the conduct of a disciplinary proceeding,

due to the commission of an offense. (3) An investigation or administrative adjudication of the commission of

an offense or of the violation of a provision of a financial law, which is conducted by an authority that is empowered to conduct an investigation or administrative adjudication, whichever is relevant.

(4) Payment of a financial liability as an alternative to a criminal proceeding , in connection with the violation of a provision of a financial law, or the conduct of an administrative proceeding due to the violation of such a provision, a possible consequence of which is the imposition of the means of administrative enforcement.

(5) The payment of a financial sanction or the receipt of a demand for such payment, due to a violation of a provision of a financial law.

(6) A court ruling in a civil suit or in a civil suit brought with respect to a violation of the provisions of a financial law, including a suit brought pursuant to section 65 of the Torts Ordinance [New Version],6 provided that the said suit included an allegation of fraud or negligence.

In this sub-section- “Financial law” and “violation” shall have the definition given to them in section 9A(e) of the Joint Investments Law. “Financial liability as an alternative to a criminal proceeding” – as defined in section 260(a) of the Companies law.

(c1) A licensee will report to the ISA the address at which the licensee conducts

his business and of any change therein, within seven days from the date on which the licensee began to conduct business as a licensee at such address.

6



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(c2) A fund manager which is a licensed corporation,, and a banking corporation will report to the ISA immediately the cessation of employment of a licensee.

(c3) A fund manager which is a licensed corporation, , and a banking corporation

will, on the 15th of January, April, July and October of each year, file a report with the ISA specifying the names of all the licensees employed by them on the last day of the month preceding the date on which the report is filed, along with the address of the branch at which each licensee is employed and the names of the licensees whose employment ended after the date the previous report was filed pursuant to this sub-section; a report filed pursuant to this sub-section will provide separate details regarding licensed investment advisers, licensed marketing agents and licensed portfolio managers.

(d) A licensee or banking corporation must also report to the ISA as described in

this section at the ISA’s special request or at the request of its Chairman. A licensee or banking corporation must also report upon receiving such a request regarding any incident or matter, if the information thereof is important to a reasonable client who is in need of the licensee’s or banking corporation’s services.

(e) A licensee or banking corporation must, at the ISA’s request or at the request

of its authorized employee, provide the ISA with a written explanation, specification, information or documents relating to the details included in a report or notice filed pursuant to this section.

(f) The ISA may publish, on its website or in two daily Hebrew newspapers

published in Israel that the ISA believes to be widely circulated newspapers, the reports or notices that are filed pursuant to this section, and it may instruct a licensee or banking corporation to publish such reports or notices in a manner in which the ISA shall direct.

(g) Reports provided pursuant to this section may not include any misleading

details. Manners of reporting to the ISA [Amended: 2004, 2010]

27A. (a) A licensed corporation’s request for the revocation or suspension of its license, pursuant to section 10(b), and any report, notice, information or other document that the licensed corporation is required to submit to the ISA or to the stock exchange pursuant to sections 27 or 27c, shall be submitted in accordance with Chapter 7A to the Securities Law.

(b) The ISA shall transfer to the stock exchange any report which is required to

be submitted to the ISA and the stock exchange pursuant to section 27(b) and which was submitted to the ISA as described in sub-section (a), and such



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submission to the ISA will be deemed to constitute fulfillment of the duty to submit such to the stock exchange as well.

Review of documents and certified copies [Amended 5765)]

27B. (a) A report submitted to the ISA pursuant to section 27(b) will be open for review by the public at the ISA, and any person may review it and receive a certified copy of what is recorded therein, either through the ISA or through others that have been authorized for such by the ISA.

(b) A certified copy of a document which has been submitted to the ISA will be

acceptable as an original document in any legal proceeding and will constitute absolute proof that the original document is held by the ISA; the provisions of this sub-section will apply to a printout of a document that was submitted to the ISA in the manner described in section 27A(a); for this purpose, the term “printout” shall have the meaning given in its definition in the Computers Law – 1995.

Additional reports [Amended 2010]

27C. (a) The Minister of Finance, in consultation with the ISA and with the approval of the Knesset Finance Committee, may establish provisions regarding the following matters:

(1) Additional reports beyond those listed in this law which a licensee or

banking corporation is required to submit to the ISA or to a client, the details to be included in such, the dates on which they are to be prepared, their submission and their form; the Minister may also establish a duty to publish such reports to the public, and the manner in which they are to be published;

(2) The details that are to be included in the reports that a licensee, banking corporation or fund manager is required to submit pursuant to this law, the dates on which they are to be prepared, their submission and their form;;

(3) Exemptions from the reporting duty prescribed in this law, for a licensee,

banking corporation, fund manager or for categories of any of them.

Chapter F: Functions and powers of the ISA ISA’s supervision of licensees [Amended: 2005 (Amendment 4), 2010]

28. (a) Licensees, with respect to the fulfillment of their duties pursuant to this law, will be subject to the supervision of the ISA.



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(b) The ISA may, for the purpose of supervision as described in sub-section (a), issue instructions relating to the manner in which a licensee, an office holder in a licensee and anyone employed by a licensee must act and conduct itself, all in order to ensure the proper conduct of the licensee and the protection of the licensee’s clients interests; such instructions may be issued for all licensees or for a particular type of licensee.

(c) (1) Instructions issued pursuant to sub-section (b) are not required to be

published in the Official Gazette, nevertheless, the ISA must publish a notice in the Official Gazette regarding the issuing of instructions as stated and the date of their entry into force;

(2) Instructions issued pursuant to sub-section (b), and any modification

thereof, will be made available for review by the public at the offices of the ISA and will be published on the ISA website, and the ISA may give orders regarding additional ways in which they will be published.

(d) (1) The ISA may, for the purpose of supervision as described in sub-section

(a), authorize a party who is not an ISA employee to carry out an inspection of a licensee, and to demand documents and information relating to such licensee which are needed for the purpose of carrying out the ISA’s function, provided that the following two conditions are met:

(a) The Israel Police has given notice, not later than three months from

the date of receiving details regarding the candidate , that for reasons relating to the safety of the public, it does not oppose the authorization of such candidate.

(b) The candidate has received appropriate training or has met additional qualification conditions, as ordered by the ISA Chairman.

(2) The party who has been authorized pursuant to this sub-section will not

disclose the content of any information or document that he has received by virtue of his position, other than for the purpose of his function either to the ISA Chairman or to an ISA employee at the instruction of the ISA Chairman; this provision will not prevent disclosure pursuant to a request from the Attorney General for the purpose of a criminal trial or pursuant to a court request.

