Following severe criticism by Minister of Justice Ayelet Shaked and Israel Bar Association chairperson Efi (Efraim) Nave of Commissioner of Capital Markets, Insurance, and Savings Dorit Salinger, a bill is being proposed to restrict her power. Sources inform "Globes" that Shaked, who chairs the ministerial legislative committee, is likely to support and promote next week a bill proposed by MK Nurit Koren (Likud) subjecting Salinger's decisions to approval by the Knesset Finance Committee.
Under the bill, which amends the Control of Financial Services (Insurance) Law, decisions and reforms favored by Salinger will require Knesset Finance Committee approval, similar to the procedure for regulations instituted by government ministers. The bill, formulated 10 days ago, will be discussed by the ministerial legislative committee next Sunday.
The measure for restricting Salinger's power is a direct continuation of the restriction of her power as Supervisor of Insurance. During a cabinet meeting two weeks ago, Shaked attacked what she described as "stealthy regulation in the capital market implemented through rules and procedures without legislation or directives and unsupervised by the Knesset."
At present, the Commissioner of Capital Markets, Insurance, and Savings has great regulatory power; no-one oversees, approves, or monitors the circulars that she produces. According to Shaked, the result is a quasi-legislative proceeding conducted by a single person with no control or supervision.
"This loophole in the law enables the Commissioner of Capital Markets, Insurance, and Savings to devise reforms and publish circulars of critical importance in the insurance industry and the capital market with no supervision by the Knesset," the preamble to the bill states.
The bill proposes that any reform, directive, or instruction from the Commissioner of Capital Markets, Insurance, and Savings will require approval from the Knesset Finance Committee, thereby according an appropriate platform for all professional groups and those in the industry to have their say.
Salinger's many regulations
As examples of what she calls "stealth regulation" in the capital market, Shaked says that 300 final circulars and 530 draft circulars and position papers by the Commissioner have been issued during Salinger's term. Shaked contrasts this with former Commissioner of Capital Markets, Insurance, and Savings Prof. Oded Sarig, during whose four-year term 63 final circulars were issued. Sarig's average was 16 circulars per year, compared with 60 per year during Salinger's term.
Shaked said, "The cabinet's resolution on reducing regulation states in Paragraph 12 that while the rules established in the resolution do not apply literally to the Capital Market Authority, the decision does apply its principles to the Capital Market Authority and establishes a reporting duty." She added, "In practice, there has been a very steep increase in capital market regulation, not exactly a decrease. The objective is to help small businesses, not make their burden heavier."
Will hostility to Salinger produce an extreme solution?
Salinger is a very active and aggressive regulator. She makes no effort to be nice to and be friends with everyone; her aim is to make a difference. Sometimes the change she makes is positive and sometimes the opposite. She has more than once entered into confrontations with senior public sector and government figures, and of course with leading figures in business. The same is true of her relations with MKs, with an emphasis on the Knesset Finance Committee and its chairperson, MK Moshe Gafni (United Torah Judaism); the agencies she supervises, headed by the Association of Insurance Brokers and Agents in Israel (AIBAI); and unsupervised agencies, such as the Israel Bar Association, headed by Nave.
Shortly after Nave personally and sharply attacked Salinger at a recent conference of the AIBAI, Shaked also voice severe personal criticism of her.
Where did Salinger go too far in her battle against the market, and where did she bypass the MKs, or just "pique" them, thereby leading to the bill now supported by Shaked? It appears that two main things aroused opposition leading to Shaked's support for the bill. One is the establishment of an insurance arbitration institution, which Salinger promoted through the Economic Arrangements Law, in which the main injured parties were lawyers, who have a very strong lobby, certainly where Shaked is concerned. The other is the effort of many years standing (also supported by Salinger's predecessors) to change the way insurance agents, who take pride in their influence over Finance Committee members, are paid.
What is involved, and where is the big change in the existing situation? The Capital Market Authority was founded on November 1, 2016 in accordance with the Control of Financial Services Law passed that year. Among other things, the law states that the Capital Market Authority will operate as an independent unit within the Ministry of Finance and the minister of finance will be responsible for it, similar to the previous situation and the position of other regulators in the Israel Securities Authority, the Bank of Israel Banking Supervision Department, and the Antitrust Authority.
Ostensibly, it seems that subjecting the Capital Market Authority to the Finance Committee is just one more measure aimed at subjecting the civil service to the politicians that is liable to have disastrous consequences, while using the personal criticism of Salinger as an excuse for this material change. Incidentally, the anger of the regulated entities and others, in addition to politicians, at Salinger is to a great degree personal, but she will leave her position at the end of this August, only three months from now.
If the proposed change takes place, it will be a very aggressive measure giving MKs more power than they previously had over NIS 1.7 trillion of the public's money and money in the concerns supervised by the Capital Market Authority. The Capital Market Authority is very young; it was founded by the MKs themselves and Minister of Finance Moshe Kahlon; it was only two years ago that they eliminated the Ministry of Finance capital market department and turned it into the Capital Market Authority.
MK Koren, with Shaked's backing, is seeking to deprive Salinger of her enforcement authority and to determine that every "reform, directive, or instruction from the Commissioner of Capital Markets, Insurance, and Savings" will require approval from the Finance Committee, thereby reducing her ability to issue circulars and position papers without the Knesset (an authority that Salinger has made great use of). While many people believe that Salinger interpreted her authority too broadly, the proposed solution goes way too far.
It is likely that the minister of finance will oppose such a measure, also in view of the past, when the previous supervisors were given authority to issue circulars and position papers without Knesset approval.
Published by Globes [online], Israel business news - www.globes-online.com - on May 24, 2018
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