ISRAEL SECURITIES AUTHORITY

Annual Report

2016

*The following text contains only selected chapters from the ISA annual report (2016). The translation is intended solely for the convenience of the reader, the ISA does not assume any responsibility whatsoever as to its accuracy and is not bound by its contents. For the original full Hebrew text click

here.

ר ש ו ת נ י י ר ו ת ע ר ךISRAEL SECURITIES AUTHORITY

CHAIRMAN יושב ראש

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May 10, 2017 / 14 Iyar, 5777

MK Moshe Kahlon MK Moshe Gafni

Minister of Finance Chair of the Finance Committee

Ministry of Finance Knesset

Dear Minister, Dear MK and Committee Chair,

ActivitiesReport on the Israel Securities Authority’s Re:

In accordance with Section 14 of the Securities Law, 5728-1968, I respectfully submit

to you this report on the activities of the Israel Securities Authority (hereinafter, “the

ISA”) in the year 2016.

In recent years, the world has undergone rapid change, and the world in which regulated

entities operate is also constantly changing. Financing options are becoming more

diverse, and competition with the world’s major securities exchanges and other

financial sources is becoming fiercer. At the same time, yet for different reasons,

negative sentiment in financial markets and the TASE has emerged. This negative

sentiment deters entrepreneurs from raising capital on the TASE, which consequently

compounds liquidity and pricing concerns. As the number of stock issues diminishes,

the demand for debt issues, which is also related to the low interest environment, is on

the rise. In such an environment, investors’ risk appetite increases, and financial

products change form. As a result of all these developments, we are required to

supervise activities that were completely unknown just a decade ago.

These and other challenges that the market poses call for innovative, “outside the box”

thinking on our part. Our duty today is not only to protect investors, remove barriers,

and correct market inefficiencies. In view of the fact that the TASE and the capital

market are currently failing to realize their enormous potential to benefit the public and

the economy, it is our obligation to develop and shape the market, in order to lead it to

a position in which it can manifest its full potential.

Actions that stimulate the capital market have enormous significance for the public and

the economy because the capital market and the TASE are as an important economic

resource that contributes to economic growth and employment, smaller government

deficit, increased investment and savings opportunities available to the public, greater

competition, and a lower cost of living.

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In a well-functioning capital market and securities exchange, investors and

entrepreneurs meet to finance economic activity and to diversify savings and

investment vehicles. Among other things, the market can encourage institutional

investors to channel the public’s funds that they hold into finance projects that spur

employment and growth, for the benefit of the economy, investors, savers, and the

public at large. Instead, in the absence of an adequate offering of investment options,

230 billion shekels of the public’s funds are diverted to finance business activities in

the United States and Europe (almost ten times more than a decade ago) rather than in

Israel. This is especially disconcerting in view of the fact that technology firms also

prefer to finance their operations overseas and occasionally relocate their operations

overseas almost entirety. This creates a long-term loss for the economy: Not only does

country loose in terms of employment and growth, it also loses the potential for foreign

companies to establish their economic operations in Israel and reinforce their ties to

Israel.

Of all the activities that the ISA promoted in 2016, I would like to emphasize the

structural change in the TASE. This recently approved change is a foundational event

in the life of the TASE and the capital market, one that will allow the TASE to become

more competitive, less expensive, and more efficient, on par with the world’s most

advanced and modern securities exchanges, and will also facilitate cooperation with

other securities exchanges, which is critical for the further development of the TASE.

But these steps are not sufficient in themselves. The structural reform of the TASE

is an extremely important and necessary step, but it is not sufficient. I share the

vision of the Minister of Finance, who wishes to lead a comprehensive reform of the

TASE and the capital market that includes creating attractive conditions for

entrepreneurs, for the benefit of the economy. Such conditions include regulatory relief

for technology companies and for new issuances that were recently completed; relief

for small and medium sized companies including a waiver of the requirement to file

quarterly statements; registration of foreign securities on the TASE; a reduction in fees

for IPOs, and many other types of relief.

In 2016, the ISA operated in four main areas of activity, with the aim of facilitating the

operations of supervised entities and reducing regulatory costs, and pursuing

uncompromising enforcement of the law against offenders:

Companies: The ISA promoted exemptions for companies performing their first

issuances; legislation to encourage R&D firms and reporting exemptions; and relief

measures for mutual funds and ETFs, portfolio managers, as well as other measures.

Investors: The ISA launched an Electronic Voting system, promoted legislation to

allow the operation of foreign mutual funds in Israel, completed the regulation of

trader platforms, completed legislation regulating the activities of credit rating

companies, completed legislation to improve financial statement reporting,

regulated the operations of REIT funds, and other activities.

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CHAIRMAN יושב ראש

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The Tel Aviv Stock Exchange: The ISA promoted various reforms including a

structural reform in the TASE, and reforms in cross-listing and finality of

settlement.

Enforcement: The ISA initiated and handled significant investigation cases,

continued to handle cases that were initiated in previous years, took enforcement

action against unsupervised investments, and conducted other enforcement

activities. In this year, several important cases of the State Attorney Securities

Department were concluded with success.

In direct continuation of the ISA’s activities in 2016, we intend to expand activities in

the following areas in 2017:

Companies: We intend to expand our work on the graded regulatory scheme to

allow greater flexibility in capital and debt raising, and to ensure that effective

enforcement deters criminal activity without paralyzing the economic activities of

firms. We intend to complete legislation that will allow for crowdfunding and peer-

to-peer lending. Furthermore, the ISA also intends to promote legislation for

establishing an entity that oversees the work of accountants (an Israeli PCAOB).

Investors: We intend to increase the available range of investment vehicles, take

action to reduce investors’ fees, facilitate online services and other web-based

initiatives. We also hope to promote investment vehicles that offer tax benefits in

line with “investment provident funds,” and explore the issue of social impact

bonds.

The Stock Exchange: We intend to study the implications of creating a list of

small-scale listed companies that will operate under reduced regulatory supervision;

take action to enhance the TASE’s efficiency and to create an appropriate

foundation that facilitates cooperation between the TASE and other securities

exchanges worldwide.

Enforcement: In addition to attention to the important cases that are being

prosecuted as part of our uncompromising enforcement policy against offenders,

we intend to target unlicensed FOREX platforms and eliminate all activities

involving binary options in Israel. On the matter of administrative proceedings, I

would like to note that the policy of the ISA is to encourage enforcement

arrangements in the early stages of a legal proceeding for the sake of enforcement

effectiveness and efficiency.

Furthermore, in view of the decline in the number of IPOs and the low trading volume

on the TASE, which adversely affect the liquidity and efficiency of the capital market,

the ISA believes that it is important to promote several steps to reinstate the TASE as

the primary vehicle of financing for business in Israel. The main steps recommended

by the ISA include:

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CHAIRMAN יושב ראש

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“Ceasefire” – An agreement among regulators, under the auspices of the Ministry

of Finance and the Ministry of Justice, to cease all efforts to enact new more

stringent regulations in order to create regulatory certainty. The frequent

regulatory changes since the 2008 crisis have caused many companies to eschew the

capital market. The most damaging outcome is an environment of regulatory

uncertainty, which undercuts companies’ efforts to plan future activities. The ISA

proposes that all financial regulators reach an agreement to suspend all work on new

stringent regulations for a period of five years (excluding special circumstances), in the

hope that regulators in other areas will join the agreement.

Tax relief to encourage the public to prefer investments in the capital market over

financial investments in real estate – The ISA proposes a tax relief strategy, in the

form of a temporary directive, that would create advantages for investing in the TASE

compared to investments in the real estate market.

I believe that the regulators’ commitment to such a “ceasefire,” in tandem with a

tax relief strategy, will make a fundamental impact and reverse current negative

market sentiment. Negative market sentiment, which is a measure of the local capital

market’s relevance and appeal to investors, is caused by several interacting factors:

almost no new issues on the TASE, low trading volumes and poor liquidity, stock prices

do not necessary reflect companies’ economic value, and accountants and attorneys

frequently advise their clients not to issue their securities on the TASE. Part of the

problem is also that the market does not yet fully appreciate or apply the exemptions,

changes, and initiatives that the Ministry of Finance and the ISA have promoted and

will continue to promote in order to reverse this trend.

In this regard I should note that the early months of 2017 show evidence of a change in

the number of companies making their first equity or debt issue on the TASE. In the

first quarter of 2017, there were 4 IPOs, and two initial public offerings of bonds. The

rise in the number of IPOs is apparently expected to continue in the second quarter of

2017 as well. I am sure that the ISA’ intense activities in recent years played an

important role in this reversal.

Establishing a new market for a specific list of small and medium-sized companies

and technology companies – Companies find it difficult to plan their operations due

to the regulatory regime imposed on traded companies — a regime that originated as a

counter-response to the financial crisis of 2008, among other things — and due to the

regulatory uncertainty that emerged as a result of frequent regulatory changes. These

factors have specifically affected small and medium-sized companies that are unable to

meet the financial burden that regulatory application entails, effectively driving these

companies from the capital market and the TASE.

We are therefore examining to propose a new market with significantly reduced

regulation compared to the main market, similar to many secondary markets around the

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CHAIRMAN יושב ראש

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world such as AIM and FirstNorth. The new market would offer small and medium-

sized companies and technology companies more latitude to focus on their business and

their growth while benefiting from the advantages of a listed company.

Incentives to institutional investors to invest in small and medium-sized public

companies and technology companies - Institutional investors manage close to NIS 2

trillion in funds, with NIS 10 billion added each month to the pension and provident

funds under their management. A portion of these funds are invested in non-negotiable

assets, another portion in major Israeli companies, and another portion, which is

steadily growing year by year, is invested outside Israel. Very few of the funds invested

in Israel are invested in small technology companies or small/medium-sized companies.

Institutional investors show little interest in small-cap companies and are not currently

equipped to perform analyses of investments in such firms. As a result, these companies

are not reviewed or analyzed and consequently are not priced as they deserve. In such

circumstances, many companies do not even consider going public or take the trouble

to list their securities in Israel: They direct their capital raising activities to attract funds

outside Israel, where the companies’ founders or owners believe they will be properly

evaluated.

To encourage institutional investors to channel the public’s funds to these companies,

too, the ISA intends to devise various solutions, including new investment vehicles, and

measures including tax relief and reduced restrictions on management fees.

Unregulated activities and trading platforms – In 2017, several legislative

arrangements are scheduled to come into effect, which will facilitate the activities of

various investments arrangements, including crowd-funding and peer-to-peer lending

models. These models will, for the first time, allow small entities, which were barred

from the capital market until now, to make investment offers to the general public and

attract the public’s funds.

Enforcement against trading platforms - The ISA continues to vigorously enforce

the law against all ventures and trading platforms that operate in violation of the

Securities Law. This year, among other things, the ISA will take steps to expand its

powers, which will allow it to eradicate trading in binary options, which has been linked

to fraudulent activities against investors in and outside Israel. It is the ISA’s position

that trading in binary options is comparable to gambling. For this and other reasons, the

ISA has prohibited trading platforms from offering binary options to Israeli clients. In

practice, however, there are trading platforms that operate in Israel and offer binary

options to clients outside Israel. In most cases these clients lose their money, but the

law does not allow the ISA to take action against the operators of these trading

platforms. Therefore, the ISA and the Ministry of Finance, together with the Attorney

General and the Ministry of Justice, are promoting an amendment to the Securities Law,

granting the ISA power of enforcement against trading platforms that offer trading in

binary options to clients outside Israel.

