(photo credit: AP)
The Israel Securities Authority is determined to swiftly and efficiently crack
down on market abuse and misconduct through the introduction of a new law that
will enable administrative proceedings.
“From today we will have another
enforcement channel enabling us to act against noncriminal violations in the
capital market, which will significantly contribute to reinforcing proper
conduct norms for players on the market, to the benefit of investors,” said
Shimshon Albek, legal adviser at the ISA, at a press conference in Tel Aviv on
Tuesday. “Administrative enforcement will ensure that the public’s money is
managed in a better way.”
On Monday night, the Knesset passed the
administrative enforcement law in second and third (final) readings.
ISA said that the legislation will provide the regulator with enforcement
alternatives, while creating efficient and effective tools for noncriminal
enforcement in addition to criminal enforcement.
Violations which will
come under the administrative enforcement law include insider trading; deceitful
or false representation of information for the promotion of deals on the capital
market; performance of coordinated deal actions to influence stock market
prices; and misuse of fund assets. Other violations in the investment advice
area include the provision of benefits to advisers to advance preferred products
and payment offers by fund managers to promote the purchase of fund
The administrative enforcement procedure will enable the ISA to
levy mostly financial sanctions and business restrictions on corporations and
individual market players from mutual fund managers and investment advisers to
investment portfolio managers, as well as on CEOs and financial
Financial sanctions will be limited to a maximum fine of NIS 1
million for individuals and NIS 5m. for corporations.
include a restriction of up to one year from business activity or license
withdrawal for up to one year.
Through the law, the ISA seeks to
streamline enforcement, shorten the time between the violation and the
corresponding sanction, and match the level of punishment to the violation. As a
result, the criminal procedure will only be exercised when
In practice, the law offers an administrative alternative
for enforcing the Securities Law and its regulations, which up until now was
only possible by means of criminal indictments. While a system of financial
sanctions has also been available, it is tailored to deal with straightforward
violations of the law and is insufficient for dealing with complex violations
such as in-depth factual investigations, the ISA said.
“In many cases the
criminal measures are too drastic and inappropriate. The criminal procedure is
cumbersome and costly, while fine imposition is too light a punishment that does
not provide sufficient deterrence to violators of the Securities Law and its
regulations,” Albek said.
The regulations will concern the issues
regulated under the three laws empowering the ISA and under which it authorized
to act – the Securities Law of 1968, the Joint Investment in Trust Law of 1994
and the Investment Advice Law of 1995.
This is in line with the authority
given to other regulators around the world, the ISA said.
As part of the
implementation of the new law, the ISA will establish an administrative
enforcement committee over the next few weeks, which will be authorized to
impose various sanctions, such as significant fines and restrictions on
The committee, which will be chaired by an ISA
employee, will consist of three members appointed by the justice minister. The
decisions by the committee will be appealable to the Economic Court, which was
established last month.