The Israel Securities Authority (ISA) recently published a draft bill for the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 5755-1995 (the “Advice Law”). The purpose of the bill is to regulate the area of of general investment advice services and to allow those services without the need for an advice license, while still meeting some requirements.
As of now, the Advice Law does not distinguish between personal advice to a client and general advice. As opposed to advice to individual clients, general advice includes no interaction between the provider of the advice and the receiver, i.e. the public (such as the publication of analysis work.) In both cases, the advice provider is required to secure a license from the ISA and to meet both legal and ISA requirements to provide the service.
A significant part of the Advice Law’s provisions is not relevant to those providing general advice, such as the duty to clarify the client’s needs and tailor the service to such needs, the duty to sign an agreement, the duty to secure the client’s consent in certain cases, etc. So far, the ISA has handled this by publishing individualized instructions intended to fit the regulations for “general” advice services. Thus, for instance, an instruction was published to regulate the area of disclosures in providing analysis work as well as an instruction regarding advice via technological means, which address, inter alia, activity through signal services and social commerce.
Should the amendment pass according to the version published, the Advice Law would address three service providers in the area of investment advice:
Advice Licensees – Those who provide personal investment advice to their clients.
General Advice Providers – These providers will no longer be subject to a license requirement, but will be bound by extensive duties, such as disclosure of conflict and disclosure of the nature of the service and the service provider. They will also be bound by a prohibition on receiving benefits from non-clients.
Analysts Employed by Supervised Bodies (as defined in the proposed amendment to the Advice Law) – Such analysts will not be subject to the license requirement, but will be obligated to register in a special registry and, along with their employees, subject to various disclosure duties. In addition, they will be subject to a restriction of publishing analysis work outside of the scope of employment and the duty of the supervised bodies to to examine their qualification for the position in light of their experience and education.
The more restrictive approach toward analysts who are employed by supervised bodies stems from the realization that such supervised bodies hold greater influence in the market and on the investing public. On the other hand, in order not to harm independent analysts whose activity is important for diversifying and deepening the information available on the market, the regulation that applies to them will be the same regulation applicable to those who provide general investment advice.