Application of the ISA’s powers [Amended 2011 (Amendment 2)]

29. (a) In this section – “Violation” – shall mean any of the following –



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(1) A violation within the meaning of section 38A;

(2) A violation within the definition of section 38F; “Offense” – one of the following:

(1) An offense pursuant to this Law;

(2) An offense pursuant to sections 284, 290, 291, 415, 423, 424, 424A and 425 of the Penal Code, which was committed in connection with an offense pursuant to paragraph (1);

(3) An offense pursuant to sections 3 and 4 of the Prohibition of Money Laundering Law, 2000, which was committed in connection with an offense pursuant to paragraph (1) or (2);

(4) An offense pursuant to sections 240, 242, 244, 245, or 246 of the Penal Code, which was committed in connection with an offense pursuant to paragraphs (1) through (3);

(b) (1) In order to ensure the implementation of this Law, or if or if there is a

reasonable basis for believing that a violation has been committed or if a suspicion has arisen regarding the commission of an offense, the ISA Chairman or an ISA employee authorized by the Chairman for this purpose in writing may:

(a) Require of any person that they provide any information or

document relating to the licensee’s business, or relating to such violation or offense;

(b) After identifying himself, enter into any place in which the Chairman or employee has a basis for believing the activity of a supervised party, as defined in the Securities Law, is taking place, and which does not serve exclusively as a residence, and demand documents such as those described in sub-paragraph (a); however, no such document may be seized if a copy thereof will suffice;

(2) The provisions of section 56A(b) of the Securities Law will apply with

regard to the return of a document provided to the ISA pursuant to paragraph (1);

(c) The provisions of section 56A1 through 56E of the Securities Law will

apply with regard to an offense, mutatis mutandi, and with the following change: in section 56C2, the words “paragraphs (3) or (4) of the definition



47

“Securities offense” will be read as if the text was “paragraphs (2) or (3) of the definition of “Offense” as defined in the Advice Law.”

Chapter G: Disciplinary Offenses and Disciplinary Proceedings

Disciplinary offenses [Amended: 2005 (Amendment 2), (No.4), 2010, 2010 (Amendment 2)]

30. (a) A licensee or banking corporation that does one of the following is committing a disciplinary offense: (1) Violates one of the provisions of sections 3(b), 7(c)(5), 8(b)(1), 11

through 16A, 18 through 20A, 22 through 26, or any commitment made pursuant to sections 7(c)(1) or (2) and 8(b)(2) or (3);

(1a) Violates one of the instructions issued by the ISA pursuant to section 28(b);

(2a) Engages in investment advising, investment marketing or investment portfolio management, without carrying the insurance required pursuant to the provisions of section 20C;

(2) Commits an act or omission which constitutes behavior which is inappropriate for a licensee;

(3) Employs a person who is not a licensee to engage in investment advising, investment marketing or portfolio management, or contracts with a foreign service provider who is not authorized to engage in advising or marketing or management as described in the provisions of Chapter B-1.

(b) The Minister of Finance, following consultation with the ISA and with the approval of the Knesset Finance Committee, will specify which matters amount to behavior which is inappropriate for a licensee.

(c) If a corporation has committed a disciplinary offense, the directors of the

corporation and its general manager will be responsible, and if the offender is a partnership, the partners – other than the limited partners – will be responsible, unless one of the following is proven:

(1) The offense was committed without their knowledge and they were not in

a position in which they should have known or could have known about it;

(2) They have taken all reasonable measures in order to prevent the commission of the offense.

Authority to investigate [Amended: 2005 (Amendment 2)]

31. (a) If a suspicion arises that a disciplinary offense has been committed as described in section 30 (hereinafter: “a disciplinary offense”), the party authorized in writing by the ISA Chairman for such purpose, may interrogate



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any person who, in the authorized party’s opinion, has information relating to the matter and may also demand that such person appear before him and provide an item or information relating to such disciplinary offense.

(b) If the ISA, after such an investigation has been carried out, finds that there is prima facie evidence that a disciplinary offense has been committed, the ISA Chairman will submit the findings of the investigation to the Attorney General or to a party authorized by the Attorney General for such purpose.

Disciplinary committee [Amended: 2005 (Amendment 4)]

32. (a) The Minister of Justice will appoint a three member disciplinary committee; the committee chairman will be an individual who is qualified to be appointed as a District Court judge, and its other two members will be public figures who are not government employees and not ISA employees.

(b) The disciplinary committee will adjudicate disciplinary offenses and requests

from the ISA pursuant to the provisions of section 10(a1). The prosecutor

33. The Attorney General or a party authorized by the Attorney General for such purpose may prosecute a disciplinary offense, and may appear, argue, present evidence and question witnesses during the disciplinary proceeding.

Disciplinary proceeding

34. (a) The disciplinary committee will notify a licensee of the details of a disciplinary complaint against him, and will give the licensee an opportunity to respond to them.

(b) The Minister of Justice may establish procedures for a disciplinary

proceeding; the disciplinary committee shall establish its own procedures to the extent they have not been established by the Minister of Justice as stated.

Disciplinary penalties [Amended: 2005 (Amendment 2), (Amendment 4)]

35. (a) The disciplinary committee may impose one or more of the following penalties on a licensee, a banking corporation or on any party responsible for an offense listed in section 30(c): (1) A warning; (2) A reprimand; (3) A fine which shall not exceed five times the amount established in

section 61(a)(1) of the Penal Code, and with respect to a banking



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corporation – a fine which shall not exceed ten times the amount established in that section;

(4) Suspension of a license for a period not exceeding two years; (5) Revocation of a license, and with respect to a party that is not a licensee –

a disqualification preventing such party from obtaining a license, for a period not exceeding ten years.

(b) A corporation may not pay a fine which has been imposed on another party,

and an employer may not pay a fine that was imposed on his employee.



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Appeal

36. (a) The decision of a disciplinary committee may be appealed by the parties, to a District Court within 30 days from the date on which they were made aware of the decision.

(b) A single judge of the District Court will hear the appeal; the judge’s decision may be appealed to the Supreme Court, if permission for such appeal has been granted by the President of the Supreme Court or by another Supreme Court judge chosen by the Court’s President for such purpose, or if permission for an appeal was given in the text of the ruling.

(c) The filing of an appeal will not postpone the execution of the decision which

is being appealed, including a decision requiring publication as described in section 38, unless the disciplinary committee or the court has provided otherwise.

(d) The Minister of Justice may enact regulations regarding the procedures for

the deliberation of an appeal. Disciplinary proceedings and criminal proceedings

37. (a) Proceedings pursuant to this Chapter will not postpone or cancel any criminal proceedings regarding the same act or omission.

