ISA close to signing recognition accord with European counterpart

Once deal completed, it will be easier and cheaper for locally listed companies to make public offerings and raise capital in EU states.

tery 224 (photo credit: Israel Securities Authority)
tery 224
(photo credit: Israel Securities Authority)
The Israel Securities Authority is in advanced talks to sign a mutual recognition agreement with a leading European securities authority. Once completed, it will be easier and cheaper for locally listed companies to make public offerings and raise capital in European Union member states. "We are in advanced stages of signing a mutual recognition of prospectuses agreement with a leading European securities authority, which is expected to be finalized as early as the end of this month," Moshe Tery, outgoing chairman of the Israel Securities Authority, told The Jerusalem Post Thursday at the ISA's offices in Tel Aviv. "The agreement would be another vote of confidence for Israel's capital market, standards of regulation and reputation as a strict and efficient enforcer." The mutual recognition of prospectuses serves as a "single passport" for issuers of securities wishing to offer their securities in more than one member country. The principle of automatic mutual recognition means that companies will no longer have to ask each member country for regulatory approval of their prospectus for potential investors, or produce duplicative sets of documentation or respond to numerous additional national requirements. "Thus, an Israeli company listed on the Tel Aviv Stock Exchange whose prospectus has been approved by the ISA will be able to issue its securities at stock exchanges of member countries in the agreement," he said. "Furthermore, mutual recognition of prospectus provisions is also expected to boost activity in the local market and encourage dual listings, since our market is also open on Sunday, and therefore six times a week." Tery, who has been chairman of the ISA since 2002 and will step down at the end of the month, said he had made it his prerogative to open the local financial market to foreign investors by introducing globally recognized standards. "We have turned the market into an attractive place to make money," he said, "by raising the awareness of Israeli public companies and the market to adopt international standards of reporting and regulation. "Our regulations focus on transparency, improved disclosure of financial information, as well as corporate controls, governance and ethics, all brought in line with high international standards." The ISA regulates the fair disclosure of about 650 listed companies and more than 800 mutual funds, the proper and fair conduct of the TASE, and portfolio managers and investment advisors. Among the changes endorsed by Tery to further globalize Israel's capital markets are the introduction of dual listings, market makers and instruments such as real estate investment trusts (REITS). The ISA also has signed dozens of consultation and cooperation agreements with countries around the globe - most recently Romania, India and Argentina - and has upgraded reporting standards with the imminent implementations of XBRL, which will allow investors worldwide to read financial reports of Israeli companies in the language of their choice, and IFRS, or international financial reporting standards. "Just as we became a hi-tech center and R&D center for the high-technology needs of companies around the world and a strong export country," Tery said, "we can become a regional financial center providing financial services such as the management of hedge funds and portfolios and consultancy to the global community, which in turn could represent a growth engine for the economy. "The challenge is to find a balance between protecting the investor public and developing the capital market's competitiveness by encouraging the entry of new participants, diversifying financial instruments and improving the market's infrastructure." In making the global community aware of the ever-growing sophistication of Israel's financial markets, Tery said, more steps needed to be advanced following the Bachar capital markets reform to lift bureaucratic and regulatory barriers in an effort to attract foreign capital. Among the recommended changes are legislation amendments to the securitization processes and REITS, the introduction of registration and licensing incentives to lure foreign funds to come to Israel and tax changes. Tery said he regretted that the authority had until now not done enough to educate investors to be more knowledgeable and equipped to absorb the complexity of new financial instruments and a more sophisticated financial market. "However, we have recently established a division at the ISA that will be dealing with this issue in cooperation with the Education Ministry and other ministries," he said. Tery said incoming chairman, Prof. Zohar Goshen, who will take over February 1, was the right candidate to lead the ISA toward greater achievements advancing global standards. "I don't know yet where my next job will take me," he said with a smile, "but I will surely stay around."