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In addition to the measures described above, the ISA also plans to study and promote

many other issues in 2017, including:

(1) Cooperation with foreign securities exchanges – Collaboration among securities

exchanges and use of a combination of well-known trading systems is now a dominant

trend. Such cooperation should increase the interest of securities exchange participants,

from in and outside Israel, in the TASE, increase trading volumes, and improve stock

pricing. Collaboration with foreign exchanges significantly increases the probability

that companies in general, and specifically Israeli hi-tech companies, will retain their

base of operations in Israel.

(2) Encourage Israeli firms to register for trading in Israel – Dozens of Israeli

companies, including Check Point, Mellanox, WIX, CyberArk, and others avoid raising

capital on the TASE or even listing their shares for trade in Tel Aviv, despite the fact

that the dual-listing arrangement almost completely exempts them from the

requirements of Israel’s Securities Law. The IAS intends to explore means to encourage

such companies to list their shares in Israel too, through steps that will guarantee that

they are subject to as similar an ecosystem in Israel as they are in the United States or

the UK. The ISA also intends to consider extending the dual-listing law to additional

countries (such as Singapore or Hong Kong), with the aim of attracting foreign

companies to trade on the TASE.

(3) Publication of analysts’ reports on IPOs – One important condition of an attractive

infrastructure for companies seeking to raise capital on the TASE is accurate pricing.

The unavailability of analysts’ reports undermines accurate pricing of a stock offering.

The ISA intends to consider permitting the publication of underwriters’ reports as part

of the IPO process.

(4) Expanding the TASE analysis program – To encourage liquidity and accurate

pricing, the R&D Law established an independent analysis program for technology

firms, with the ultimate aim of encouraging firms to trade on the TASE. Under this

program, independent analyses of these firms are funded by the TASE, the Ministry of

Finance, and the Chief Scientist. In view of the program’s success in increasing these

firms’ value and almost doubling their trading volume, an expansion of the program to

other sectors will be considered.

(5) Financial instruments on the TASE designed to reduce government spending – The

assets held by institutional investors can potentially be used to invest in national

development and other projects and these projects can be funded through special

purpose financial instruments on the TASE rather than from the government budget.

Currently two projects are in an advanced stage of development, and are pending a

formal recommendation to promote them: The first is mutual funds that invest

exclusively in small and medium-sized companies, and the second is mutual funds that

fund BOT infrastructure projects.

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(6) Clarifying the position on institutional investors’ voting on executive salaries in a

manner irrelevant to the companies’ business – Today, institutional investment

institutions, which are subject to restrictions on their own executives’ salaries,

sometimes prefer to limit the wages of the executives in the companies in which they

invest. This propensity not only reduces the motivation of non-financial corporations

to issue their securities on the TASE, but it also causes listed companies to consider

delisting. The ISA will take steps to clarify institutional investors’ obligation to vote on

executive salaries in these non-financial companies on the merits.

List of ISA activities in 2016 and early 2017

In 2016, the ISA continued to implement its program for 2016-2017, which I presented

last year, actively working on initiatives and changes in the four main areas of activity

- the TASE, investors, companies, and enforcement.

The ISA has and will continue to take action in two additional areas. In the first of these

areas, the ISA promotes commensurate regulation, specifically additional regulatory

relief, with the aim of creating attractive conditions for companies and entrepreneurs to

offer their securities on the TASE, without compromising investor protection. In the

second area, the ISA is committed to uncompromising enforcement of the law against

offenders, to create deterrence and increase investors’ trust in the market.

The ISA took the following actions with respect to companies in 2016 and early 2017:

Graded regulation project – In early 2017, the Knesset Finance Committee

approved regulations that the ISA initiated to simplify the quarterly financial

reporting requirements of small reporting companies. The project includes a

structured process of review of the relief measures and their implications on these

companies and the investor public. The graded scheme is based on differential

criteria, primarily size (market cap of up to NIS 300 million). The approved

regulations abolish the obligation to file first and third quarterly financial

statements, and they apply to small corporations whose issues are limited to shares,

and to companies whose securities are not listed for trade.

Crowdfunding - Crowdfunding and P2P (peer-to-peer) lending models allow small

and medium-sized R&D firms to raise a limited amount of capital from the public

through specialized web-based platforms. Amendments have been made to the

Securities Law to regulate these models, although the amendments will come into

effect when the corresponding regulations are approved. The draft regulations

concerning crowdfunding are currently being debated by the Knesset Finance

Committee. The proposed regulation defines limitations on the maximum scope of

capital that can be raised or invested, and sets conditions for the registration of the

web-based platforms used for this model. These platforms will be subject to

oversight by the ISA. The ISA plenary also approved an outline of regulation of

funding corporate loans (P2B), and corresponding regulations will be promoted.

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CHAIRMAN יושב ראש

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Incentives for IPOs - In 2016, a series of relief measures proposed by the ISA in

coordination with the Ministry of Justice, to encourage private companies to

conduct their initial stock issues on the TASE were enacted into law. These

measures include arrangements related to corporate governance, including an

exemption to newly listed companies from the requirement to approve a

remuneration policy, approve terms of service and employment of the controlling

shareholder, and approve dual service as CBOD and CEO for five years from the

date of the IPO; and an exemption from the requirement to appoint a balance sheet

committee, subject to certain conditions. The relief measures also include

arrangements that facilitate and simplify issuance procedures, such as: These

companies are allowed to publish a shelf prospectus and negotiate with

sophisticated investors as early as the IPO date; they are granted an extension of the

deadline for filing offering, and other measures. Additional measures concern

disclosure and reporting, including an exemption from the requirement to attach to

their financial statements an auditing accountant’s opinion of the statement of

effectiveness of internal controls.

R&D companies - Several years ago, the Committee to Promote Investments in

Public Companies in the R&D Sector published recommendations, which included:

to encourage IPOs of relatively large hi-tech companies, and encourage the

establishment of listed venture capital funds. In the past three years, the ISA has

promoted legislation in line with the Committee’s recommendations. In April 2016,

Securities Regulations (Reports of Corporations Whose Shares are Included in TA

Tech-Elite Index) 2016 were published, concerning exemptions on disclosure and

reporting requirements for companies whose shares are included in the TASE TA

Tech-Elite Index, and facilitative measures such as the option to report in English

and to file financial statements according to US GAAP.

At-the-Market Offering (ATM) - In July 2016, legislative amendments came into

effect adding ATM, a new mechanism for offering securities to the public during

trading on the TASE. This mechanism allows a company to raise capital or debt

from the public by issuing sell orders during trading, subject to specific restrictions.

The offering is based on the company’s shelf prospectus and on a comprehensive

program that is defined in advance and published in a shelf offering report. This

mechanism, which is yet another ISA initiative to perfect the local capital market

and improve liquidity on the TASE, is expected to create greater flexibility for

companies that wish to issue securities, and significantly reduce the time from the

decision to issue to its implementation (time to market). The mechanism is also

designed to simplify local issuance procedures and reduce their costs. To examine

the implementation of this mechanism in practice in the local market, in view of its

uniqueness and novelty, it was defined in a temporary directive in effect for three

years. At the end of this period, the ISA will consider whether to extend the

mechanism, and if so, whether any changes in its terms are required.

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Commercial securities - Commercial securities are short-term debt certificates

characterized by high liquidity and low credit risk. In 2016, the ISA staff studied

this matter and recommended incentives to develop this market. The

recommendations were approved by the ISA plenary after a round of public

comments, and were referred to the next stage in the legislation procedure.

Regulatory relief for public offerings of securities that are not designated for

listing on the TASE – The ISA is studying the possibility of establishing as a law

an outline for a facilitative regulatory regime for companies that wish to raise a

limited amount of capital from the public. The outline of the model is based mainly

on an existing model in the United States, with adjustments and necessary changes

in view of the laws in Israel and the features of the local market.

Real-estate investment funds - The ISA headed an inter-ministerial subcommittee

that studied the regulatory barriers to REIT funds’ operations in financing,

constructing, and operating rental housing projects. The subcommittee, which also

reviewed other barriers to REIT funds’ operations, drafted a bill that was debated

by the Knesset Reforms Committee in 2016 and was approved and enacted as law.

Special Purpose Acquisition Companies (SPACs) – The ISA is studying the

possibility of having Israel adopt a model along the lines of the SPAC model that

exists in the United States, the UK, Canada and other countries. This move is

designed to allow entrepreneurs to raise capital on the TASE for new companies

that have no operations, with the intent of introducing into the SPAC non-financial

activities into will use the capital. If adopted, such a model would indirectly bring

to the TASE additional, small and large, companies that need capital to grow and

thrive.

The ISA took the following actions with respect to investors in 2016 and early 2017:

Supervision of trading platforms – In 2016, the ISA concluded its review of the

trading platform license applications that were filed. Until the day the law came into

effect, May 26, 2015, 21 license applications were filed. Since then, the ISA decided

to deny 8 applications, and 6 applications were withdrawn. In the third quarter of

2016, the ISA decided to grant the first licenses to six companies and determined

that these licenses would be subject to various conditions, including conditions

concerning the type of financial instruments permitted to be traded on the trading

platforms. Using its authority, the ISA prohibited trading in binary options on

trading platforms in view of the problematic features of binary options, especially

because trading in binary options is essentially similar to gambling. In February

2017, a legislative memorandum that proposes to prohibit trading platforms in Israel

from offering binary options to investors outside Israel was published.

Proposed amendment to ETNs legislation - In late 2016, a proposed amendment

to the Joint Investments in Trust Law was submitted to the Knesset, proposing to

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impose the regulatory regime of the law on ETNs, and establishing the legal

foundation for ETFs, which have features similar to US ETFs. The proposed

amendment includes a change in the previous legislative outline, eliminating the

liability component of ETNs and thereby transforming them into ETFs that do not

guarantee the yield of their underlying assets. On January 10, 2017, the amendment

passed the first reading in the Knesset.

Developing the mutual fund market – In 2016, legislation that opens the Israel’s

capital market to foreign mutual funds came into effect. Regulations were also

enacted to allow mutual funds specializing in investments in hi-tech companies to

offer their units to investors.

Tightening oversight and control mechanisms on mutual funds and ETNs – In

2016, an outline came into effect, in which mutual fund managers undertook not to

raise the management fees in these funds more frequently than once a year, on

January 1. Furthermore, a directive was issued, implementing the recommendations

of the Inter-ministerial Committee for the Examination of Custodian Services in

Israel, which include an obligation to disclose the fund’s exposure to credit risks.

Also published was an outline of the operations of ETN trustees, which was adapted

to the ETN sector.

Relief measures in the area of mutual funds and ETNs – In 2016, regulations

came into effect, establishing a new prospectus model for mutual funds. This model

is designed to significantly reduce the number of permit applications, increase

efficiencies, and reduce the related costs imposed on fund managers. The legislative

outline includes the option of early adoption of the model; In practice, all the fund

managers who were able to choose early adoption of the model did so in 2016.

Regulations limiting the fund manager’s obligation to attend the general meetings

of the corporations whose securities are held by the funds they manage also came

into effect; this obligation was imposed only on meetings in which the fund

manager’s presence potentially affects the voting results. In the area of ETFs, an

outline was defined to reduce the length of shelf prospectuses and streamline the

procedure for obtaining a permit to publish a shelf offering.