(b) If a person has been criminally indicted for an act or omission which also

constitutes a ground for disciplinary proceedings, the disciplinary committee may suspend its deliberations until a final decision is rendered in the criminal proceedings.

Publication of the decision

38. The disciplinary committee may instruct that all or part of a decision regarding a disciplinary offense be published, in a manner that the committee determines to be appropriate; if the committee has given such an instruction, the ISA may publish the decision in accordance with the instruction.



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Chapter G-1: Imposition of a Financial Sanction by the ISA [Amended 2005 (Amendment 4), 2011 (Amendment 2)]

Financial Sanction [Amended: 2005 (Amendment 4), 2010, 2010 (Amendment 2), 2011 (Amendment 2)] 38A. (a) If a party has violated one of the provisions of this law that apply to such party, as described in the Second Schedule (in this Chapter, an offender and a violation, respectively), the ISA may impose a financial sanction on the offender, and the provisions of Chapter 5-C of the Securities Law will apply, mutatis mutandi, regarding this matter, and with the changes specified in this Chapter. Amount of the financial sanction (Amended: 2011 (Amendment 2)) 38B. (a) The amount of the financial sanction to be imposed on an offender pursuant to this

Chapter will be the amount specified regarding such offender in the Second Schedule, in accordance with the part of the First Schedule in which the violation that the party has committed is listed.

(b) The amount of the sanction to be imposed pursuant to this Chapter on an offender

which is a license portfolio manager company will be determined pursuant to the Third Schedule, in accordance with the total value of the company’s assets; for this purpose “total value of the assets” shall mean the total value of the securities and the financial assets managed by the company, in accordance with the last reporting submitted by the company to the ISA pursuant to this Law prior to the date on which the violation was committed.

Reduced amounts (Amended: 2011 (Amendment 2)) 38C. (a) The ISA may not impose a financial sanction which is lower than that established in this

Chapter, except in accordance with the provisions of sub-section (b).

(b) The Minister of Finance, with the consent of the Minister of Justice, may prescribe in regulations the circumstances and considerations pursuant to which it will be possible to reduce the amount of the financial sanction specified in the Third Schedule, at prescribed maximum rates.

Violations of an identical provision with respect to multiple clients (Amended: 2011 (Amendment 2)) 38D. The violation of an identical provision with respect to multiple clients will be viewed as a

single violation, and the financial sanction pursuant to section 38B will be determined in accordance with the date of the last violation.



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Amendment of the Second and Third Schedules (Amended: 2011 (Amendment 2)) 38E. The Minister of Finance, at the suggestion of the ISA or upon consultation with it, and with

the consent of the Minister of Justice and with the approval of the Knesset Finance Committee, may amend the Second and Third Schedules, provided that the amount of the financial sanction prescribed in the Third Schedule does not exceed NIS 2,000,000.

Chapter G-2: Imposition of Administration Enforcement Measures by the Administrative

Enforcement Committee7 (Amendment: 2011 (Amendment 2))

Definitions (Amendment: 2011 (Amendment 2)) 38F.6 In this chapter: “The Committee” – the Administrative Enforcement Committee appointed pursuant to section 52FF(a) of the Securities Law; “Violation” – one of the following acts or omissions:

(1) An act or omission listed in the Fourth Schedule;

(2) An act or omission included in the list established by the ISA pursuant to section 38K, of acts or omissions which indicate that a party who has committed them has not acted with the caution that a reasonable licensee would have exercised under similar circumstances.

Application of the provisions regarding the adjudication of a violation and an administrative enforcement proceeding (Amendment: 2011 (Amendment 2)) 38G. 6 The provisions of Chapter 8-D of the Securities Law relating to an offender and to a

violation of one of the provisions listed in Part C of the Seventh Schedule of that Law will apply, mutatis mutandi, and with the changes enumerated in this part, to the offender and to the violation.

Application of the provisions regarding a financial sanction (Amendment: 2011 (Amendment 2)) 38H. 6 The provisions of section 52AAA(a) of the Securities Law will apply, as described

below, with regard to the imposition of a financial sanction pursuant to this Chapter, as specified below.

7 Chapter G-2 (section 38F – 38L) will enter into force at the time that procedural rules are established for the work of an administrative enforcement committee pursuant to section 52M(a) of the Securities Law.



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(1) Regarding an offender who is an individual licensed investment adviser or marketing agent – in a maximum amount of NIS 25,000.

(2) Regarding an offender who an individual licensed portfolio manager – in a maximum amount of NIS 50,000.

(3) Regarding an offender who is another individual – in a maximum amount of NIS 1,000,000.

(4) Regarding an offender which is a corporation – in a maximum amount of NIS

5,000,000. Liability of a general manager and partner, other than a limited partner (Amendment: 2011 (Amendment 2)) 38I. 6 The provisions of section 52LLL of the Securities Law will apply with regard to an

offender and a violation. However, the amount of the maximum financial sanction which may be imposed, pursuant to this section, on a general manager of a corporation or on a partner in a partnership, other than a limited partner, whichever is relevant, will be NIS 50,000.

Prohibition of indemnification and insurance (Amendment: 2011 (Amendment 2)) 38J. 6 (a) Notwithstanding the provisions of any law, and without detracting from the

provisions of sections 262 through 264 of the Companies Law:

(1) No proceeding pursuant to this Chapter or pursuant to Chapters G-1or H-1 (in this section - a proceeding) may be insured, either directly or indirectly;

(2) Any insurance contract covering a proceeding will be void;

(3) A corporation may not indemnify and may not pay, either directly or indirectly, any financial sanction imposed on another party, and the controlling shareholder of a corporation may not indemnify and may not pay, either directly or indirectly, any financial sanction imposed on the corporation, on a senior office holder in the corporation or on an employee of the corporation;

(4) Any provision regarding or any undertaking to provide indemnification with

regard to a proceeding will be void.

(b) (1) Notwithstanding the provisions of sub-section (a), a person may be indemnified or insured with respect to a payment to a party who was injured by a violation described in section 52BBB (a)(1)(a) of the Securities Law, or with respect to a payment of expenses incurred in connection with a proceeding that was conducted regarding such person’s matter, including reasonable litigation expenses – including attorney’s fees, and including by way of an advance indemnification.



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(2) Any undertaking to indemnify or to insure an office holder in a corporation

pursuant to paragraph (1) will be void, unless the company’s by-laws include a provision allowing such.

