Security regulators to impose sanctions on market abusers

Sanctions will "reinforce proper conduct norms for players on the market, to the benefit of investors," shorten corresponding sanction time.

By SHARON WROBEL
January 18, 2011 23:04
3 minute read.
Illustrative photo

stocks 311. (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.”

Be the first to know - Join our Facebook page.


On Monday night, the Knesset passed the administrative enforcement law in second and third (final) readings.

The 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 units.

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 officers.

Financial sanctions will be limited to a maximum fine of NIS 1 million for individuals and NIS 5m. for corporations.

Other sanctions 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 appropriate.

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 violators’ business.

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.


Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection

By GLOBES, NIV ELIS