Publication of a directive for licensed professionals whose services involve the

use of technological means – In 2016, a directive was published, designed to

permit investment consulting and portfolio management services to be offered using

online communications media, while guaranteeing to protect customers’ interests.

This order is an adaptation of the Investment Advising Law, which was enacted in

the pre-online communications age, to contemporary times, amd opens up a new

area of activity for licensed professionals, allowing them to appeal to new target

groups, including customers whose investment potential is less than the current

minimum qualifying sum for consulting and portfolio management services. The

directive also regulates additional financial activities that use technological means,

such as text messages and social finance.

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Suspension of operations of unlicensed algotrading firms – In 2016, the ISA

continued its in-depth examination to identify unlicensed algotrading firms that

offer portfolio management services or investment consulting services using an

algorithmic trading software program. The ISA took steps to suspend the operations

of numerous companies in this field.

Investments in the R&D sector – According to the recommendations of the

Committee for Promoting Investments in Public R&D Companies, mentioned

above, investor-side legislation was also implemented:

(a) An amendment to the Income Tax Ordinance (No. 220 and a Temporary

Directives) 2016, granting tax benefits to investors in public issuances on the TASE

of R&D companies, and tax benefits to the controlling owners who are also

employees of such companies.

(b) In August 2016, the Finance Committee approved the Joint Investments in Trust

Regulations (Elite Technology Fund) 2016, which allow the establishment of closed

mutual funds that may invest up to 50% of their assets in private R&D companies.

(c) In September 2016, the TASE analysis program commenced its operations. In

this program, which is also based on the R&D Committee recommendations, two

international entities, selected by the TASE in a tender, perform analyses on

technology and biomed companies that are program members, and publish them on

the MAGNA system and the TASE website, where they areavailable to the public.

Expanding the electronic voting system – In 2016, this system, which was

launched in 2015, now offers the option of self-identification and voting using a

smart ID card. This is the first project by a public agency that effectively

implements the use of smart ID cards. In 2016, 73,589 accounts, including hundreds

of non-institutional investors, used the system to vote in 1,526 general meetings.

Furthermore, an encryption system was incorporated in the system to protect voters’

privacy, and a mobile phone voting option was also added.

Web accessibility of the MAGNA system and the ISA website – In 2016, web

accessibility was incorporated into these sites, based on the WAI standard of the

WWW3C (World Wide Web Consortium C).

The ISA took the following actions with respect to the TASE in 2016 and early 2017:

Structural reform in the TASE – In 2016, the ISA worked intensively with the

Ministry of Finance to promote a bill whose main purpose is to establish a

legislative foundation for the separation of members’ ownership in the TASE from

their right to use its services, while eliminating restrictions on the distribution of

profits that the TASE generates. These changes were designed to allow the TASE

to become a more efficient and significant competitor of other securities exchanges

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in international markets and of bill proposal was approved by the Finance

Committee and also approved in the second and third reading in the Knesset.

Cross-listing – The ISA staff, in conjunction with the TASE, developed a bill to

establish a mechanism that permits shares of companies listed on overseas

exchanges to be traded on the TASE, without requiring the consent or involvement

of the relevant companies, and without imposition of ISA supervision or disclosure

obligations on those companies pursuant to the Securities Law and its regulations.

The purpose of this law is to increase liquidity in the TASE and increase the

efficiency of the local capital market by diversifying the traded assets, increasing

trading volumes, and reducing transaction costs on foreign securities, among other

measures. The bill limits this scheme to shares of companies traded on two of the

largest US exchanges, companies with an especially high cap value (over USD 50

billion), and companies that have no link to Israel (based on specific tests defined

for this purpose). The bill was approved by the Knesset in March 2017.

A “securities exchange” for small cap firms – The numerous small cap firms

operating in Israel constitute an important growth engine for the economy and play

a major role in the country’s economic development. A lack of access to sources of

financing could be a serious impediment to these firms’ growth and operations. In

view of this situation, a team of representatives of various ISA departments was

appointed to study the possible establishment of a separate trading list that would

be customized to small cap firms, and would emphasize relief measures and

removal of obstructions, to help these firms raise the capital they need to grow and

become established companies. Such as “exchange” is expected to contribute to the

development of the capital market and increased range of investment opportunities

for investors. To conduct a broad, open discussion about this possibility and the

various issues that it entails The ISA recently published a request to the public to

offer suggestions and ideas concerning a special purpose trading list for small cap

companies.

Ongoing oversight of the TASE and the clearing houses – In 2016, ISA

representatives accompanied the discussions of the TASE board of directors and its

committees, and the discussions of the TASE Clearing House board of directors.

The ISA discussed and approved the TASE’s proposals to amend its guidelines, and

advised the adoption of the amendments to the TASE’s articles of association, as

suggested by the TASE. Furthermore, the ISA promoted legislation to change the

structure of ownership of the TASE, from a partnership model to a for-profit

corporation model, as described above. The ISA also studied the compliance of the

TASE clearing houses with the obligations and requirements imposed on payment

and settlement systems based on international standards and principles; the ISA

identified the gaps in compliance and tracked the actions taken by the TASE

clearing houses to rectify them; and the ISA took steps to implement the ISA

directive of December 2015 to ensure the proper operation of the TASE Clearing

House Ltd. and the Maof Clearing House Ltd.

ר ש ו ת נ י י ר ו ת ע ר ךISRAEL SECURITIES AUTHORITY

CHAIRMAN יושב ראש

13

The ISA took the following actions with respect to enforcement in 2016 and early 2017:

Investigative actions – The ISA, also in 2016, was engaged in the investigation

and examination of events related to suspected inclusion of misstatements in

financial statements of corporations and other fraudulent acts related to the

operations of these corporations. Also subject of investigation this year were

schemes that attempted to raise capital without a prospectus or a license while

making misrepresentations to the public.

Furthermore, as part of the ISA’s involvement in international collaborations, the

ISA conducted judicial inquiries on behalf of foreign agencies, under the treaties of

which it is a member, including a large number of requests related to FOREX and

binary options trading. Resolving the issue of binary options is obviously

complicated, and the ISA is vigorously pursuing a suitable solution, with the full

cooperation of all the relevant agencies.

Criminal enforcement – In 2016, the Securities Department of the Tel Aviv

District Attorney’s Office (Taxation and Finance) filed 12 indictments including a

serious indictment in the Siemens – IEC affair, one of the most serious bribery

offenses ever to have been discovered in Israel.

The ISA is also aware of the risks in public securities offerings that are made with

no prospectus, and is working vigorously and allocating full resources to exposing

such operations. For example, in 2016, Amir Bramley, the Kela Fund, and other

companies Bramley managed, were charged with the following grave offenses:

embezzlement of hundreds of millions of shekels; deceit, fraud and breach of trust,

offering securities to the public with no prospectus, falsifying records in corporate

documents, and money laundering.

In 2016, cases were brought before the court involving securities fraud, in which

defendants are market players and portfolio managers; insider information cases,

and cases concerning the concealment of a controlling shareholders’ personal

involvement in fraud, and reporting with the intent of misleading a reasonable

investor.

In 2016, several significant convictions were also achieved in several major cases,

including Manofim Finansim, IDB, and Psagot. The Manofim Finansim case ended

a mitigated sentence and withdrawal of the defendants’ appeals against the

conviction, although the Supreme Court held that securities fraud calls for stricter

punishment. The IDB case ended in the District Court with the conviction of Mr.

Nohi Dankner and a two-year sentence imposed on Dankner and a one-year

sentence on Mr. Itay Strom. The Psagot case ended with the conviction of the main

ר ש ו ת נ י י ר ו ת ע ר ךISRAEL SECURITIES AUTHORITY

CHAIRMAN יושב ראש

14

defendants, Mr. Edri and Mr. Ben David. Notably, in early 2017, the State filed an

appeal against the lenient sentence handed down in the IDB case.

Administrative enforcement – In 2016, the ISA’s Administrative Enforcement

Department handled 12 new cases and conducted proceedings in 6 cases that were

filed in 2015. The enforcement actions involved companies and individuals, and the

cases concern a large number of topics, including reporting violations by public

companies, securities manipulations through self-transactions, use of insider

information, and one case involving the operation of a trader’s account without a

license. The enforcement measures included significant financial fines, and

prohibitions on senior officers from serving in a regulated entity ion the future. In

the area of simple financial fines, the ISA imposed 14 financial fines for Securities

Law violations. The ISA intends to continue to focus on enforcement in cases

related to violations where there is considerable public interest in enforcement, and

will focus on taking action against the individuals directly involved in the

violations, based on the understanding that the range of involved individuals in

offenses of negligence might be broad. The ISA also will continue to promote

enforcement arrangements in the early stages of administrative proceedings as a

means of securing effective enforcement and deterrence, against both the offenders

and against future offenders.

Private enforcement – In 2016, the ISA continued to play a role in private

enforcement, and encouraging the prosecution of deserving cases primarily by

lending assistance in financing lawsuits. The ISA is also involved in settlements

that are intended to ensure the interests of investors at the conclusion of the

proceeding. The ISA has also played a role in several legal proceedings involving

issues of far-reaching significance.

All the actions I described above were designed to realize our vision to transform the

Israeli capital market into the growth engine of Israel’s economy. There is no magic

formula for the capital market and the TASE, yet I believe that, taken together, all of

these actions have laid a sound foundation and represent a significant step forward for

the capital market and the TASE in Israel. This a national mission that calls for the ISA

and government agencies — government ministries and other state agencies — to join

hands and take the necessary steps to move forward.

Respectfully,

Prof. Shmuel Hauser

Israel Securities Authority

2016 Overview

January 4 – The Corporate Finance Division Audit Unit published a summary report of

findings on trade receivables balances and estimated provisions for doubtful debts.

January 18 – Securities Order (Replacement of the Fourth Addendum to the Law) 5776-

2016, replacing the Fourth Addendum to the Securities Law, was published in the Official

Gazette (Reshumot).

January 31 – A staff position paper was published clarifying the equity and insurance

requirements for trading platforms.

February 2 – Joint Investments in Trust Regulations (Fund Managers’ Participation in

Meetings of Holders) 5776-2015 and Joint Investment in Trust Regulations

(Reports)(Amendment) 5775-2015 came into effect.

February 4 – The ISA decided to reject the license application of Trade Marker and

Markets Ltd (trade name: Trade Marker).

February 15 – The ISA published an outline for operations of ETN trustees, addressing

the unique requirements and risks entailed in the ETN market.

February 17 – An annual revision procedure for ETN economic briefs was defined,

including improved disclosure procedures.

February 22 – First implementation of a model for relief in the procedures for public

offerings of ETNs: reduction in scope of shelf prospectuses, and regulation of a shortened

permit issue procedure for publish shelf offerings.

February 24 – Securities Order (Amendment to the First Addendum to the Law) 5776-

2016, which modifies the definition of “qualified investors” in the First Addendum to the

Law, was published in Reshumot. To establish a well-defined and easily interpreted test

that is better suited to corporations and trading platforms, item 12 in the First Addendum

to the Securities Law was amended by eliminating the reference to the Advising Law,

which was replaced by three alternatives for how qualified investors might meet the

financial strength tests.