List of acts or omissions which can indicate a defect in the exercise of caution (Amendment: 2011 (Amendment 2)) 38K. 6 The ISA will, for the purpose of this Chapter, establish a list of the acts or omissions

which can indicate that a licensee who has committed such acts or omissions has failed to act with the caution that a reasonable licensee would have exercised under similar circumstances; this list will be published on the ISA’s website and will enter into effect 30 days from the date of its publication. However, a change in the list will not apply to an administrative enforcement proceeding which is pending; a notice of the publication of the list and of any change therein, and the dates for their entry into effect, will be published in Reshumot.

Amendment of the Fourth Schedule (Amendment: 2011 (Amendment 2)) 38L. 6 The Minister of Finance may, at the suggestion of the ISA or upon consultation with it,

and with the consent of the Minister of Justice and with the approval of the Knesset Finance Committee, amend the Fourth Schedule, by way of an order.

Chapter H: Penalties

Penalties [Amended: 2005 (Amendment 2), (Amendment 4) 2010, 2010 (Amendment 2), 2011 (Amendment 2)]

39. (a) A person who is convicted of having committed one of the following shall be punishable by imprisonment for a term of two years, or by imposition of a fine in an amount five times the fine prescribed in section 61(a)(3) of the Penal Code, and if a corporation is so convicted – it will be subject to a fine which is twice the size of the said fine:

(1) Engaged in investment advising, investment marketing or

investment portfolio management without a license, in violation of the provisions of section 2(a) through (b1); in

(2) Employed a party who is not a licensed marketing agent to engage

in investment marketing, in violation of the provisions of section 2(b2).

(3) Engaged in investment management, in violation of the provisions

of section 9(a);



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(4) Engaged in investment advising in violation of the provisions of section 9(b), or employed a party who is not a licensed adviser to engage in investment advising, in violation of the provisions of the same section;

(5) Engaged in investment marketing or employed others to engage in

investment marketing, in violation of the provisions of section 9(c1);

(6) Engaged in investment marketing, in violation of the provisions of

section 9(f). (b) A person who is convicted of having committed one of the following shall

be punishable by imprisonment for a term of one year, or by imposition of a fine in an amount five times the size of the fine prescribed in section 61(a)(2) of the Penal Code, and if a corporation is so convicted – it will be subject to a fine which is twice the size of the said fine:

(1) Held or purchased securities for himself, in violation of the provisions

of section 4(a);

(2) Managed investment portfolios for a family member or for a corporation of which he or a family member of his are controlling shareholder, in violation of the provisions of section 4(b);

(2a) Provided false or misleading information in an application for a license

pursuant to section 5, or in reporting to the ISA pursuant to section 27.

(3) Served as an office holder in a licensed corporation, in violation of the provisions of section 9(d);

(4) Received a benefit in connection with investment advising, investment marketing or the execution or abstention from executing a transaction, in violation of the provisions of section 17(a);

(5) Granted a benefit, either directly or indirectly, to one of his employees,

branches or divisions, in connection with investment advising, investment marketing or the execution or abstention from executing a transaction, in violation of the provisions of section 17(c);

(6) Stipulated the calculation of the wages and reimbursement of expenses

for which a client will be charged in a manner which is in violation of the provisions of section 17(d);



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(7) Provided advice or executed a transaction with regard to a financial asset to which an institutional body which is an interested party in the adviser or in his employer, has a connection, in violation of the provisions of section 17A;

(8) Entered into an irregular agreement with an institutional body, without

obtaining approval for such, in violation of the provisions of section 17B(a);

(9) (Deleted);8

(10) Used the term “advising” or a word derived therefrom in the name

through which he conducts his business, or in an advertisement, in violation of the provisions of section 20B;

(11) As a non-licensee, engaged in investment advising through the

media, without including a notice as described in section 3(b);

(12) Made an offer to provide services, in violation of the provisions of section 3A;

(13) Disclosed the content of information or document which he received

by virtue of his position, in violation of the provisions of section 28(d)(2).

(b1) A person who acted intentionally to prevent or to cause the failure of an

adjudication proceeding regarding a violation, or an administrative enforcement proceeding pursuant to chapter 8-D of the Securities Law, as applied in Chapter G-2, will be punishable by imprisonment for a term of three years, or by imposition of a fine in an amount two and one half times of the fine prescribed in section 61(a)(4) of the Penal Code, and if a corporation committed these acts – it will be subject to a fine which is five times the size of the said fine.

(c) (Repealed.) (d) (Repealed.)

8 An investment adviser who properly had holdings in a company that issued exchange-traded notes prior to 1 June 2010 will continue to be subject to the language of the former section 17c of the law (“Notwithstanding the provisions of any relevant law, an investment adviser or a corporation with which the adviser is affiliated will not issue exchange-traded notes”), through 10 August 2013.



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Corporate director’s liability [Amended: 2011 (Amendment 2)]

40. If an offense, as described in section 39, is committed by a corporation, the corporation’s directors and its general manager will be liable, and if the offender is a partnership, the partners – other than the limited partners – will be liable, unless they have proved that one of the following conditions have been met: (1) That the offense was committed without their knowledge and that there was

no reason that they should have known of its commission, or that they could not have known of it.

(2) That they have taken all reasonable measures in order to prevent the violation.

Issuance of documents from the ISA through secure electronic mail [Amended 2009 (Amendment 2)]

40A.9 The provisions of Chapter 7B of the Securities Law will apply, mutatis mutandi, to any notice, instruction, demand or any other document that the ISA or an employee authorized for such purpose may, pursuant to this law, deliver to a licensed corporation, or to a party which has submitted an application to become a licensed corporation.

Chapter H-1: Arrangement To Prevent the Initiation of Proceedings or to Conclude

Proceedings, Subject to Conditions [Amendment 2011 (Amendment 2)]

Definitions [Amendment 2011 (Amendment 2)]

40B. In this chapter –

“Proceedings” - a proceeding for the adjudication of a violation or an administrative enforcement proceeding, pursuant to Chapter 8-D of the Securities Law, as applied through Chapter G-2, or a criminal investigation pursuant to section 56C of the Securities Law, as applied through section 29(c), whichever is relevant;

“Violation,” “offense” - as defined in section 29(a).

9 Pursuant to section 6 of the 2009 Amendment (Amendment 2), section 40a will take effect on the date on which the regulations pursuant to section 44J of the Securities Law take effect, or on the date that rules enacted pursuant to section 44K(a) of the Securities Law take effect, whichever is later. The Amendment further provides that notwithstanding the provisions of section 40A of this law, for the 60 days following the said date of entry into force, any instruction, demand, notice or other document which has been issued pursuant to the provisions of section 40A will also be issued to the addressee in the manner that had been used prior to the date of entry into force.



