February 23, 2017
The Ministry of Finance published a Memorandum of Law to amend the Securities Law, prohibiting Israeli trading platforms from offering binary options to overseas investors.
The Memorandum also prohibits the operations of trading platforms that are located in Israel and cater exclusively to overseas clients if they operate without a trading platform license issued by the country of its clients — even if these platforms do not offer binary options.
Approximately one year ago, the ISA prohibited trading platforms that trade with Israeli clients from 0ffering trades in binary options. It is the ISA’s position that trading in binary options is akin to gambling and for this and other considerations, the ISA prohibited trading platforms from offering Israeli clients to trade in binary options.
Nonetheless, in the current legal situation, trading platforms that operated in Israel exclusively vis a vis overseas clients can still trade in various financial instruments, including binary options, without being subject to any regulation or oversight.
In the past year, various law enforcement agencies, including the ISA, have received a large number of serious complaints of extensive financial losses sustained by clients in various countries around the world as a result of trading activities, especially trading in binary options, by Israeli trading platforms that trade with their overseas clients without being restricted by any regulation or licensing requirements. This phenomenon has gained momentum, creating negative repercussions worldwide, causing significant damage to the image of the State of Israel in general, and to the reputation of its financial markets in particular.
Against this backdrop, the Attorney General has taken steps to coordinate and promote action by the legislative and enforcement agencies. The Counseling and Legislation Department of the Ministry of Justice and the ISA jointly prepared the Memorandum of Law that was published today. The Memorandum extends the ISA’s enforcement powers to include the activities of trading platforms managed in Israel that cater exclusively to clients outside Israel.
The Memorandum prohibits such platforms from offering their overseas clients to trade in binary options, and prohibits platforms managed in Israel from operating vis a vis overseas clients without an appropriate foreign license. The Memorandum does not permit trading platforms to operate vis a vis clients from countries in which trading platform managers are not subject to any regulation.
Entities who violate the prohibitions set forth in the Memorandum may be subject to various penalties, including criminal penalties such as two years’ imprisonment.