March 10 – The ISA decided not to approve binary option trading on trading platforms.

March 10 – The ISA decided to reject trading platform license applications of Etrader Ltd

(trade name: Etrader) and Manx Online Trading Ltd (trade name: Imarkets).

March 21 – ISA Corporate Finance Dividion staff establishes a timetable for regularly

publishing staff Q&As on a variety of topics.

April 1 – An outlined developed by the ISA jointly with mutual fund managers, came into

effect, requiring the mutual fund managers to refrain from increasing the management fees

in the funds under their management other than on a fixed data; Fund manager who decided

to increase management fees may do so only on January 1 of each calendar year.

April 5 – The ISA published Legal Position 104-17: Obligation to Report and Inform of

Compliance with Definitions of Shell Companies.

April 6 – The ISA published Legal Position 105-32: Financial Statements as Insider

Information and Financial Information Reporting.

April 6 – Amendment No. 59 to the Securities Law 5776-2016 was published, entering

into effect 30 days after publication. The main purpose of the Amendment is to promote

cooperation between the ISA and corresponding agencies in other countries, to adjust the

Law to recent changes both in domestic law and in the nature of international

collaborations.

April 10 – Regulations designed to encourage IPOs were published in Reshumot. The

regulations address two main issues: relief in the issuance procedure and relief in reporting

requirements. Concurrently with these amendments, amendments concerning

encouragement of IPOs were also introduced in the Companies Law and its Regulations.

April 10 – Regulations concerning the cancellation of the requirement to attach a bound

cover to reports of transactions with controlling owners, exceptional private placements,

and tender offer specifications, were published in Reshumot. The Regulations also

establish the authority of the ISA Chair or a duly appointed employee to issue exemptions

on disclosing specific details in reports of transactions with controlling owners or

exceptional private placements. The Regulations came into effect on the date of

publication.

April 10 – Securities Regulations (Financial Statements of Corporations Whose Shares are

Included in the TA Tech - Elite Index) 5776-2016 were published in Reshumot and came

into effect on the publication date. The Regulations define relief measures for companies

operating in the hi-tech sector that are included in the TA Tech Elite index or that have

received approval in principle from the TASE to be included after their registration for

trade. The Regulations define other relief measures for small companies, and yet other

relief measures for hi-tech companies that do not meet the definition of a small company.

April 10 – Securities Rules (Cases in which Shelf Offering Reports are Subject to ISA

Approval) 5776-2016 were published in Reshumot. The Rules define the circumstances

under which an ISA permit is required for publishing a shelf offering report, and define the

conditions for such approval. These Rules apply to offerings that have a complex offering

structure and the due disclosure to be given to the investor public before making an

investment decision.

April 21 – Joint Investments in Trust Regulations (Details, Structure, and Form of Fund

Prospectuses) (Amendment) 5776-2016, Joint Investments in Trust Regulations (Annual

Fund Reports) 5776-2016, and Joint Investments in Trust Regulations

(Reports)(Amendment) 5776-2026 were published in Reshumot. These Regulations

establish a new model for mutual fund prospectuses that will reduce the workload of fund

managers, and facilitate and streamline the prospectus approval procedure.

April 19 – The ISA announced that it would, for the first time, publish the forms of the

licensing test (based on the Investment Advising Law) in entirety.

May 4 – Legislative proposal for a graded regulatory scheme and relief measures for small

corporations was published.

May 5 – Regulations related to the regulation of foreign fund offerings in Israel were

published in Reshumot: Joint Investments in Trust Regulations (Offering Foreign Fund

Units) 5776-2016, Joint Investments in Trust Regulations (Distribution Fee)(Amendment)

5776-2016, Joint Investments in Trust Regulations (Classification of Funds for Publication

Purposes)(Amendment) 5776-2016, Securities Regulations (Application Fee for Permit to

Publish Prospectus)(Amendment) 5776-2016, and Securities Regulations (Annual

fee)(Amendment) 5776-2016. These Regulations outline the format for offering foreign

funds in Israel, in line with Amendment 23 to the Joint Investments Law.

May 17 – Securities Regulations (Periodic and Immediate Reports)(Amendment no. 5)

5776-2016 were published in Reshumot. The Amendment has two aims: to disclose the

manner of voting by stakeholders and institutional investors, and to present misstatements

in financial statements in immediate reports.

May 19 – The ISA decided to reject the trading platform license applications filed by

Capital Markets 24 Ltd (trade name: Prime Broker) and USG Capital Israel Ltd (trade

name: USG Capital).

May 22 – Staff Position 103-38: Initial Negotiations with Classified Investors –“Testing

the Waters” was published.

May 31 – Web accessibility of the MAGNA system completed.

June 2 – Regulations in the matter of offerings of securities through trading on the TASE

were published in Reshumot: Securities Regulations (Periodic and Immediate

Reports)(Amendment No. 6) 5776-2016, Securities Regulations (Mode of Offering

Securities to the Public)(Provisional Order) 5776-2016, and Securities Regulations (Shelf

Offerings of Securities) (Provisional Order) 5776-2016. To increase the efficiencies of the

local capital market and increase trading volumes on the TASE, these Regulations define

an additional mechanism for offering securities to the public through sell orders issued on

the TASE. This mechanism serves as a second, more flexible and convenient channel for

raising capital through the TASE, and it further reduces the time required to issue shares,

simplifies existing issuance procedures, and reduces issuance costs.

June 14 — The ISA decided to reject the trading platform license applications files by Gal

Media Trade Ltd (trade name: ITrader) and Smart Capital Markets Ltd (trade name: Smart

Capital Markets).

June 28 – A report by the Corporation Finance Division Audit Unit was published,

containing a summary of the findings on disclosures of remuneration to stakeholders who

hold executive offices, pursuant to Regulation 21.

June 30 – The first stage of the operating scheme for ETN trustees was completed, mainly

amendments to trustee deeds and regulation of trustee fees.

July 4 – The ISA published Legal Position 103-39: Q&A on Offering and Selling

Securities to the Public.

July 5 – The ISA published a uniform evaluation model for ETN assets and liabilities.

July 13 – The ISA published Q&As on at-the-market offerings (ATM).

July 18 – The ISA published an audit report on real estate appraisals in central Israel.

July 19 – Securities Regulations (Signature Confirmation)(Amendment) 5776-2016 were

published, together with rules defined by the ISA, allow entities with multiple holdings

(mainly, institutional investors) to appoint a representative to vote as their proxy, after an

electronic identification process. .

July 25 – The Knesset plenary approved the first reading of Securities Bill (Amendment

No. 60)(Change in the Stock Exchange Structure) 5776-2016. The bill aims to establish

the option of changing the structure of ownership of the Stock Exchange by transforming

it into a for-profit entity.

July 25 – The Knesset plenary approved the first reading of Securities Bill (Amendment

No. 61)(Cross-Listing) 5776-2016. This bill adopted the cross-listing mechanism that

permits listing of shares on the local exchange of foreign companies traded on foreign

exchanges, without requiring any notification, consent, or involvement of said foreign

companies. The aim of this mechanism is to increase liquidity on the Stock Exchange and

increase the efficiencies of the local capital market, while protecting the interests of the

investor public.

July 31 – The ISA decided to reject the trading platform license application filed by D.G.I

Media Ltd.

August 2 – Web accessibility of the ISA’s promotional website completed.

August 3 – The Knesset plenary approved the first reading of Securities Bill (Amendment

No. 62)(Finality of Clearing House Settlement) 5776-2016. This bill establishes the

directives required to minimize the risks to which the TASE clearing houses are subject,

and creates legal certainty for the finality of settlements in the clearing houses on an

ongoing manner and when a clearing house participant enters an insolvency process.

August 15 – The ISA published Resolution 199-13: Reports According Regulation 5(3)(b)

of the Tech Elite Regulations.

August 16 – The ISA published findings from ISA staff studies on evaluations of start-up

companies.

August 17 – The ISA received certification to international data security standard ISO

27001. This standard defines systematic and specific principles for the establishment,

management, and maintenance of IS systems in order to address cyber threats. Certification

was achieved in response to a resolution by the Government of Israel on February 15, 2016,

according to which all government ministries will attain such certification within two years.

August 23 – The ISA published a directive for licensees concerning services rendered

through the use of technological means.

September 2 – The bord of IOSCO selected a representative of behalf of the International

Department to serve as Deputy Chair of the C6 Committee on credit rating.

September 5 – An exhibition of ads designed by copywriting graduates was held, to

increase public awareness of financial behavior and smart consumerism, and a warning

against unregulated investments. The exhibition was the result of a collaboration between

the ISA and "Habetsefer" – Israel’s Advertising and Digital Agencies Academy.

September 14 – The ISA published a staff position paper on the operations of trading

platforms and offering trading services based on trading platform algorithms.

September 29 – The ISA adopted the following resolutions with respect to the following

trading platforms: Plus 500 Israel Ltd (trade name: Plus500), Atrade (trade name: ATrade)

FXCM Trading Ltd (trade name: FXCM), RFX Global Trading Ltd (trade name: Real

Forex) and First Index Ltd (trade name: First Index): (1) To approve the training rules of

these companies, as defined in Section 44R of the Law and pursuant to Section 44M of the

Law; (2) To grant the controlling owners permits of control pursuant to Section 44X(a) of

the Law; (3) To grant the companies a license to manage a trading platform, as defined in

Section 44L of the Law; (4) To define in the license the types of financial instruments and

activities that the companies may perform, pursuant to Section 44M(d).

October 5 – The ISA published a notice to R&D companies that wish to go public.

October 5 – The ISA published Resolution 101-21: Q&A on Remuneration Policies.

October 6 – A memorandum on Joint Investments in Trust Law (Amendment )(ETFs)

5777-2016 was distributed. The memorandum proposed to convert ETNs, which currently

operate under the Securities Law 5728-1968, into ETFs that operate under the Joint

Investments in Trust Law.

November 1 – The ISA published a revision to Staff Position 103-29, on findings related

to due disclosure of collateral and/or charges granted by reporting corporations to secure

payment of bonds.

November 2 – The ISA made the following decisions regarding TGL Colmex Capital

Markets Ltd (trade name: Colmex): (1) To approve the company’s trading rules as defined

in Section 44R of the Law and pursuant to Section 44M of the Law; (2) To grant permits

of control to the controlling shareholders pursuant to Section 44X(a) of the Law; (3) To

grant the company a license to manage a trading platform as defined in Section 44L of the

Law; (4) To define in the license the types of financial instruments and activities that the

company may perform, pursuant to Section 44M(d).

November 5 – The ISA published the Audit Unit’s report containing a summary of

findings on inventory.

November 13 – The ISA Plenary approved a directive to mutual fund managers and

trustees concerning the regulation of custodial issues and the duty of disclosure of credit

risk factors.

November 16 – Uniform structure and format rules for the composition of ETN assets and

liabilities were developed. ETN issuers are expected to publish their reports beginning from

Q3/2017.

November 20 – The ISA decided to reject the trading platform license application of Trade

Capital Markets Ltd (Matah 24).

November 22 – Joint Investments in Trust Regulations (Elite Technology Fund) 5777-

2016 were published in Reshumot. These Regulations permit public offerings of units of

elite technology funds that intend to specialize in investments in Israeli elite technology

companies in the early R&D phase.