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Authority of the ISA Chairman or of the District Prosecutor to enter into an arrangement, subject to conditions, to avoid the initiation of a proceeding or to conclude a proceeding 40C.The authority of the ISA Chairman and of the District Prosecutor’s to enter into an

arrangement with conditions, to avoid the initiation of a proceeding or to conclude a proceeding, whichever is relevant, pursuant to the provisions of Chapter 9-A of the Securities Law, will be available to them regarding a violation or offense, and the provisions of that Chapter will apply for this purpose, mutatis mutandi.

Chapter I: Miscellaneous Provisions Fees [Amended: 2005 (Amendment 2), 2010]

41. (a) The Minister of Finance, in consultation with the ISA and with the approval of the Knesset Finance Committee, may prescribe fees to be paid to the ISA by applicants for licenses, by licensees, by those requesting to be registered in the foreign service providers register or by those registered in it pursuant to the provisions of Chapter B-1, and may establish provisions regarding linkage and interest differentials to be paid in the event of a delay in the payment of fees that are prescribed pursuant to this section, and regarding the application of the Tax Ordinance (Collection) to the collection of such fees and linkage and interest differentials.

(b) If a licensee or a party registered in the foreign service providers register fails to pay a fee which it is required to pay pursuant to the provisions of sub-section (a) within one year from the date set for its payment pursuant to the provisions of the said sub-section, the licensee’s license will be suspended or the registration will be deleted, whichever is relevant, beginning on the date set for such in a warning which was delivered to the party by the ISA, until payment of the fee is made, together with the linkage and interest differentials described in the provisions of the same section. A licensee whose license has been suspended pursuant to the provisions of this sub-section will give notice of such to his clients immediately and in writing. A notice regarding the deletion of a registration from the foreign service providers register pursuant to the provisions of this section, will be delivered in accordance with the provisions of section 10G.

(c) The renewal of a license that has been suspended or revoked pursuant to

this law or the renewal of a registration in the foreign service providers register that has been deleted pursuant to this law will depend on the payment of the licensee's debts or of the party whose registration was



59

deleted, whichever is relevant, arising from the non-payment of the fee or of the linkage and interest differentials which the party was required to pay pursuant to the provisions of sub-section (a).

Modification of the First Schedule [Amended: 2011 (Amendment (2)]

41A. The Minister of Finance, may, in an order and in accordance with the ISA’s recommendation or in consultation with it, and with the approval of the Knesset Finance Committee, modify the First Schedule.

Implementation and regulations

42. The Minister of Finance is in charge of the implementation of this law, and may enact regulations regarding any matter relating to its implementation, in accordance with ISA’s recommendation or following consultation with it; regulations pursuant to this section will be enacted with the approval of the Knesset Finance Committee.

Amendment of the Banking Law (Licensing) Amendment 10

43. Amendment of the Banking Law (Licensing) – 1981.10 Amendment of the Banking Law (Customer Service) Amendment 4

44. Amendment of the Banking Law (Customer Service) – 1981.7 Amendment of the Banking Ordinance – Amendment 19

45. Amendment of the Banking Ordinance, 1941.7 Amendment of the Joint Investments Law

46. Amendment of the Joint Investments Trust Law – 1994. 7 Entry into force and transitional provisions for certain sections [Amended 1996, 1997]

47. (a) Sections 2 through 8, 10, 39 and 40 will enter into force on the 26th of Kislev, 5757 (1 July 1997).

(b) Sections 13, 16(b) and (c), 17, 18 and 26, to the extent they relate to those

who were clients of an investment adviser or a portfolio manager prior to the publication of this law, shall enter into force six months after the date of such publication.

10 The text of that law has been updated to include the amendment and it is therefore omitted here.



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(c) For the purposes of sub-sections (a) and (b), an individual or corporation

engaged in investment advising or portfolio management on the date of the publication of this law, until the 25th of Sivan 5757 (30 June 1997), will be viewed as being licensees pursuant to this law.

Transitional provisions [Amended 1998, 2005 (Amendment 2)]

48. (a) In this section – “examinations” – examinations established pursuant to sections 7 and 8 of this law.

“determinative period” – the period beginning on the 2nd of Elul, 5754 (9 August 1994) and ending on the 25th of Sivan, 5757 (30 June 1997).

(b) For the purpose of receiving a portfolio manager’s license, a party who was engaged in Israel in portfolio management throughout the determinative period will be exempt from the examinations, except for the examination in professional ethics.

(c) For the purpose of receiving an investment adviser’s license, a party who was

engaged in Israel in investment advising or in portfolio management throughout the determinative period will be exempt from the examinations, except for the examination in professional ethics.

(c1) The provisions of sub-sections (b) and (c) will apply to whoever submits an

application for a license with an exemption from the examinations as described in those sub-sections until the 3rd of Shvat, 5766 (1 February 2006).

(d) A party that on the 6th of Tamuz 5758 (30 June 1998) was engaged in

investment advising or portfolio management, whichever is relevant, by virtue of a temporary license, will be exempt, until the 22nd of Tevet 5760 (31 December 1999), from the examinations, except for the examination in professional ethics.

(e) (Deleted.)

Publication in the Official Gazette

49. This law will be published within 30 days from the date of its passage.



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First Schedule

(The definition of a “qualified client” in section 1)

1. A joint investment trust fund or a fund manager. 2. A management company or provident fund as defined in the Provident Funds Control

Law. 3. An insurer. 4. A banking corporation or an auxiliary corporation as defined in the Banking Law

(Licensing), other than a joint services company. 5. A licensee. 6. A stock exchange member. 7. An underwriter in compliance with the qualification conditions listed in section 56(c) of

the Securities Law. 8. A corporation, other than a corporation which was incorporated for the purpose of

receiving services, with equity exceeding 50 million NIS; in this paragraph, the term “equity” – includes the definition given to that term by foreign accounting rules, international accounting standards, and accepted accounting principles in the United States, as defined in sections 17(b)(1) and 36 of the Securities Law.

9. An individual regarding whom one of the following conditions is met and who has given his consent in advance to being considered a qualified client for the purpose of this law: (1) The total value of the cash, deposits, financial assets and securities – as defined in

section 52 of the Securities Law – owned by the individual exceeds 12 million NIS. (2) The individual has expertise and skills in the capital market field or has been

employed for at least one year in a professional position which requires capital market expertise.

(3) The individual has executed at least 30 transactions, on average, in each quarter during the four quarters preceding his consent; for this purpose, the term “transaction” will not include a transaction executed by a portfolio manager for an individual who has entered into a portfolio management agreement with the manager.

