כניסה

Directive for the fund managers on disclosure in the fund’s name of possible exposure to bonds that are not rated investment grade, to bonds of companies without an affiliation to Israel, and to a banking corporation in which the fund’s cash and deposits

The number of companies incorporated, managed and operating outside of Israel, offering bonds to the Israeli public, has increased in past few years. The activity of these companies in the Israeli financial market offers certain advantages such as diversification of investments in the market, increasing the number of public offerings in the market and development of a global financial market.  


Nevertheless, the experience accumulated with the issue of bonds of companies without an affiliation to Israel shows that there is a number of potential problems, which are the product of the global characteristics of those companies, specifically the physical and conceptual remoteness of their operations and managers and the public offering structure that generally characterize those companies. These problems concerning the mechanisms for protecting the public of investors, are harmful to the effectiveness and application of the supervision and enforcement mechanisms, and consequently offer a weaker range of protection to investors in those companies. 


Due to the said difficulties, the Authority plenum approved an amendment to the Directive for the fund managers regarding adding an exclamation mark to the fund's name in order to reflect the risk level associated with investing in these assets to the public.  


The directive states that a mutual fund investing in bonds of companies with no affiliation to Israel, excluding those with a local rating of AAil or higher, must add an exclamation mark “(!)”to the fund’s name if the potential exposure to such bonds combined with the exposure to other risk factors, which were part of the directive prior to this amendment, exceeds the potential exposure of the fund to stocks.  


The amendment is intended to deal with the situation in which mutual funds with no exposure to stocks and are therefore conceived by investors as sound investments, acquire bonds of companies with no affiliation to Israel without having the special risks associated with such an investment being properly disclosed to the public.  


“company with no affiliation to Israel” is defined a company for which all the following are true: its bonds are listed in Israel; its place of incorporation is outside of Israel; its business is managed outside of Israel and its shares are not offered to the public in Israel. 


The amendment does not forbid from investing in bonds of those companies or from issue them. 

The amendment to the directive was approved after publishing the amendment proposal for public comments twice and followed by changes and adjustments the suggested amendment. The main changes which were formulized in the amendment to the directive in relation to the original suggested amendment include a change to the circumstances in which adding an exclamation mark will be required such that they will not derive from the bonds' rating, instating a extended three year commencement period for companies whose bonds are already listed and setting that the commencement of the amendment will be six months from the date of its publication also for companies with no affiliation to Israel whose bonds have not yet been listed in Israel prior to the entry of the amendment into force. 

The amendment to the directive was done following several actions taken by the Authority in the past few years which were intended to minimize the risks associated in investing in companies with no affiliation to Israel. This actions included instating regulation and oversite regimes. The authority sees amending the directive a supplemental move which is important and proportional in order to protect the public of investors in Israel. 

The Diredtive  

Summery of changes 

Public comments table 

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