November 24 – Licensing exams on securities laws and professional ethics were held in

English for the first time, removing obstacles before new immigrants wishing to complete

their licensing requirements according the Advising Law.

December 1 – The ISA published Accounting Staff Position Paper 11-4: Disclosure on the

Effects of Implementing IFRS 15 Revenue from Contracts with Customers.

December 1 – The ISA published Q&As on Position Paper 99-4 concerning a test of

materiality for misstatements in financial statements, and on Position Paper 105-24 on the

manner of publishing amended financial statements.

December 15 – The ISA published Auditing Enforcement Decision AU-16-1 on the

foundation necessary for a going concern note in interim periods, where the company

intends to remove the going concern note and where significant uncertainty exists

regarding the Company’s financial position.

December 22 – The interface with trading platforms in the trading platforms supervision

system was completed.

December 27 – Settlement of corporate securities issues was shifted to electronic channels.

Therefore manual settlement will be abolished on January 1, 2017.

December 28 – Joint Investments in Trust Bill (Amendment No. 24)(ETFs) 5777-2016

was published in Reshumot. This bill focuses on regulating and supervising investments in

ETNs, which are currently regulated and supervised pursuant to the Securities Law, which

currently applies almost entirely focused to disclosure issues, will be performed under the

Joint Investments in Trust Law. The Bill establishes the legal foundation for the conversion

of the financial instruments that are currently issued as ETNs into mutual funds, subject to

the conditions listed in the Bill.

December 31 – The second stage of the operating scheme for ETN trustees, mainly the

establishment of trustees’ automated systems, was completed.

December 31 –The voting system integrated support for Smart ID cards and smartphones.

Events in the first half of 2017

January 1 – A study on the competition in Israel’s brokerage market commenced in

conjunction with the Anti-Trust Commission. The brokerage market in Israel comprises

banks, investment houses, and foreign brokers. The aim of this study is to identify flaws

that undermine competition in this market and how to outline methods to resolve them.

January 4 – RFI published on the topic of a special purpose trading list for small

companies.

January 9 – The Joint Investments in Trust Bill (Amendment No. 27)(ETFs) 5777-2016

was approved in the first reading. The Bill was passed to the Finance Committee, to be

drafted for the second and third readings.

January 15 – The ISA published Staff Position Paper 199-14: Deposit of Blocked

Securities by Trustees. According to this position paper, reporting corporations that offer

securities in private placements are advised to deposit the securities with a trustee for the

duration of the blocked period.

January 23 – The Knesset Finance Committee approved an amendment to the Fifth

Addendum and the Seventh Addendum to the Securities Law concerning trading platforms

to its own account. After the enactment of the Securities Regulations (Trading Platforms

to its own Account) 5775-2014, which imposed additional obligations on trading platforms

to its own account, violations that constitute grounds for imposing monetary fines by the

ISA, and violations that constitute grounds for an administrative enforcement procedure

were added to the above Addenda.

January 30 – The Israeli version of XBRL reporting language was revised and will be

implemented beginning from the report for the year 2016.

February 1 – A decision was made to establish an interdepartmental data governance team

to manage, improve, and safeguard the ISA’s economic data assets. The team will be

established to analyze the ISA’s needs and to analyze its existing information, and the

systems and integration, to maximize interdepartmental cooperation, define work

standards, and continually address new needs and ensure systems maintenance.

February 5 – Staff Position Paper 105-27: Disclosure on Projected Cash Flows was

revised and new Q&A were added and others modified. Among other things, a continuous

negative cash flow from ordinary operations was defined, and cases in which it exists were

analyzed.

February 7 – The ISA published Legal Staff Position Paper 111-01, Delisting Initiated by

a Foreign Company. According to the Position Paper, a condition precedent for

implementing Section 35BB of the Law, which concerns delisting securities of a foreign

company, is that after the securities are delisted, holders have the opportunity to trade in

the securities on the foreign exchange.

February 8 – The Knesset Finance Committee approved Securities Regulations (Periodic

and Immediate Reports)(Amendment) 5777-2016 and Securities Regulations (Details of

Prospectuses and Draft Prospectuses – Structure and Form) 5777-2016. These Regulations

abolish the obligation of small companies to file quarterly financial statements.

February 20 – The Knesset Finance Committee approved Securities Regulations (Shelf

Offerings of Securities)(Amendment) 5777-2017 on abolishing event reports in shelf

offering reports, and permitting shelf reports to be filed in March.

February 23 – A memorandum was published to amend the Securities Law with respect

to the operations of trading platforms that appeal exclusively to investors outside Israel.

March 2 – The Economic Division of the Tel Aviv District Court issued a decision,

denying the appeal filed against the ISA by Fairtrade (which operates an online platform

for trading in binary options).

March 16 – A proposal to amend the Anti-Money Laundering Order (Obligations of

Identification, Reporting and Record Keeping of Trading Accounts to its Own Account to

Prevent Money Laundering and the Financing of Terrorism) 5776-2015 was published on

the ISA website for public comments.

March 19 – Staff Position 104-15: Reportable Credit Events was revised, adding new

Q&As and modifying others, related to, among other things, the need to disclose financing

activities of investees that are not subsidiaries, the dates on which disclosure of compliance

with financial covenants is required, and the need to disclose precise interest rates on

material loans.

March 30 – Securities Law (Amendment No. 61) in the matter of the finality of settlement,

and Securities Law (Amendment No. 62) in the matter of cross-listing, were published in

Reshumot.

April 6 – Securities Law (Amendment No. 63) in the matter of modification to the structure

of the TASE was published in Reshumot.

April 6 – Securities Regulations (Annual Financial Statements)(Amendment) 5777-2017

was published in Reshumot.

April 6 –Securities Regulations (Details of Prospectuses and Draft Prospectuses –

Structure and Form)(Amendment) 5777-2017 in the matter of signing event reports, were

published in Reshumot.

Enforcement Activities* - 2016

On January 6 - The Magistrate Court sentenced Danny Bracha and Alon Wagner, who

were convicted of insider trading originating in specific insiders. Wagner was also

convicted of violations of the Investment Advice Regulations, Wagner was sentenced to

seven months imprisonment, a suspended jail sentence, and a NIS 120,000 fine. Bracha

was sentence to a four months community service, a suspended jail sentence, and a NIS

150,000 fine. Wagner appealed against the verdict and the sentence and Bracha appealed

against the verdict.

On January 10 - the Administrative Enforcement Committee certified an enforcement

arrangement between the ISA and Eitan Gal, Meir Rokah, and Nir Shay, who admitted to

charges of reporting violations and inclusion of misstatements in financial statements. In

the arrangement, monetary fines of NIS 250,000, NIS 150,000, and NIS 1000, respectively,

were imposed on the respondents, as well as suspended fines in the same amounts. The

CEO Gal and the CFO Rokah were prohibited from acting as officers in regulated entities

for a period of one year and one and a half years, respectively.

On January 11 - the Administrative Enforcement Committee certified an enforcement

arrangement between the ISA and CPA Benyamin Muchtar. Muchtar was accused of

inclusion of misstatements in the auditing accountant’s report attached to the financial

statements. Muchtar admitted to the facts of the arrangement but did not admit that these

constituted violations. Under the arrangement, Muchtar was sentenced to a NIS 100,000

fine and a suspended fine in the same amount.

On January 12, the Supreme Court dismissed the appeals of Tal Yagerman, Aryeh Givoni,

David Habi and Rafi Peled, and upheld their conviction by the District Court. The Supreme

Court did however p artially accept the State’s appeal against the leniency of Yagerman’s

sentence, and increased the severity of the sentence from four to six years. Furthermore,

Peled’s fine was doubled to NIS 200,000. The remaining sentenced were not amended.

On January 13, the Administrative Enforcement Committee certified an enforcement

arrangement between the ISA and Yosef Volosky, who admitted to using insider

information he received from a specific insider. Under the arrangement he was sentenced

to a monetary fine of NIS 150,000.

On January 14, the District Court sentenced Yaakov Bolos and Azami Nashashibi. Bolos

was convicted of theft, falsification of corporate documents, and use of a forged document.

Bolos and Nashashibi were also convicted of misleading reporting. The Court sentenced

Bolos to 21 months imprisonment, a suspended jail sentence, and a monetary fine of NIS

1 million. Nashashibi received six months community service, a suspended jail sentence,

and a monetary fine of NIS 1 million. After the conviction, Bolos and Nashashibi appealed

against the verdict and the sentence.

On February 7, the Magistrate Court sentenced Michael Barzel who had been convicted

of reporting violations, based on his own admission in a plea bargain. The Court sentenced

Barzel to four months community service, a suspended jail sentence, a monetary fine of

NIS 140,000, and a three-year restriction on his service as an officer.

On February 14, the Administrative Enforcement Committee certified an enforcement

arrangement between the ISA and Avinoam Barak, who was accused of insider trading

based on information received from a specific insider. In the arrangement, Barak admitted

to the facts but did not admit that the facts constitute the alleged violations. Under the

arrangement, he was sentenced to a monetary fine of NIS 120,000 and a suspended fine in

the same amount.

On February 28, the Magistrate Court sentenced Ronen Crystal after he was convicted of

the following violations: theft by a manager, obtaining a thing by deceit under aggravating

circumstances, fraud and breach of trust in a corporation, violations by administrators in a

corporation, and reporting violations, all on his own admission in the plea bargain. The

Court imposed a sentence of 28 months imprisonment, a suspended jail sentence, and a

monetary fine of NIS 200,000.

On March 7, the Magistrate Court convicted Simodan and its owner Roy Meir of securities

fraud and actions prohibited to licensed professionals under the Regulation of Investment

Advice Law. The Court acquitted Anat Peled who was a salaried employee who worked

under Meir in the Simodan group of companies.

On March 20, the Administrative Enforcement Committee rejected an enforcement

arrangement between the ISA and an unnamed individual, an insider in a public company,

who was accused of negligent disclosure of insider information. Under the arrangement,

the unnamed individual did not admit to the disclosure of insider information, but he agreed

to a monetary fine of NIS 85,000 and a suspended fine in the same amount. In view of the

Committee’s rejection of the arrangement on grounds of insufficient evidence, the ISA

decided to use its authority to close the case against the unnamed individual.

On March 22, the District Court (Economic Department) partially accepted an

administrative appeal filed against the decision by the Administrative Enforcement

Committee that Moti Menashe and Upswing Capital Ltd committed violations of selling

blocked shares on the TASE, and against the enforcement measures that were imposed.

The Court rejected the petitioners’ argument concerning one of the violations and accepted

Menashe’s arguments concerning four additional violations. The original NIS 100,000 fine

imposed on Menashe and a suspended fine in the same amount were reduced to NIS 50,000.

The enforcement measures against Upswing were upheld.

On March 29, the District Court convicted Freddy Robinson, who served as CEO and

CBOD of the public companies Shahar Hamillenium and its parent company Milomar, and

Oren Duadi, CFO of Milomar, of obtaining a thing by deceit under aggravating

circumstances, and fraud and breach of duty in a corporation. Robinson, Duadi, and

Milomar were also convicted of reporting violations.

On April 10, as part of a settlement between the parties, the Tel Aviv District Court

dismissed an appeal against a decision of the Fines Committee to impose, under the

Prohibition of Money Laundering Law, a monetary find on IBroker Trade and Securities

Ltd. As a matter of exception, the ISA set the fine at NIS 60,000 instead of NIS 90,000.

