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Until recently, an offer of foreign mutual fund units to the public in Israel was possible only under a fund prospectus approved by the Israel Securities Authority (ISA), unless the ISA exempted the fund from its duty of publishing such prospectus. Since this process was expensive and difficult, such exempts were never given by the ISA, and as a result foreign mutual funds were not offered to the public in Israel. In order to encourage foreign mutual funds to offer their units in the Israeli capital market, the Israeli legislator has recently changed the regulatory scheme and approved new rules regarding foreign fund unit offerings. According to this new legislation, the ISA will be authorize to permit the offer of foreign fund units according to the prospectus under which units are being offered in the country of origin of the fund, as long as the foreign fund meets several criteria, including:

  1. The foreign fund operates under the laws of the US or certain EU countries and has received a permit from the relevant regulatory agency of its country;
  2. The net asset value of the foreign fund is at least $50 million and its units are offered for at least six months prior to their offering in Israel;
  3. If the fund is traded abroad, the units are listed for trading on the NYSE, AMEX, NASDAQ or LSE;
  4. The total net assets manages by the fund manager is at least $20 billion;
  5. The manager of the foreign fund has an experience of managing not less than five funds whose units are offered to the public for at least five years and during the two years prior to the offering in Israel their total net asset value was at least $500 million;
  6. The foreign fund manager deposited a financial guarantee issued by an Israeli bank, for the benefit of the ISA in amount of NIS 1 million and, in addition, a deposit of securities as specifies in the regulations;
  7. The foreign fund manager appointed an Israeli representative;
  8. Identical rights are given to holders of units purchased in Israel in comparison to holders of units of the fund purchased in the foreign markets.

In addition, the new regulations set the proceedings for the application for the abovementioned permit, including orders regarding the duty to issue reports to the ISA. This new legislation will enable leading financial bodies from abroad to enter the Israeli capital market and, hopefully, will improve the competition in this market by increasing and extending the investment opportunities.  


Amit Steinman is a partner at the Israel based law firm S. Horowitz & Co. He advises on the full range of corporate and commercial transactions with a particular focus on mergers and acquisitions, joint ventures, equity investments, capital markets and acquisition financing. His clients include multinational corporations, financial institutions, private equity funds and start-up companies, spanning a wide range of sectors including technology, energy, infrastructure, telecoms, homeland security, financial services, media and clean-tech.

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