10. A corporation which is wholly owned by investors who are among those listed in this Schedule.

11. A corporation which was incorporated outside of Israel, whose activity has characteristics similar to those of a corporation listed in this Schedule.

First Schedule A

Section 24A

“Large Portfolio Management Company” – a company that has a license to manage investment portfolios to which on December 31 at least one of these two conditions applies:

(1) It and other companies with a license to manage investment portfolios belonging to the same group had, jointly, more than 50 clients the total value of whose assets is greater than five billion new shekels; (2) It and other companies with a license to manage investment portfolios belonging



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to the same group had, jointly, more than 1,000 clients;

A company will continue to be considered a large portfolio management company even if said conditions have ceased to apply to it until the end of three years after neither of those conditions applied to it; “Group” – a group of corporations with connections of control between them, including a

subsidiary and an associated company as defined in the Securities Law, and a company controlled by a company that controls any one of them;

“Total value of assets” – the value of the securities and financial assets managed by the

portfolio management company.

Second Schedule Section 38A

(1) A licensee who has provided investment advice through a media outlet without including

a notice of whether or not the licensee has a personal interest in the matter, or a notice that the licensee’s provision of advice cannot serve as a substitute for advice which takes into consideration the details and special needs of the particular person, in violation of the provisions of section 3(b) – unless the licensee has provided the media outlet with such notices and received commitments that the said notices would be included in the media outlet’s publication;

(2) Failed to indicate in an agreement with a client which services will be provided by a foreign service provider or regarding which financial assets and securities those services would be provided, in violation of the provisions of section 10D;

(3) Failed to immediately notify the client regarding the termination of the activity of a foreign service provider, in violation of the provisions of section 10G;

(4) Failed to clarify with the client the purposes of the investment, the client’s financial condition – including his securities and financial assets – or the other circumstances that are required, even if the client has agreed to provide information regarding these, in violation of the provisions of section 12;

(5) Failed, before beginning to provide service, to enter into a written agreement with the client or to provide the client with a copy of the said agreement, or failed to include in such an agreement the subjects that the licensee is required to include in it, or failed to update the client’s details in the agreement, in violation of the provisions of section 13;

(6) Failed to include in the records of conversations with a client, the details prescribed pursuant to section 15(a) or failed to prepare or retain details as stated, or did not deliver them to the client, in violation of the provisions of that section;



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(7) Ordered securities for a client for the offering of which a corporation related to him or a corporation related to a corporation in which the licensee is employed served as an underwriter, without obtaining the client’s written consent to such in advance, or failed to report such an order to the client within 30 days from the date on which it was placed, in violation of the provisions of section 16(b);

(8) Purchased securities for a client for the offering of which a corporation with which he licensee is affiliated or a corporation which is affiliated with a corporation in which the licensee is employed served as an underwriter, before three months have passed from the date on which the underwriting commitment was fulfilled, without obtaining the client’s written consent to such [specific transaction] in advance, or purchased such securities for a client after three months but less than six months have passed from the date on which the underwriting commitment was fulfilled, without obtaining the client’s written consent to such in advance, or failed to report to the client about the said purchase within 30 days from the date of its execution, in violation of the provisions of section 16(c);

(9) Purchased securities for a client for the offering of which a corporation with which he licensee is affiliated or a corporation which is affiliated with a corporation in which the licensee is employed served as an underwriter, off the stock exchange or at a price exceeding the known stock exchange rate on the date of the purchase, in violation of the provisions of section 16(d);

(10) Failed to inform clients, wherever the licensee conducts business, in a clear and noticeable sign or in another manner as ordered by the ISA Chairman, of the fact that the licensee is engaged in investment marketing and not in investment advising, or regarding the fact that the licensee is a corporation which is affiliated with an institutional body or marketing agent, whichever is relevant, or to which institutional bodies’ financial assets the licensee has a connection, in violation of the provisions of section 16A(a)(1), or failed to disclose to each client, prior to the entry into a contractual relationship with the client, in language that the client can understand, orally and in a written document, or failed to publish on the licensee’s website, the above-mentioned matter of the licensee being engaged as described above or the matter of the licensee being a corporation such as is described above or the connection that the licensee has with the financial assets and the significance thereof or the fact that the licensee has preferred these financial assets, in violation of the provisions of section 16A(a)(2), or failed to include a notice as to as to whether the licensee has a personal interest in the matter or not, or failed to include a notice that investment marketing does not serve as a substitute for marketing which takes into consideration the details and special needs of the particular person, in violation of the provisions of section 16A(d).

(11) Failed to inform the client of the special risk involved in the execution of one of the transactions listed in section 18(c), in violation of the provisions of section 18(a);

(12) Executed a transaction among those listed in section 18(c) on behalf of a client, without the client having approved the particular transaction or all transactions involving the



64

same type of risk, in advance and in writing, in violation of the provisions of section 18(b);

(13) Failed to maintain confidentiality regarding any information of which the client has made the licensee aware, including with regard to documents that were transferred to the licensee and the content thereof or any other detail relating to the transactions regarding which the licensee engaged in advising or marketing vis-à-vis the client or which the licensee has executed in the client’s account, in violation of the provisions of section 19;

(14) Advertised in the media, in a circular, by mail, electronic mail or facsimile transmission, on the Internet or through any other means, that the adviser engages in investment advising with relation to financial assets to which a particular institutional body has a connection, in violation of the provisions of section 20A;

(15) Engaged in the occupation which is the subject of the license without complying with the conditions and the amounts established regarding insurance, equity, bank guarantee, a deposit or securities, in violation of the provisions of section 20C.

(16) Failed to hold the licensee’s clients’ securities or financial assets separately from the licensee’s own, in violation of the provisions of section 22(1).

(17) Failed to hold clients' securities and financial assets separately, or to maintain separate records regarding the funds, securities and financial assets of each client, in violation of the provisions of section 22(2).

(18) Managed a cash account, a securities and financial assets account for the licensee’s clients other than at a banking corporation, a bank outside of Israel, with a stock exchange member or with a party that is authorized according to the law in the country in which such party operates, to manage a cash account, securities or financial assets account, in violation of the provisions of section 22(3).

(19) Failed to execute transactions for clients separately from those executed for the licensee’s own account, in violation of the provisions of section 22(4).

(20) Failed to credit and charge clients’ accounts on the day the transactions are executed, in violation of the provisions of section 22(5).

(21) Used a client’s funds, securities or financial assets other than for the purpose of executing transactions for such client and other than in accordance with the agreement entered into with such client and with the power of attorney received from such client, in violation of the provisions of section 23(a).

(22) Executed a transaction with a client or received a benefit from a client’s asset, without obtaining the client’s consent in advance and in writing to the particular transaction or to the particular benefit, in violation of the provisions of section 23(b).



