The Knesset Finance Committee this week approved the long-awaited changes to the underwriting method in Israel, which will ease local activities in the primary market and encourage the entry of foreign participants.
The enhanced method, proposed by the Israel Securities Authority, will allow underwriters to allocate securities to institutional investors in a public offering as is the case in the US and not only through a Dutch auction - a procedure that uses a bidding process to find an optimal market price for a stock - but also according to their own discretion.
The new practice will be limited to offerings to institutional investors. After days of negotiations in an effort to solve disagreements between the banks and the brokers, the Committee agreed to pass the new regulations for a period of only two years instead of the five demanded by the ISA.
The approved regulations prohibit the underwriter, affiliated with a banking group, to act as a pricing underwriter (one who regularly participates in fixing the issuing price), in issues of companies whose overall obligation to the underwriter's group is above 15% of the overall balance of the issuing company and not 20% as suggested by the ISA.
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