Generally speaking, the process of legislation or secondary legislation in securities laws originates with
the Securities Authority. For the most part, the initiative for a law or regulation arises against the
backdrop of the need for initial regulation of a matter not yet regulated under the existing laws that
govern securities, or where existing legislation needs amending.

To commence the process, the Authority’s staff formulates guiding principles as regards the bill or the
proposed regulations. This stage of formulating the idea includes comprehensive research of the issue,
internal debates, an examination of foreign laws and of how the issue is addressed in various parts of the
world, consultation with relevant governmental concerns (the Ministry of Finance and the Ministry of Justice).
Also, comments are sometimes solicited from outside concerns such as professional experts, public
representatives, public bodies, as well as certified public accountants and lawyers engaging the relevant
field. The next step is to compose an initial draft of the proposed enactment along with explanatory notes, in
line with the guiding principles already formulated. The draft determines the details of the proposed
arrangement, taking pains to ensure clarity of wording as well as uniformity with other, similar enactments.

The draft is referred for discussion to the Authority’s plenum, which decides whether or not to approve
the proposed wording and expedite its progress along the pathway to legislation.

Following approval by the Authority’s plenum, the proposed draft is referred to the Minister of
Finance. At this stage, a distinction must be drawn between secondary legislation (regulations) and primary
legislation (laws):

The legislative route followed by regulations is shorter. The laws by which the Authority is governed and
which it enforces (the Securities Law and also the Joint Investments in Trust Law and the Regulation of
Investment Counselling and Portfolio Management Law) provide that the Minister of Finance is also responsible
for the implementation of those laws, and is entitled, in his official capacity, to enact regulations in all
matters pertaining to the implementation of the laws. Some of the laws embody the duty of consulting with
another concern. Following approval of the proposed wording by the Ministry of Justice, it is referred, in
most cases, to the Knesset Finance Committee. The Committee holds a discussion on it, with the participation
of representatives of the Securities Authority, representatives of various other ministries, other pertinent
concerns, and representatives of the Attorney General. The committee is entitled to invite experts on the
matters tabled for discussion to take part in its debates. It may, indeed, invite anyone having an interest in
the regulations. Once the Knesset Finance Committee has discussed and approved the regulations, the Minister
of Finance signs the regulations and they are published in Gazettes – the official publication of the
State of Israel. The binding wording of the regulations, or the amendment to the regulations, and the date of
their coming into force is as published in Gazettes (Kovetz HaTakanot – Subsidiary Legislation.

In case of primary legislation, the bill undergoes a lengthier process. In accordance with the decision of
the Minister of Finance, the Legal Advisor to the Ministry of Finance disseminates a law memorandum, setting
forth the wording of the bill and explanatory notes prepared by the Securities Authority, as formulated
together with the Ministry of Finance staff. The memorandum gives the wording of the proposed law or
amendment, along with explanatory notes on each and every Article, or, alternatively, in relation to every
idea referred to in the memorandum. Likewise, the memorandum denotes the economic implications of the bill.

The object of the law memorandum is to allow for the possibility of a public debate on the bill while
obtaining reactions and comments from various Government bodies and from the public. The memorandum is
therefore distributed to a large number of relevant concerns. The memorandum is referred to the Supreme Court, to the Governor of the Bank of Israel, the Government Secretary General, and various ministries, to the law faculties, the Bar Association and so forth. Responses to the memorandum may be entered over a period of 21 days from date of distribution.

 

Once the comments on the law memorandum are examined by the Securities Authority and the Ministry of Finance
and are integrated into the memorandum insofar as necessary, and after obtaining the approval of the Deputy
Attorney General (Fiscal) and of the Budgets Commissioner at the Ministry of Finance, the memorandum is placed
as a bill before the ministerial committee for legislative affairs, noting the reservations made by government
ministries, and which were not incorporated into in the bill. In addition, the representatives of ministries,
both those expressing reservations and those supporting the bill, may attend the discussion held at the
ministerial committee for legislative affairs and present their positions to the committee.

On approval of the bill by the ministerial committee, the minutes of the discussion and the bill itself are
distributed to government ministries. Absent any objections to the draft, the resolution of the ministerial
committee takes the force of a government resolution within two weeks. The Ministry of Finance, together with
the Legislative Drafting Commission at the Ministry of Justice, prepares a draft of the bill that is published
in Gazettes (Bills). The wording contains a preface, which presents an overall picture of the background to
the law and the need for it, as well as specific explanatory notes to the various Articles of the bill. The
bill is then referred to the Knesset Speaker and tabled before the Knesset.

The initial debate on the bill is held after the bill has been before the Knesset for at least two days,
unless the Knesset Finance Committee, at the Government’s request, has decided to bring refer the
debate. The Minister of Finance or his deputy presents the bill to the Knesset plenum, which holds a general
debate on the need for the proposed law. The Knesset vote – on first reading – decides wither or
not the bill will pass to the appropriate committee for debate.

Bills relating to securities are referred to the Knesset Finance Committee. The committee discusses the bill
together with representatives of the Securities Authority, representatives of the Government ministries, and
other pertinent concerns as well as representative of the Attorney General’s office. The committee may
extend invitations to participate in its discussions to experts on the issues on the agenda, and also to any
person having an interest in the matter under legislation. While the bill is being processed, the committee
may introduce such amendments into the draft as it deems fit, provided they do not represent a departure  from the substance of the bill. On conclusion of the discussions, the bill is returned to the Knesset plenum, for
second and third readings.

 

The second reading takes place shortly after the bill is returned to the Knesset plenum. It opens with
remarks by the committee chair, who explains the essential elements of the bill lying before the Knesset, and
the changes made in the original wording. The plenum discusses and votes on each Article separately.
Discussion focuses on the various formulations of the Articles, including objections filed by committee
members or by other Knesset members.

If no objections are entered to the wording proposed by the committee, the third reading will follow
immediately after the second reading, and the Knesset will vote on the bill as a whole. If objections were
entered, the third reading will be postponed in order to ascertain that there is no need for further amendment
and also in order to give the Government time to decide whether it wishes to retract the bill in view of the
objections upheld. However, a representative of the Government or the chair of the committee that brought  the bill for second and third reading may, in special cases, ask for the third reading to take place straight
away, even if objections were filed.

The bill, once approved by the Knesset in third reading, is signed into law and published in the Official
Gazettes (Book of Laws). The binding wording of the law, or the amendment to the law, and the date of  coming into force thereof, are as published in Gazettes.