Israel: New Regulations For Offering Foreign Mutual Investment Funds To The Public In Israel

  • Under new regulations which were recently adopted and will become effective in November 2016, the Israel Securities Authority is authorized to permit the offering of foreign mutual funds of major asset managers to the public in Israel, including by way of dual listing with the Tel Aviv Stock Exchange.
  • Only foreign mutual funds which operate in accordance with the US Investment Company Act of 1940 or the European Directive (UCITS) are eligible to be offered to the public in Israel. The new regulations set forth additional criteria that should be met in order to obtain such permit (including with respect to the fund managers).
  • The new regulations set forth the distribution fees that may be paid to Israeli banks in connection with foreign funds and the fees that Israeli banks may charge to their clients in this respect.
  • As of the end of 2015, there were 1,392 mutual funds in Israel with an aggregate asset value of approximately $60 billion, 262 of which focus primarily on investments outside of Israel and have an aggregate asset value of approximately $5.4 billion.
  • As of the end of 2015 the "ETF" market in Israel reached a total market value of approximately $26.5 billion (100% growth since 2010) out of which approximately $10.7 billion are attributable to "ETF"s tracking non Israeli indices.

1. Background

On May 5th, 2016 the long awaited regulations1 for the offering of foreign (non-Israeli) mutual investment funds (including ETFs) of major asset managers to the public in Israel (the "New Regulations"), were finally published. The New Regulations will become effective 6 months following publication, i.e. beginning of November 2016.

The New Regulations reflect the Israel Securities Authority's (the "ISA") endeavor to open the Israeli retail investment market for competition and allow Israeli investors to access the global mutual investment funds (including ETFs)2 of major asset managers.

The Joint Investment Law regulates the public offering and activity of mutual funds in Israel. Prior to the New Regulations, in order to offer foreign mutual funds to the public in Israel, such mutual funds had to comply with all the regulatory requirements imposed on Israeli funds, including the publication of a prospectus approved by the ISA. Therefore, in practice foreign mutual funds are not currently offered directly to the public in Israel.

The New Regulations allow the offer of foreign mutual investment funds in Israel by authorizing the ISA to grant permits to offer foreign mutual investment funds to the public in Israel subject to the submission of an application and fulfillment of certain criteria as specified under the New Regulations.

The following is a brief overview of the New Regulations.

2. Main Criteria for Offering Foreign Funds in Israel

The ISA is authorized to grant a permit to a foreign fund manager (the "Fund Manager") to offer units of a foreign fund to the public in Israel, including by way of registration of the fund's units for trade in the Tel Aviv Stock Exchange3 (the "TASE"). The following is a brief summary of the main requirements for receiving such a permit:

1. The foreign fund operates in accordance with the US Investment Company Act of 1940 or the European Directive (UCITS)4.

2. The total value of assets managed by the Fund Manager (including affiliates under joint control) is greater than USD 20 Billion.

3. The Fund Manager manages no less than five funds whose units are offered to the public for at least five years, and the total value of assets held in each of such funds was no less than USD 500 Million during a period of two years prior to the day the Fund Manager submitted an application to offer foreign fund units in Israel.

4. The price of the foreign fund units is continuously published on a website to which the public has access at no cost.

5. The foreign fund cannot be a fund that specializes in investments in Israel5.

6. The net asset value of the foreign fund is at least USD 50 Million.

7. The foreign funds' units will have been offered in Europe or in the United States no less than 12 months prior to the initiation of the offering of its units to the public in Israel.

8. As security for any administrative fine which may be imposed on the Fund Manager (in connection with breach of certain obligations) it shall deposit a bank guarantee issued by an Israeli bank for a sum of at least NIS 1 million6 or, in lieu of a bank guarantee, a cash deposit or traded securities deposit7 in an account with an Israeli bank.

9. The Fund Manager deposited for the benefit of the units holders in Israel cash or securities in an account in an Israeli bank, the amount of which shall vary based on the aggregate value of the units of its funds held through Israeli distributers (from deposit in the sum of NIS 250,0008 for units value of NIS 250 Million up to a deposit in the sum of NIS 129 Million for units value of at least NIS 24 Billion with Israeli distributers)10.

10. The Fund Manager appointed an authorized representative in Israel to serve as a liaison between the Fund Manager and the ISA, and between the Fund Manager and the unit holders in Israel. The representative may be either of the following: (i) an Israeli branch of the Fund Manager (or of a person controlling it or a company controlled by such person), provided that the appointed employee speaks Hebrew; (ii) an Israeli licensed Investment Advice/Investment marketing/portfolio management company; or (iii) an Israeli mutual fund manager.