On April 13, the District Court sentenced Shlomi Shany, who was convicted on his own

admission in a plea bargain of the violations stated in an amended indictment. Shani was

convicted of insider trading based on information originating in a specific insider, and

obtaining a thing by deceit, and fraud and breach of duty in a corporation. The Court

imposed two six-month sentences of community service, a suspended sentence, and a

monetary fine of NIS 200,000.

On April 15, a decision was made to contingently close the case against Siemens AG. In

a settlement reached with Siemens AG, the global concern admitted that it had transferred

EUR 9.5 million to bank accounts around the world and had given bribes IEC executives

in the amount of EUR 2.5 million in connection with various tenders in which it had

participated. Siemens AG undertook to pay NIS 160,000 to the State Treasury and appoint

an external supervisor to oversee its businesses in Israel, and supervise the assimilation in

the company of a culture of compliance regarding bribery violations.

On April 18, the Tel Aviv District Court ruled on the parties’ appeal against the verdict

handed down by the Magistrate Court in the trial against Eliyahu Uzan. Uzan was convicted

of theft by an administrator, obtaining a thing by deceit under aggravating circumstances,

fraud and breach of trust in a corporation, falsification of corporate documents, and

misleading reports. The Court imposed 23 months imprisonment, a suspended jail

sentence, and a monetary fine of NIS 550,000. The State appealed against the leniency of

the sentence, and Uzan appealed against its severity. The District Court upheld the jail

sentence, and increased the fine to NIS 750,000.

On April 19, the ISA imposed monetary fines, under various laws. Under the Securities

Law: a fine of NIS 32,400 was imposed on the public company Jerusalem Investments in

Technologies Ltd for a delay in filing financial statements. Under the Advising Law: a fine

of NIS 97,070 was imposed on Excellence Nesuah Portfolio Management Ltd for failure

to mark exceptional securities as such in reports to customers and failure to state the value

of the exceptional assets; a fine of NIS 665,015 was imposed on Infinity Investment

Portfolio Management Ltd for obtaining refunds of commissions in violation of an

agreement; a fine of NIS 45,056 was imposed on Impact Investment Portfolio Management

Ltd for insurance violations and failure to report non-compliance with the terms of its

license to the ISA of. Under the Mutual Funds Law: a fine of NIS 135,518 was imposed

on Excellence Mutual Funds Ltd for purchasing and holding a foreign bond that was not

consistent with the conditions of the Asset Regulations.

On May 5, the District Court sentenced Gil Erlichman, who was convicted on his own

admission in a partial plea bargain, of the violations attributed to him in an amended

indictment. The violations include money laundering, falsifying corporate records, fraud

and breach of trust in a corporation. The Court sentenced Erlichman to three months

community service and imposed a monetary fine of NIS 150,000.

On May 9, the Administrative Enforcement Committee certified an enforcement

arrangement between the ISA and Hot Communications Ltd, Kol Holdings Ltd, Joey

Dexter, Jeremy Bonin, and Herzl Ozer. According to the arrangement, the respondents

were charged with negligently including misstatements in two immediate reports of Hot.

Ozer was attributed supervisor responsibility for these violations. The respondents

admitted to the facts of the arrangement but did not admit that these actions constituted

violations. According to the arrangement, the following monetary fines were imposed on

the respondents: NIS 1,750,000 and NIS 2,250,000 on Hot and Kol respectively; NIS

275,000 and NIS 225,000 on directors Dexter and Bonin, respectively; and NIS 100,000

on Ozer. Hot also undertook to revise its immediate report reporting policy. Dexter and

Bonin resigned from their positions in Hot and undertook not to serve as officers for one

year and one and a half years, respectively.

On May 15, an indictment was filed against Hannah Rado for insider trading in the

Compugen affair, based on information from a specific insider. According to the

indictment, Czaczkes, Rado’s brother, possessed insider information about advanced

negotiations conducted between Compugen and Bayer, a German company, of which he

learned from his wife Dikla, VP Finance at Compugen. Czaczkes told Hannah that he

possessed insider information and advised her to purchase Compugen stock. Possessing

this information, Rado purchased shares in Compugen before the immediate report was

issued. After the share price rose following the report, Rado sold the entire quantity of

shares that she had purchased.

On May 15, an indictment was filed against Aryeh Shimon Czaczkes Axselbrad, in the

Compugen affair (see above) for insider trading based on information from a specific

insider.

On May 16, an indictment was filed against Sharon Holtzman for securities fraud and

forgery that affects transactions. According to the indictment, Holzman took steps to

disseminate false favorable information on the Internet to induce others to purchase shares

of a company whose securities Holtzman previously purchased.

On May 18, an arrangement was signed with Ran Waldman to contingently close his file.

In this arrangement the parties agreed that Waldman performed several hundred

coordinated self-trades between securities and provident fund accounts under his personal

management belonging to him, to another individual, and to their family members.

Waldman’s actions create the grounds for the violation of fraudulent influence on securities

and obtaining a thing by deceit. According to the arrangement it was also agreed that the

State Attorney would not file an indictment against Waldman for these violations.

Waldman undertook to pay NIS 200,000 and to refrain from serving as an officer in any

supervised entity for one year.

On May 19, the District Court sentenced Ido Nissentzweig, former Excellence dealing

room operator. Nissentzweig was convicted on his own admission in a plea bargain, which

led to an amended indictment for falsifying corporate documents, hundreds of counts of

theft by an authorized individual, hundreds of counts of market manipulations on securities

prices, fraud and breach of trust in a corporation, and money laundering. The Court

imposed a sentence of 27 months imprisonment on Nissentzweig and a fine of NIS 50,000.

Nissentzweig appealed against the severity of the sentence.

On May 23, The District Court (Economic Division) dismissed an administrative appeal

filed against a decision of the Administrative Committee concerning the responsibility of

Barak Rozen and Guy Canada for the commission of an administrative offense involving

the inclusion of misstatements in an immediate report. With respect to the enforcement

measures that were imposed, the Court decided that its intervention in enforcement

measures was limited in any case, and upheld the sentence, yet ordered a token reduction

in the fine imposed on Canada, from NIS 150,000 to NIS 120,000.

On May 26, an indictment was filed against Siemens Israel Ltd, a subsidiary and the local

arm of Siemens AG. The indictment describes a massive bribery affair, in which Siemens

AG, through Siemens Israel Ltd (see above, April 15), bribed a long list of senior IEC

employees with payments totaling several millions of dollars. These payments were made

in connection with IEC tenders valued at billions of shekels. Senior IEC employees were

also indicted alongside Siemens.

On May 29, the Magistrate Court imposed a sentence on Roy Meir and Simodan, after

their conviction of securities fraud and actions prohibited to a licensed professional (see

March 7 above): Meir was sentenced to three months community service, a suspended jail

sentence and a monetary fine of NIS 60,000. The Court imposed a token fine of NIS 250

on Simodan.

On June 7, the Court issued a sentence to Nir Sharabi after his conviction on his own

admission, in a plea bargain, of the violations attributed to him in the amended indictment:

money laundering, falsifying corporate documents, fraud and breach of trust in a

corporation. The Court sentenced Sharabi to three months community service and a

monetary fine of NIS 100,000.

On June 7, an indictment was filed against Yaron Yeini, who served as CEO and the

controlling owner of Kadron. He was accused of: obtaining a thing by deceit under

aggravating circumstances, fraud and breach of trust in a corporation, violations by

administrators and employees in a corporation, and reporting violations.

On June 9, an indictment was filed against Eyal Hadad and a company known as Selection,

for securities fraud by deceptively influencing share price fluctuations, and for reporting

violations. According to the indictment, Hadad performed self-trades that affected the price

of Itamar shares and did not report that Selection had become a party at interest in Itamar.

On June 16, a decision was handed down on an appeal filed with the Supreme Court by

Shimon Yamin. The District Court convicted Yamin on his own admission of several dozen

counts of obtaining a thing by deceit under aggravating circumstances, and receipt of

prohibited incentives related to portfolio management, and sentenced him to 22 months

imprisonment, imposed a suspended jail term and a monetary fine of NIS 75,000 and

payment of damages to the victims of the violation in the amount of NIS 500,000. The

Supreme Court accepted Yamin’s appeal against the sentence and reduced the fine to NIS

15,000.

On June 19, the decision by the Administrative Enforcement Committee against Avishai

Sandner was published, determining that Sandner, an insider due to his being married to

an insider in a public company, negligently disclosed insider information. The Committee

imposed a monetary fine of NIS 30,000 on Sandner, considering his financial situation and

the fact that he gained no financial benefit from the violation.

On June 23, an indictment was filed against Shay Avni and a company known as Kol. The

indictment attributes to Avni and to Kol, which Avni owns, the following two violations:

theft by an authorized individual, and deceptive influence on securities price fluctuations.

Avni was also charged with obtaining a thing by deceit under aggravating circumstances,

portfolio management without a license, and passing bad checks.

On June 23 the District Court sentenced Ran Bar Tikva, after he was convicted on his own

admission in a plea bargain of the violations stated in an amended indictment. Bar Tikva

was convicted of insider trading, obtaining a thing by deceit, fraud and breach of trust in a

corporation. The Court sentenced Bar Tikva to six months community service, and

imposed a suspended jail term and a fine of NIS 400,000.

On June 26, an indictment was filed against Amir Bramli, Kela Funds, and Rubicon.

Bramli was charged with theft by an authorized individual, obtaining a thing by deceit

under aggravating circumstances, attempt to obtain a thing by deceit under aggravating

circumstances, money laundering, prohibited actions involving prohibited assets, public

offering without a prospectus, forgery with intent to obtain a thing by deceit under

aggravating circumstances, fraud and breach of trust in a corporation, violations by

administrators and employees in a corporation, and reporting violations. Together with

Bramli, the private company Rubicon and Kela Fund were also charged.

On June 30, the ISA decided to help fund a class action against D-Pharm Ltd (Class Action

38731-05-15) and a class action against Bezeq Israeli Communications Company Ltd

(Class Action 44126-01-15). The action in the matter of D-Pharm concerns the claim that

the respondents failed to disclose in the company’s prospectus the true results of an

experiment that the company conducted on the key drug that it developed. The action in

the matter of Bezeq concerns the argument that Bezeq failed to properly report a Ministry

of Communications decision to reduce connection fees and a Ministry of Communications

decision to include telephone services in the wholesale market reforms.

On July 4, the District Court convicted Nohi Dankner of the following violations:

fraudulent influence, fraudulent inducement, failure to report with intent to mislead,

misstatement in a prospectus and commission of a prohibited action involving a prohibited

asset. IDB was convicted of the same violations as Dankner with the exception of money

laundering, which was not attributed to IDB. Furthermore, Itay Shtrom was convicted of

fraudulent influence, fraudulent inducement, and commission of a prohibited action

involving a prohibited asset. Shtrom was acquitted of witness tampering with respect to

Adi Sheleg’s testimony, with which he was charged in an indictment. Close Trading Ltd

was charged with all the violations of which Shtrom was convicted. This case concerns

massive fraudulent trading activities involving IDB shares on three trading days,

surrounding a secondary securities issue of critical significance for the company.

