Entry of Foreign Mutual Funds to the Israeli Market

In July 2014, Chapter I1 of the Joint Investment Trust Law, 5754-1994 was enacted. This chapter relates primarily to the offering of units of foreign mutual funds in Israel. The validity of the chapter was contingent on the entry into force of applicable regulations.

A few days ago, the Financial Committee of the Israeli Knesset, approved the Joint Investment Trust Regulations (Offer of Units of a Foreign Fund), based on which managers of foreign funds may offer their funds to the Israeli public.

Pursuant to the Regulations, the Israeli Securities Authority may now permit a foreign fund manager to offer units of such fund in Israel, under a prospectus, and subject to the fulfillment of several conditions:

  1. The value of the total assets managed by the foreign fund manager must be at least USD 20 billion.
  2. The foreign fund manager must manage at least five mutual funds abroad, whose units have been offered to the public for at least five years.
  3. The value of the assets managed in the Foreign Mutual Funds in the two years preceding the proposed offering in Israel must be at least USD 500 million. In addition, the value of the specific foreign mutual fund to be offered in Israel must be at least USD 50 million.
  4. The units of the mutual fund must have been offered for purchase in Europe or the United States for at least six months before being offered in Israel.
  5. The offered foreign mutual fund does not specialize in investments in Israel.
  6. The prices of the foreign fund units offered to the Israeli public are published online in an ongoing manner and are accessible to the public at no financial cost at any time.
  7. The foreign fund is operating pursuant to the Investment Company Act of 1940 or under the UCITS.
  8. The foreign fund manager will deposit a bank guarantee or alternatively a securities deposit, in favor of the Israeli Securities Authority and holders of the mutual fund’s units.
  9. The foreign fund manager must appoint a representative in Israel to be the contact of the mutual fund for the Israeli Securities Authority and the holders of the fund units in Israel.

Please note the final version of the Regulations have yet to be published in an Official Publication – a condition for their enforcement.