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(23) Conditioned the licensee’s compensation on the profit that the client received from a transaction or from the number of transactions that were executed for the client, in violation of the provisions of section 24.

(23a) Violated provisions under Sections 24B(b) to (c) or (e) concerning the service or

appointment of external directors or restrictions on serving on the board of directors of a large portfolio management company;

(23b) More than two financial bodies served simultaneously as a director, contrary to the

provisions of Section 24B(d), or served as a member of the audit committee, contrary to the restrictions determined in Section 24(H)(d);

(23c) Violated the provisions of Section 24C(b) or (c) concerning a restriction on the serving

of a chief executive officer and the powers given to the chief executive officer; (23d) Violated provisions under Section 24D concerning qualification conditions for

directors and committee members, concerning the internal controls and internal enforcement plan;

(23e) Violated the provisions of Section 24E(a) or (b) concerning the conduct of board of

directors’ meetings; (23f) Failed to keep minutes of meetings of the board of directors or audit committee as

required under Sections 24E(c) or 24H(j); (23g) Violated the provisions of Section 124(2) in that the board of directors did not approve

the internal controls and the internal enforcement plan for a period of more than six months;

(23h) Violated the provisions of Section 24F(4) or (5) in that the board of directors did not

perform one of the duties under said Section for a period of more than six months; (23i) Violated the provisions of Section 24H(1) or (2) in that the audit committee it

appointed did not discuss the internal auditor’s work plan or the ways of correcting shortcomings he found;

(23j) Violated provisions under Section 24(H)(c) or (d) concerning the composition of the

audit committee it appointed and the restrictions on serving on it; (23k) Violated the provisions of Section 24H(g) or (h) concerning the holding of audit

committee meetings.

(24) Failed to maintain records of each transaction executed for a client, of each instance of providing advice to a client or of each instance of marketing carried out vis-à-vis a client, or failed to maintain such records for a period of seven years, in violation of the provisions of section 25.



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(25) Failed to provide a client with a detailed statement, in violation of the provisions of

section 26, or failed to include an item that was required to have been included in the statement in accordance with provisions enacted pursuant to section 27C, provided that a special requirement has been established, pursuant to that section, to include the item.

(26) Violated an instruction issued pursuant to section 28(b).

(27) Failed to provide information or a document in violation of a request from the ISA Chairman or from an ISA employee authorized for such, which was addressed to a supervised entity, as defined in the Securities Law, in violation of the provisions of section 29(b) or in violation of the provisions of section 56A1 of the Securities Law, as applied in section 29(c);

(28) Failed to provide a notice to the licensee’s clients or failed to publish an announcement in a newspaper, in violation of the provisions of section 38A(a), 38G or 40C.

(29) Insured, indemnified or paid a financial sanction in place of another party, in violation of the provisions of section 38J.

Section B

(1) Employed a person to act in the licensee’s name, in investment advising, investment marketing or portfolio management, in violation of an undertaking pursuant to section 7(b)(2) or (4) or (c)(1) or (2) or pursuant to section 8(b)(2) or (3), whichever is relevant.

(2) Received a benefit, either directly or indirectly, in connection with investment advising, investment marketing or portfolio management, execution of a transaction or non-execution of a transaction, which is not compensation or reimbursement of expenses received from the client, as established in an agreement pursuant to section 13(b)(3), in violation of the provisions of section 17(a);

(3) Gave one of the licensee’s employees or one of the licensee’s branches or one of its units, in connection with investment advising, investment marketing or portfolio management, execution of a transaction or non-execution of a transaction, a benefit which is determined upon consideration of the identity of the entity which has issued the securities that are the subject of the advice, marketing or transaction, or the identity of the entity that has a connection to the financial assets that are the subject of the advising, marketing or transaction, in violation of the provisions of section 17(c);

(4) Determined the calculation of the compensation or reimbursement of expenses for which the client will be charged for the investment advising, based on the identity of the entity issuing the securities or of the financial assets to which he has a connection, regarding which the advice was provided, or based on the client’s payment to such entity, in violation of the provisions of section 17(d);



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(5) Used the word “advising” or any word derived therefrom in the name under which the licensee conducts its business, or in one of the licensee’s advertisements, in violation of the provisions of section 20B.

(6) Failed to submit a report to the ISA or to provide it with a notice, explanation, specification, information or documents, in the manner or on the date prescribed for such, in violation of the provisions of sections 10G, 27, 27A, 27C, or 42, or in violation of provisions pursuant to sections 52AA, 52HHH, 54C(c) or 54F of the Securities Law, as applied in sections 38A, 38G and 40C, or failed to include, in a report, an item that the licensee was required to include in the report in accordance with provisions pursuant to section 27C(2), provided that a special requirement has been established, pursuant to that section, to note the item.

(7) Violated the provisions of Section 24C(a) concerning the appointment of the chairman of

the board of directors; (8) Violated the provisions of Section 24F(1) concerning the appointment of a chief

executive officer; (9) Violated the provisions of Section 24F(3) concerning the appointment of an internal

auditor; (10) Violated the provisions of Section 24H(a) concerning the appointment of an audit

committee.



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Third Schedule (Section 38B(a))

1. For a licensed portfolio manager company – a violation of a provision listed in Part A of

the Second Schedule:

Total Value of Assets

(In NIS)

Amount of Financial Sanction

(In NIS) Up to 50,000,000 50,000

From 50,000,001 to 500,000,000 100,000

From 500,000,001 to 5,000,000,000 150,000

Above 5,000,000,000 200,000

2. For a licensed portfolio manager company – a violation of a provision listed in Part B of

the Second Schedule:

Total Value of Assets

(In NIS)

Amount of Financial Sanction (In NIS)

Up to 50,000,000 125,000

From 50,000,001 to 500,000,000 250,000

From 500,000,001 to 5,000,000,000 375,000

Above 5,000,000,000 500,000

3. For a licensed investment adviser corporation or a licensed marketing agent corporation –

(1) A violation of a provision listed in Part A of the Second Schedule – the number of

licensees employed by the corporation, multiplied by NIS 25,000, up to an amount of NIS 200,000.

(2) A violation of a provision listed in Part B of the Second Schedule – the number of licensees employed by the corporation, multiplied by NIS 50,000, up to an amount of NIS 500,000.



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4. For a banking corporation – (1) A violation of a provision listed in Part A of the Second Schedule – NIS 400,000.

(2) A violation of a provision listed in Part B of the Second Schedule – NIS 1,000,000.

5. For an individual holding a portfolio management, investment advising or investment marketing license -

(1) A violation of a provision listed in Part A of the Second Schedule – NIS 10,000.

(2) A violation of a provision listed in Part B of the Second Schedule – NIS 15,000.

Fourth Schedule

(Section 38F)

(1) Violated one of the provisions described in the Second Schedule and which applies to the licensee, and during the three years preceding the violation had at least twice violated the same provision, and the ISA had informed the licensee regarding the commission of each of the said violations, separately, whether or not it had imposed a financial sanction for the commission of the violation;

(2) During the period of one year, violated the same one of the provisions listed in the Second Schedule which applies to the licensee, vis-à-vis a number of clients, as described below, as relevant:

(a) Regarding an offender which is a banking corporation or which is a licensee

having at least 50 clients – vis-à-vis at least 20 clients.

(b) Regarding an offender which is a licensee having at least 20 clients but less than 50 clients – vis-à-vis at least 10 clients.

(c) Regarding an offender which is a licensee having less than 20 clients – vis-à-vis

most of the clients. (3) Engaged in investment advising without having an investment adviser’s license or

engaged in investment advising other than as an individual or as the employee of a company that holds an adviser’s license, or as the employee of a licensed portfolio manager company which is also engaged in advising, or as an employee of or partner in a partnership that holds an adviser’s license, in violation of the provisions of section 2(a).



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(4) Engaged in portfolio management without being a licensed portfolio manager, or engaged in portfolio management other than as an employee of a licensed portfolio manager company, in violation of the provisions of section 2(b);

(5) Engaged in investment marketing without being a licensed marketing agent or

engaged in investment marketing other than as an individual or as an employee of a licensed marketing agent company, or as an employee of a licensed portfolio management company which engages in marketing as well, or as an employee of or partner in a licensed marketing agent partnership, in violation of the provisions of section 2(b1);

(6) Employed to act in its name, in investment marketing regarding financial assets that it

manages or which it offered or issued, persons who are not licensed marketing agents or licensed portfolio managers, in violation of the provisions of section 2(b2);

(7) Without being a licensee, provided investment advising through a media outlet

without including a notice as to whether or not the offender has a personal interest in the matter or a notice that the advice provided does not serve as a substitute for advice which takes into consideration the details and special needs of a particular person, in violation of the provisions of section 3(b), unless the offender provided the media outlet with the said notices and received commitments that the said notifications would be included in the media outlet’s publication;

(8) Made an offer to provide services in violation of the provisions of section 3A; (9) Held or purchased securities or units – as such are defined in the Joint Investments

Law – for the licensee’s own behalf, in violation of the provisions of section 4(a);

(10) Managed investment portfolios for a member of his family or for a corporation of which either he or a member of his family is a controlling shareholder, in violation of the provisions of section 4(b);

(11) Engaged in portfolio management, in violation of the provisions of section 9(a);

(12) Engaged to act in the licensee’s name, in investment advising, a person who is not

one of those listed in paragraph 9(b);

(13) Served as an office holder in a licensed corporation which is affiliated with a banking corporation, if the licensee also serves as an office holder or employee in the banking corporation or in another corporation which is affiliated with the banking corporation, in violation of the provisions of section 9(d);

(14) Engaged in investment marketing other than as stated in section 9(c1), in violation of

the provisions of section 9(f);



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(15) Favored the licensee’s personal interests or those of another over the benefit of the licensee’s clients, or favored the interest of one client over that of another, in violation of the provisions of section 11;

(16) Failed to adjust the advice or the marketing services provided to the licensee’s clients

or to adjust the type of transactions that the licensee carries out on the behalf of the clients to the needs and instructions of each client, in violation of the provisions of section 12;

(17) Failed to make proper disclosure to a client matters that are of material importance

with respect to the advice or marketing which the licensee provides and to the proposed transaction, in violation of the provisions pursuant to section 14;

(18) Failed to notify the client of the existence of a conflict of interest between the client

and the licensee or the licensed corporation in which the licensee works or is a partner, in the manner prescribed pursuant to section 15(a) or (b), or executed a transaction which involves a conflict of interest, without obtaining the client’s advance written consent, in the manner prescribed in section 15(a);

(19) In providing investment advice or in managing investment portfolios, favored the

licensee’s own securities or financial assets or those of a corporation affiliated with a corporation in which the licensee works or is a partner, because of the said affiliation, in violation of the provisions of section 16(a).

(20) Included a notice to the effect that the licensee has no personal interest in the matter,

when the licensee does have a personal interest in the matter, in violation of the provisions of section 16A(d).

(21) Provided advice or executed a transaction with respect to a financial asset to which an

institutional body, holding ten percent or more of any kind of means of control in the investment adviser, has a connection, in violation of the provisions of section 17A;

(22) Entered into an agreement with an institutional body without obtaining the advance

written consent of the ISA Chairman, and if the licensee is a banking corporation - , the consent of the Supervisor of Banks as well, in violation of the provisions of section 17B(a);

(23) Failed to notify the client of a special risk involved in the execution of a transaction

which is not one of the transactions listed in section 18(c), in violation of the provisions of section 18(a);

(24) Executed, on behalf of a client, a transaction which is not one of the transactions

listed in section 18(c) and which involves a special risk, without the client having given advance written approval for the particular transaction or for transactions involving the same type of risk, in violation of the provisions of section 18(b);



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(25) Engaged in underwriting, in violation of the provisions of section 20D(a), or engaged in an occupation which is not one of those listed in section 8(b)(1), in violation of the provisions of section 20D(b);

(26) Failed to provide a client with a report in violation of the provisions of section 26, if

the licensee should have known that such failure could mislead the client;

(27) Failed to submit a report to the ISA or to provide it with a notice, explanation, specification, information or documents, in the manner or on the date prescribed for such, in violation of the provisions pursuant to sections 27, 27A, 27C, or pursuant to section 42, or in violation of provisions pursuant to sections 52AA, 52HHH, 54C(c) or 54F of the Securities Law, as applied in sections 38A, 38G and 40C, respectively, if the licensee should have known that such a failure could mislead a reasonable investor;

(28) Included a misleading detail in the licensee’s reporting, in violation of the provisions

of sections 26(d) or 27C, if the licensee should have known that such a failure could mislead the client or a reasonable investor, as relevant;

(29) Disclosed the content of information or document received by virtue of his position,

in violation of the provisions of section 28(d)(2).

Yitzchak Rabin Avraham (Beiga) Shochat Prime Minister Minister of Finance

Ezer Weizmann Shevach Weiss

President of the State of Israel Chairman of the Knesset

chapter a: interpretation [amendments: 1997 (amendment 2 ... · investment portfolio management...

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