On July 13, the District Court sentenced Yaakov Barzilay, former dealing room operator

at Excellence, who was convicted on his own admission in a plea bargain of the violations

stated in an amended indictment: falsifying corporate documents, hundreds of counts of

theft by an authorized individual, hundreds of counts of fraudulent influence on securities

prices, fraud and breach of trust in a corporation, and money laundering. The Court

sentenced Barzilay to 21 months imprisonment and imposed a fine of NIS 100,000.

On July 13, the District Court sentenced Freddy Robinson and Oren Duadi after they were

convicted in March (see March 29, above). The Court sentenced Robinson to 15 months

imprisonment, imposed a suspended jail term and a NIS 1.5 million fine, and sentenced

Duadi to six months community service and imposed a fine of NIS 150,000. A fine of NIS

250,000 was imposed on Milomar.

On July 14, the Administrative Enforcement Committee certified, by majority vote, an

enforcement arrangement between the ISA and Yehuda Hakim, a day trader who admitted

to market manipulations by performing 582 self-trades. Under the arrangement, a

suspended monetary fine of NIS 200,000 was imposed, and Hakim undertook to refrain

from trading in securities for a period of 36 months. According to the arrangement, if

Hakim violates this commitment, a fine of NIS 100,000 will be imposed.

On August 4, the Administrative Enforcement Committee certified an enforcement

arrangement between the ISA and Leo Noe and Ivor Smith, who were accused of insider

trading. The respondents admitted to the facts stated in the arrangement but did not admit

that they constitute a violation. According to the arrangement, a fine of NIS 350,000 was

imposed on each of the respondents and a suspended fine in the same amount was also

imposed.

On September 6, Dov Rozman, the manager and owner of Rozman D. Investment

Initiatives Ltd was charged with managing investment portfolios without a license,

fraudulent influence, and reporting violations. Rambam Shavit, who was the owner of

Rambam Capital Markets and Investments Ltd was also charged alongside Dov Rozman

with abetting engagement in investment portfolio management without a license.

On September 12, the Supreme Court ruled on appeals filed by Jacky Ben Zaken, Eitan

Eldar, and Manofim Finansim Ltd. Ben Zaken and Eldar were convicted by the District

Court of fraudulent influence on securities prices, conspiracy to commit a crime, and

obtaining a thing by deceit under aggravating circumstances. Manofim was convicted of

deceit as Ben Zaken was an organ of the company. Ben Zaken, Eldar, and Manofim

appealed against the verdict and the sentence, and the State appealed against the fine

imposed on the defendants. On the Court’s advice, the defendants withdrew their appeals

against the conviction. The appeals filed by the State and the defendants against the

sentence were partially accepted, and the Supreme Court reduced Ben Zaken’s jail sentence

to 26 months and Eldar’s sentence to 22 months, yet increased the fines to NIS 800,000 for

Ben Zaken and NIS 500,000 for Eldar. The appeal against the fine imposed on the company

was denied.

On September 21, the Administrative Enforcement Committee certified an enforcement

arrangement between the ISA and Eitan Shliselberg, who admitted to violations related to

trading manipulations by performing 352 self-trades. Under the arrangement, a fine of NIS

180,000 was imposed on Shliselberg.

On September 22, the Administrative Enforcement Committee certified an enforcement

arrangement between the ISA and Babylon Ltd and its officers Alon Carmeli, Noam Lanir,

and Shanit Peer Zefoni. Under the arrangement, Babylon and Carmeli were attributed

negligent reporting violations, and negligent inclusion of misstatements in periodic reports

was attributed to all respondents. The respondents admitted to the facts stated in the

arrangement but did not admit to the commission of the violations. Under the arrangement,

a NIS 1 million fine was imposed on Babylon, which undertook to redefine its procedure

for issuing immediate reports. A fine of NIS 250,000 was imposed on Alon Carmeli and

he was prohibited to serve as a senior officer in a supervised entity for a period of five

months. A fine of NIS 150,000 and suspended prohibition to serve as an officer for six

months was imposed on Noam Lanir. A fine of NIS 75,000 was imposed on Shanit Peer

Zefoni.

On September 26, an indictment was filed against Gideon Moran and Ofer Eitan. Gideon

Moran served as a director in the public companies Carmon Software Services Ltd and

Y.Z. Queenco Ltd., and served as CBOD of Azimutline Financial Solutions Ltd. Moran

was charged with insider trading based on information from a specific insider, under

separate charges under Section 52d and 52c of the Securities Law, and reporting violations

and security fraud. Ofer Eitan, who was the VP Business Development and member of the

board in Azimutline was, alongside Moran, also charged with insider trading based on

information from a specific insider.

On September 27, an indictment was filed against Guy Ben David, owner and manager

of the partnership RGR Group, and against Eran Greenfeld, Gad Osopasky, and Gabriel

Kalimi, who served as dealers in RGR. The indictment attributes to the defendants

numerous counts of securities fraud by fraudulently influencing prices of securities, and

fraudulent inducement. The RGR partnership was also accused of all the above violations,

through the defendants’ actions. According to the indictment, the dealers in RGR, under

the management of Ben David, devised a deceptive plan to manipulate the prices of

securities that were expected to be to be included in and removed from indices in 2011-

2012

On September 28, the Tel Aviv District Court ruled on an appeal filed by portfolio

manager Michael Gavish against his sentence that was handed down by the Magistrate

Court. The Magistrate Court convicted him of a long series of violations: theft by an

authorized individual, obtaining a thing in deceit under aggravating circumstances, fraud

and breach of trust in a corporation, fraudulently influencing market prices. inducement to

enter into securities trades, reporting violations, forgery of a document with the intent to

obtain a thing in deceit, and obstruction of justice. Gavish was sentenced to 60 months

imprisonment for these violations, a suspended jail sentence, and a fine of NIS 150,000. At

the advice of the Court, the appellant withdrew his appeal against the conviction. The

District Court reduced the appellant’s sentence by 20 months, for a total of 40 months

imprisonment, and affirmed the fine.

On September 27, the Tel Aviv District Court convicted Yehoshua Zoller, who served as

CBOD of Dash Apex Holdings Lt, and Yehuda Keren, who served as a director in that

company, of a series of violations involving obtaining a thing by deceit, and providing false

reports with an intent to mislead. Zoller, together with Etti Tanzer, was also convicted

insider trading – Zoller was convicted under Section 52c and Tanzer was convicted under

Section 52d of the Securities Law.

On October 30, the ISA decided to assist in funding a derivative action in the matter of

Aaora Ltd and others (Derivative Action 41206-03-16. Underlying this action are

arguments against the company’s decision to enter into an agreement with a legal firm

owned by the wife of the company’s controlling shareholder.

On October 30, the ISA imposed fines under various laws. Under the Securities Law, fines

in the amount of NIS 201,390 were imposed on four public companies for a delay in filing

financial statements: Jerusalem Investments in Technologies Ltd, Maayan Ventures Ltd,

Kamen Capital Ltd, and New Horizon Group Ltd. Under the Advising Law, a fine of NIS

35,630 was imposed on Kramim Capital Markets (Investment Portfolio Management) Ltd

for failure to mark exceptional assets in reports to customers and failure to list the value of

the exceptional assets and the value of the portfolio with deductions as required; a fine of

NIS 41,941 was imposed on Julius Bar Financial Services (Israel) Ltd for non-compliance

with insurance requirements and failure to report non-compliance with the terms of its

license to the ISA.

On November 15, the Administrative Enforcement Committee certified an enforcement

arrangement between the ISA and DGI Media Ltd and Gabriel Lavie, who admitted to

violations of managing a trading platform without a license and making trading offers on

an unauthorized trading platform. It should be noted that this was the first implementation

of the provisions of the law concerning trading platforms. In the arrangement, a fine of NIS

300,000 was imposed on Gabriel Lavie, who also received a suspended fine in the same

amount, and was prohibited from serving as a senior officer in a supervised entity for a

period of two years. A fine of NIS 200,000 was imposed on the company.

On December 5, the District Court sentenced Dankner, Shtrom, IDB, and ISP, after they

were convicted on July 4 (see above). The Court sentenced Dankner to 24 months

imprisonment, and imposed a suspended jail sentence, and a fine of NIS 800,000;

sentenced Shtrom to 12 months imprisonment, and imposed a suspended jail sentence, and

a fine of NIS 500,000. A fine of NIS 250,000 was imposed on IDB and a fine of NIS

150,000 was imposed on IDP.

On December 5, the District Court ruled on the appeals filed by Danny Bracha and Alon

Wagner against the verdict and sentence handed down by the Magistrate Court (see January

6, above). Wagner appealed against the verdict and the sentence, while Bracha appealed

against the verdict. The District Court denied the appeals against the verdict but reduced

the one year sentence of imprisonment imposed on Wagner to six months community

service.

On December 6, the Monetary Fine Committee imposed a fine of NIS 250,000 under the

Anti-Money Laundering Law on Meitav Dash Trade Ltd for the following money

laundering violations: duty of auditing, duty to perform a KYC procedure, duty to perform

ongoing controls of the KYC procedure, duty to confirm details of account holders, and

duty to obtain a declaration of account beneficiaries and controlling owner.

On December 8, the Supreme Court ruled on the appeals filed by Yaakov Bolos and Azami

Nashashibi against the verdict and sentence handed down by the District Court (see above,

January 14). The Supreme Court denied Bolos’ appeal and upheld the imprisonment and

fine, and reduced the sentence in lieu of the fine to six months imprisonment. The Court

also acquitted Nashashibi of the violation of failure to report the termination of a lease

agreement and failure to report referral of a dispute to arbitration, and reduced the jail

sentence to four months community service. The Court also reduced the fine imposed on

Nashashibi to NIS 500,000 or three months imprisonment.

On December 21, the Administrative Enforcement Committee’s decision against Hananya

Cohen was published, in which it determined that Cohen, a day trader, committed market

manipulations by performing 269 self-trades. The Committee imposed a NIS 25,000 fine

on Cohen, taking into consideration his financial position, personal circumstances, the deep

remorse that he expressed and his commitment to change his ways.

On December 22, the District Court convicted David Edri, who served as the manager of

the brokerage department of Psagot Investment House, and Shay Ben David, who served

as manager of the brokerage dealing room at Psagot. Both were convicted of two district

charges of obtaining a thing by deceit under aggravating circumstances, and fraudulent

influence on securities prices. Edri was convicted of another charge including securities

fraud, and fraud and breach of trust in a corporation. The Court acquitted Aharon Navon,

who served as director of the dealing room in Deutsche Bank, and Saar Weintraub, who

was a dealer in the dealing room of Deutsche Bank, of the charges attributed to them in the

indictment for insufficient evidence. The Court acquitted Edri and Ben David of one count

of obtaining a thing by deceit under aggravating circumstances and of one count of

securities fraud involving one of the securities. The indictment includes three charges, each

of which might have served as grounds for a separate indictment, both in terms of their

severity and the scope of traded funds. Underlying each of the charges is a different factual

foundation, but all three include a charge of fraudulent influence on securities prices,

among other things.

On December 25, the ISA imposed a fine of NIS 38,910 under the Securities Law on Hap

Venture World Wide Fund Ltd, for publications that constitute an offer of securities

without a prospectus.