11. The rights of a person who holds a unit of a foreign fund purchased in Israel, which derive from the holdings of such unit or share, shall be equal to the rights of any of the foreign fund's unit holders or shareholders (outside Israel).

12. Foreign fund unit holders in Israel shall be entitled to file a suit against a foreign Fund Manager and its representative in an Israeli court for damages incurred due to a breach of law by either of them.

13. Application – in order to obtain the ISA permit for the offering of the foreign fund in Israel of for the registration of its unit on the TASE, the Fund Manager is required to submit an application to the ISA in accordance with the New Regulations. The application will be based on the foreign prospectus under which the funds units are offered outside of Israel and shall include other documents and certain information as required in the New Regulations.

14. Reporting Duties – in general, the Fund Manager is required to submit to the ISA (for publication to the public) every report which it is required to issue under the law of its country of origin (including under the rules of its regulator in such country) and under its prospectus in its country of origin11. Any report shall be written in either Hebrew or English. Furthermore, a Fund Manager shall submit a quarterly report for all of the foreign funds under its management offered to the public in Israel, detailing the units value held by distributors in Israel, and shall specify the unit value of each fund held by the a distributor.

3. Distribution Considerations

The success of marketing foreign mutual funds in Israel to Israeli investors may depend, among others, on marketing efforts of the banks in Israel, as most Israeli retail investors still invest in financial products such as mutual funds via their banking services and the advice of the investment advisers employed by the banks.

An Israeli bank may not refuse to distribute units of a foreign fund (i.e. to purchase or sell units of such funds for its clients) for reasons related to the fund or the Fund Manager. However an Israeli bank may decide not to distribute units of foreign funds at all.

According to the New Regulations, certain retractions regarding payments and benefits in connection with purchase, redemption, sale or holding of units, including the Israeli regulatory regime regarding distribution fees applicable to Israeli mutual funds, will apply to distribution of foreign mutual funds as well.

Although other distributers (such as local investment marketing agents) are not limited in the benefits they may receive from the Fund Manager, Israeli banks are limited in the distribution fee which they may receive from the Fund Manager. Specifically, under the New Regulations, the maximum daily distribution fee that may be paid by a Fund Manager or received by Israeli banks or other TASE members may not exceed the unit's redemption price as published for that day (and if not published – the last one published) multiplied by 0.35%/365.

We note that some Israeli banks may consider entering into agreement with intermediary platforms which aggregate several fund managers.

In case the Fund Manager does not enter into an agreement with an Israeli bank regarding payment of distribution fee, the bank may charge its client (who holds the fund's unit(s)) a fee in a sum which is no greater than the distribution fee it could have received from the Fund Manager. However if the fund's units are listed for trade on the TASE, the bank may only be able to charge its clients an execution fee for the purchase or sell of units.

In any event, the fees charged by the bank to its clients may neither vary due to the fact that units were issued by different Fund Managers, nor due to the fact that the bank did not enter into an agreement with the Fund Manager for the payment of distribution fees, nor due to the fact that the fund is a foreign fund.


1 Joint Investment in Trust Regulations (Offering Units of a Foreign Fund)-2016

2 Currently, there are no "local" ETFs in Israel; since index products in Israel are structured more like ETNs (there is a proposed set of regulation intended to change their structure to funds for joint investments in trust).

3 In which case the approval of the Tel Aviv Stock Exchange shall also be required, and the units of such funds will have to be listed for trade in an exchange outside Israel as well.

4 Council Directive 2009\65\ec on the coordination of laws, regulation and the administrative provisions relating to the undertakings for collective investment in transferable securities (UCIT).

5 During the legislation process the ISA has clarified that this will not prevent such fund from investing in Israeli companies altogether. Currently funds denominated in NIS cannot be offered under these new regulations (the ISA will consider in the future the possibility to allow foreign funds denominated in NIS or which have a NIS exposure hedge).

6 Currently – approximately USD 258K; this sum is linked to the CPI. This is required only once for a Fund Manager and not per every fund offered.

7 According to the New Regulations the market value of such securities shall be discounted (discount factors vary per security type) for the purpose of calculating the value of the Deposit.

8 Currently – approximately USD 64.5K; this sum is linked to the CPI.

9 Currently – approximately USD 3.1 Million

10 See footnote 7 for Securities deposit.

11 It shall also be required to submit immediate reports regarding replacement of the authorized representative of the Fund Manager in Israel and regarding termination of the offering of its funds' units in Israel.

Banking Update | July 2016

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions