The Israeli Parliament (Knesset) Finance Committee recently
approved, following a long legislative process, the Joint
Investment Trust Regulations (Foreign Fund Unit Offerings), 2016
(the "New Regulations"). The New Regulations include a
simple and convenient mechanism to enable large foreign mutual
funds managers (the "Manager") to publicly offer units of
a foreign fund (the "Fund") to retail clients in
Israel, based on the filings and reports issued by such Manager in
its country of origin, which can be submitted in English. Units can
be offered upon receipt of approval from the Israel Securities
Authority ("ISA"). Such offering can be made through
local or foreign investments advisors and/or through the Tel Aviv
The New Regulations determine conditions under which the ISA may
permit a public offering of units, provided that the offering
guarantees the interests of Israeli investors and the units are
offered in accordance with the approval of regulatory agencies in
the state of origin.
According to the New Regulations, in order to be granted
approval by the ISA to publicly offer the units of the Fund in
Israel, certain criteria must be met, including:
The Manager must manage no less than
five funds that have been publicly traded for at least five years,
with each such funds having assets with a total value of at least
USD 500 million during the preceding two years;
The total value of the assets and
clients portfolios under management of the Manager, any person
controlling the Manager and any entity controlled by such
controlling person, must be at least USD 20 billion;
The value of the Fund's net
assets must be at least USD 50 million at the time of the request,
and the units can be purchased in Europe or the United States for
at least the preceding 12 months;
If the Fund is a traded Fund, the
offered units must be listed for trade in a foreign stock
The Fund must operate under the U.S.
Investment Company Act or the European directive UCITS;
The Fund prices are published on an
ongoing basis and are freely available online;
The Fund cannot specialize in
investments in Israel;
The Manager must deposit a bank
guaranty in favor of the ISA, issued by an Israeli bank, of no less
than ILS 1 million (~USD264,000) (the "Guaranty Amount"),
or deposit the Guaranty Amount or securities valued no less than
the Guaranty Amount in an Israel bank deposit;
The Manager must also deposit in an
Israeli bank a cash deposit in favor of the unit holders in Israel
in a sum between ILS 250,000 (~USD66,000) and ILS 12,000,000
(~USD3,168,000) or securities with such value, with the actual
amount based on the value of units held by Israeli
The Manager must appoint a
representative in Israel to serve as a liaison between the Manager
and the ISA and the unit holders in Israel. The representative can
be either: (i) an Israeli Fund Manager; (ii) a foreign Fund
Manager, a person who controls it, or a corporation under its
control, if it has a branch in Israel, as long as he is fluent in
the Hebrew language; (iii) a licensed corporation for marketing of
investments or management of investment portfolios in Israel;
The rights of a unit holder of a
Fund, resulting from its holdings, purchased in Israel, shall be
identical to the rights of every unit owner in the Fund.
The New Regulations will come into effect on November 5, 2016
and may very well revolutionize the Israeli mutual fund market with
respect to funds that invest in securities outside of Israel.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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