On December 25, the Tel Aviv District Court handed down a sentence on Amitai Matzliah,

a former trader in the foreign securities dealing room of Excellence Investment House,

after he was convicted in October 2015 on his own admission in a plea bargain and an

amended indictment, of theft by an authorized individual, obtaining a thing by deceit under

aggravating circumstances, and fraud and breach of trust in a corporation. The Court

sentenced Matzliah to six months community service, and imposed a suspended jail

sentence and a fine of NIS 100,000.

Enforcement – 2017

On January 15, the District Court of Tel Aviv convicted Rambam Shavit on his own

admission, under a plea bargain, of abetting investment portfolio management without a

license (the first charge in the indictment). Shavit managed customers’ accounts in the

company that he owns, and made it possible for Dov Rozman to manage investment

portfolios for his clients while Rozman’s license was suspended.

On February 6, the District Court convicted Aryeh Czaczkes Axselbrad, on his own

admission in an amended indictment, of insider trading based on information from a

specific insider. Czaczkes disclosed insider information to his sister, Hannah Rado, about

advanced negotiations between Compugen and Bayer AG. After receiving the information,

Rado purchased shares in Compugen before it published an immediate report on this

matter, and when the price of the shares increased in response to the report, Rado sold the

entire number of shares that she had purchased.

On February 7, the District Court sentenced Gad Osopasky and Gabriel Kalimi, after they

were convicted on their own admission in a plea bargain, of committing the violations

stated in the indictment. Osopasky and Kalimi served as traders in RGR Group, and were

convicted of numerous counts of securities fraud by fraudulently influencing securities

prices and fraudulent inducement. The Court sentenced Osopasky to six months

community service, and imposed a suspended jail sentence and a fine of NIS 200,000. The

Court imposed on Kalimi an eight months suspended prison sentence, and a fine of NIS

60,000. In the indictment, Guy Ben David, the owner and manager of the RGR Group

partnership, and Eran Greenfeld, who was a trader at RGR, were also charged. The scheme,

managed by Ben David, was designed to affect the prices of securities that were expected

to be included in and removed from indices in 2011-2012.

On February 8, the Tel Aviv Magistrate Court sentenced Yehoshua Zoller, who served as

CBOD of Das Apex Holdings Ltd, and Yehuda Keren, who served as a director in the

company, after they were convicted of a series of charges of obtaining a thing by deceit

and providing false reports with the intent to mislead. The Court also handed down the

sentence for Etti Tanzer, who was convicted of insider trading together with Zoller. Zoller

received a sentence of six month community service, a suspended jail sentence and a fine

of NIS 500,000, Keren received a suspended jail sentence and a fine of NIS 150,000.

Tanzer received a suspended jail sentence and a fine of NIS 140,000. The State Attorney

filed an appeal against the leniency of the sentence.

On February 8, the Tel Aviv District Court handed down a sentence for Rambam Shavit

(see January 15, above), imposing two months community service, a suspended jail

sentence, and a fine of NIS 15,000.

On February 8, the Tel Aviv District Court handed down a sentence for Avraham

Ashkenazi, who was convicted on his own admission, in a plea bargain, of theft by an

authorized person, fraud and breach of trust in a corporation, and fraudulent influence of

securities prices. Uri Weisman, former employee of Excellence Investment House, was

also named in the indictment. The Court sentenced Ashkenazi to seven months

imprisonment, a suspended jail sentence, and a fine of NIS 200,000.

On February 21, an appeal was filed against the sentence handed down by the Tel Aviv

District Court against Ido Nissentzweig of 27 months imprisonment, a suspended sentence

of 18 months imprisonment, and a fine of NIS 50,000 (see May 19, 2016, above). The

Supreme Court dismissed the appeal.

On February 26, the ISA decided to assist in funding a derivative action in the matter of

Y.O.E.L. Jerusalem Oil Exploration Ltd and others, and to assist in funding a class action

in the matter of Olitzky Mining (1990) Ltd. The class action in the matter of Y.O.E.L.

concerns the argument that the company’s decision to issue options to the company

secretary and to its legal advisor was flawed. The action involving Olitzky involves the

argument that the consideration that was paid for the company shares in a complete

purchase offer was less than the fair value of the shares.

On March 9, the Tel Aviv District Court convicted David Richard Coon, Yaakov Hayin,

Haim Bar Ner, Yonah Schweitzer, and Tzvi Eyal of bribery, fraud and breach of trust by a

public servant, and with the exception of Schweitzer, of money laundering. The Court

convicted them on their own admission under a plea bargain of the violations stated in the

amended indictment. The indictment describes a serious incident in which Siemens AG,

through its subsidiary Siemens Israel, paid millions of dollars in bribes to senior IEC

employees in connection with tenders of a value of several billion shekels. The indictment

also names David Almakayas, and Siemens Israel.

On March 27, the Tel Aviv District Court convicted Dov Rozman on his own admission

in a plea bargain (also see January 15, above), of the charges in an amended indictment.

Rozman was convicted on securities fraud, management of investment portfolios without

a license, and reporting violations.

On March 30, the District Court sentenced Aryeh Czaczkes Axselbrad, after he was

convicted on his own admission to the facts of the modified indictment (see above,

February 6). The Court sentenced Czaczkes to four months community service, and

imposed a suspended jail sentence and a fine of NIS 100,000.

On April 6, the District Court sentenced Sharon Holzman, who was convicted on his own

admission of the violations attributed to him in the indictment. Holzman was convicted of

securities fraud and forgery that influences transactions. Holzman took steps to disseminate

false favorable information on the Internet to induce others to buy securities of a company

whose securities Holzman previously acquired. The Court sentenced him to six months

community service, and imposed a suspended jail sentence and a fine of NIS 30,000.

On April 6, the District Court sentenced Yaron Shalom Yeini, who was convicted on his

own admission of the violations attributed to him in an amended indictment. Yeini served

as the CEO and controlling owner of Kadron, and was accused of reporting violations,

fraud, and breach of trust in a corporation, as well as violations by administrators and

employees in a corporation.

On April 9, the case against Yonatan Moran was closed conditionally. The parties reached

an agreement that Moran had performed coordinated self-trades in Queenco shares, and the

State Attorney would not file an indictment in his matter. Moran undertook to pay NIS

200,000 and to refrain from serving as a senior officer in a licensed entity for a one-year

period.

On April 5, the Administrative Enforcement Committee certified enforcement

arrangements between the ISA and Therafix Biosense Ltd and its officers – Ari Aminetzah,

Asher Shmulevitch, and Dorit Krayner — who admitted to negligent reporting violations,

negligent inclusion of misstatements in financial statements, and negligent misleading a

government agency. Under these arrangements, a fine of NIS 150,000 was imposed on the

company and the company undertook to revise its immediate reporting procedure to

prevent a recurrence of the violations. Fines of NIS 125,000, NIS 150,000 and NIS 75,000

were imposed on Aminetzah, Shmulevitch, and Krayner, respectively, and the Court

imposed suspended fines in the same amounts, and a prohibition to serve as senior officers

for a period of two and a half years for Aminetzah, a suspended period of one year for

Shmuletvitch, and a suspended period of six months for Krayner. Furthermore, the

Committee thereby dismissed an enforcement arrangement that had been made with the

company’s external legal adviser.

___________

Selected tables

No. of applications filed and permits issued for publication of prospectus

2014-2016*

Prospectuses Shelf prospectuses

Year Total

applications

filed

Total

permits

issued

IPO permits

issued (of

total permits

issued)

Shelf

prospectus

permits

issued (of

total

permits

issued)

No. of

companies

offering

securities

based on a

shelf

prospectus

Total shelf

prospectus

reports

2014 121 111 15 (13%) 78 (70%) 130 176

2015 131 112 21 (18%) 79 (70%) 112 171

2016 133 119 16 (13%) 95 (79%) 144 228

* The data relate to prospectuses submitted and prospectuses that received permits between February 1

of each of the years listed in the table and up to January 31 of the following year.

Capital raised and issues of shares, convertible securities and bonds 2015-2016*

(in NIS millions)

2015 2016

Shares, options, and convertible bonds

A. Issued to the public

Shares and options issued on the local market 2,259 2,441

Rights issues 927 803

Convertible bonds issued on the local market 236 1,332

Foreign issues 29,650 489

B. Private placements

Shares and options issued on the local market 1,758 682

Issues to employees 50 646

Capital raised overseas

3,675 22,021

Foreign convertible bonds 0 86

C. Options exercised

Stock options 337 674

Participation unit option 1 177

Convertible bond options 0 24

Total shares, options, and convertible bonds 38,893 29,375

Bonds

A. Public issues

Corporate bonds 50,882 61,379

B. Private placements

Corporate bonds 3,787 1,895

Institutional bonds (on Retzef, the institutional trading

arena) 971

3,206

Unlisted bonds 1,444 631

C. Exercised bond options 0 0

Total bonds 57,084 67,111

Total capital raised from the public issues and private placements 95,977 96,486

* not including indices

Statistical data on mutual funds by category

December 31, 2016

Total

funds

Total fund

assets (NIS

millions)

Average

portfolio

value

(NIS

millions)

% of

total

fund

assets

Local bonds - general 334 72,069 215.78 33.7

Local bonds – corporate and

convertible 223 32,730 146.77 15.3

Israeli government bonds 198 31,805 160.63 14.9

Money funds 32 18,884 590.13 8.8

Local shares – shekel-only 138 20,373 147.63 9.5

Local shares 131 13,217 100.89 6.2

Foreign shares 171 10,464 61.19 4.9

Foreign bonds 98 8,859 90.40 4.1

Flexible 29 4,013 138.38 1.9

Fund of funds 15 608 40.53 0.3

Leveraged and strategic 19 586 30.84 0.3

Foreign – general 1 336 336.00 0.2

Local bonds – foreign

currency 2 108 54.00 0.1

For foreign residents only 2 30 15.00 0.0

Investigation files on which the Investigations Unit commenced action, by

violation (criminal offenses only) 2012-2016

Offense 2012 2013 2014 2015 2016 Total

Securities fraud 5 5 5 3 1 19

Insider information - 3 2 3 4 12

Deceptive information or non-

disclosure (in prospectus,

financial statements, or

immediate reports) and raising

capital without a prospectus

- 1 2 3 4 10

Violations by TASE members

and violations under the

Advising Law 1 1 - 1 1 4

Violations under the Advising

Law: Bribery, theft, receiving

gifts

- 1 1 1 1 4

Total 6 11 10 11 11 49

Assistance rendered by investigations, intelligence, and control

departments to foreign agencies (Judicial inquiries) 2012-2016

2012 2013 2014 2015 2016 Total

Judicial inquiries 6 9 4 16 12 47

Total licenses issued to individuals (portfolio managers,

investment advisers, and investment marketers) 1997-2016

Year Portfolio

managers Investment

advisers Investment

marketers

1997-2012 2,469 6,907 1,288

3201 173 229 147

4201 351 163 501

5201 139 145 132

6201 128 114 104

Total licenses issued 3,062 7,558 1,821

Select figures

No. of mutual funds 2012-2016

Indictments by violation 2012-2016

2016

Reporting violations 1

Securities fraud 6

Insider information 3

Bribery 1

Theft 1

Total 12

Mutual fund assets, December 31 2012-2016 (in NIS Billions)

No. of ETN series 2012-2016

Public holdings in ETNs 2012-2016

Value of Assets Managed by Portfolio Managers 2012-2016 (in NIS

Billions)