Securities Authority seeks tough measures

Brokers, dealers, other financial players will face stricter supervision, regulations

By SHARON WROBEL
March 2, 2010 06:48
2 minute read.
Zohar Goshen.

zohar goshen 311. (photo credit: Courtesy)

 
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The Israel Securities Authority is taking steps to tighten supervision of financial players in an effort to crack down on irregularities in the capital market in a faster and more efficient way.

“More than a year after the outbreak of the global financial crisis the lessons have not yet been fully implemented,” ISA Chairman Zohar Goshen said Monday at a press conference in Tel Aviv. “The ISA will implement the necessary lessons in the area of accountability and supervision of market players, especially companies at risk.”

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The lessons of the global financial crisis have demonstrated the need for putting credit-rating agencies under supervision, he said. Flaws in the way rating companies operate, mainly in the rating systems used, in conflicts of interest and in a lack of transparency have been revealed, he added.

The ISA is preparing proposals for legislation to expand regulation of financial advisers, brokers and dealers, who have not been been supervised, Goshen said. It also would recommend legislation to regulate alternative trading systems, which are non-exchange trading venues such as electronics communication networks and call markets that match buyers and sellers who make large trades, he said.

The ISA this year plans to establish an independent body that will put auditors and accountants under supervision, similar to the Public Company Accounting Oversight Board in the United States, Goshen said.

The PCAOB is a private-sector, nonprofit body created by the Sarbanes-Oxley Act of 2002. It oversees the auditors of public companies to protect investors’ interests.

Goshen said he was confident legislation for the establishment of a court for economic affairs, which has passed its first reading in the Knesset and is awaiting the approval of the Knesset Finance Committee, would be passed this year and start operating under the auspices of the Tel Aviv District Court. Such a court would deal mainly with issues of corporate and securities law, he said.



“Today, enforcement tools to handle breaches of the securities laws mainly entail launching criminal proceedings that are limiting, timely and costly,” Goshen said.

“The amendment, which is expected to get its first reading in the Knesset in the coming days, will provide us with more-efficient enforcement tools, such as financial sanctions in substantial sums, compensation payments to those affected by the breach, and other penalties to correct the breach and prevent its repetition.”

Goshen presented the ISA’s new technology system for collating information on the trading of financial instruments in capital markets, which is expected to start operating in August.

“The system will be like a big brother watching over capital markets,” he said. “It will enable us to identify irregularities in trading and portfolio management in a way that was not possible until now.”

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