The Israel Securities Authority today published an unusual warning to investors on the Tel Aviv Stock Exchange (TASE) to beware of algorithms trading. The Securities Authority asserts that there are many concerns operating in this area with no supervision, and warns that investors could lose all their money.
On June 11, 2014, the Securities Authority warned the public of the risks involved in unsupervised investments. On that occasion, the Securities Authority was referring to risks related to illegal financial activity by the concerns managing money, their inability to meet their obligations to the investors, the absence of proper disclosure, etc.
The Securities Authority is now issuing a more specific warning about algorithms trading, in which financial companies invite the public to invest in programs that utilize computer algorithms for making decisions about investments in securities of various types. According to the Securities Authority, these companies contact potential investors mostly through the Internet and e-mail, and invite many Israelis to manage their money through algorithms trading.
"In view of the rise in the number of public queries on the matter, including those who regard themselves as injured parties, the Securities Authority wishes to make it clear that such computerized portfolio management usually requires a portfolio management license from the Securities Authority and meeting the provisions listed in the law," the Securities Authority stated. "Concerns conducting this activity without a portfolio management license are apparently in violation of the provisions of the law. Let it be stressed that a license to manager a trading floor or a consultation license or an investment marketing license is not the right license for this activity."
The Securities Authority warns against investing money in these unsupervised concerns, saying, "Investing money through concerns that have not obtained an appropriate license from the Securities Authority, and whose activity is unsupervised, is subject to extremely significant risks, the materialization of which is liable to lead to the loss of all of their investors' money. At the same time, it should be noted that actual supervision of the activity for which a trading floor license is required (forex companies) has not yet begun, and the requests by the trading floors for a license are currently being individually considered."
Published by Globes [online], Israel business news - www.globes-online.com - on August 2, 2015
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