Minister of Finance Ronnie Bar-On has approved a legislative amendment which will enable large portfolio management companies to operate in Israel without the need to obtain a local license. The initiative is being promoted by the Israel Securities Authority, which has suggested that foreign investment houses be allowed to operate in Israel without a license, provided that they meet certain qualifying requirements, which it will set down. "This is a further step designed to integrate Israel's financial industry in the global financial market," said Bar-On.
"After implementing a similar reform in the mutual fund industry, we have now taken a major step towards the completion of the fabric which connects the Israeli market with international markets," said Securities Authority chairman Moshe Tery. He added that the authorities had already been approached by a number of foreign investment houses interested in offering their services to the Israeli market.
As things stand at present, every portfolio manager offering management or consulting services must hold an appropriate license. He may not provide any services to investors without such a license, even if he is operating out of another country and offering the service over the telephone or the Internet, and the managed account is located outside of Israel as well. The current law also prohibits an Israeli investor from initiating an approach to a foreign investment house, as long as it does not hold a portfolio management license in Israel.
The Securities Authority first proposed a legislative amendment allowing foreign entities to operate in Israel a few years back, providing that they met either of the following two requirements. First, a foreign investment house had to carry out transactions through either an Israeli portfolio manager or a bank licensed to engage in investment consulting, with the local partners bearing full responsibility for the foreign investment house's activity. The other condition provides for portfolio managers from the US and EU to agree to work directly with Israeli investors, as long as these were large private or institutional investors. It was also proposed that the portfolio management itself would be carried out in the manager's country of origin, leaving just the marketing activity to be handled in Israel.
Following approval by the finance minister, the amendment will be submitted to the ministerial legislative committee, after which it will be sent to the Knesset for approval.
Published by Globes [online], Israel business news - www.globes.co.il - on January 28, 2008
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