On 23 March 2011, the European Securities and Markets Authority (“ESMA”) announced that it has reached an agreement with the Israeli Securities Authority (“ISA”) allowing Israeli companies listed on the Tel Aviv Stock Exchange, subject to certain provisos, to use their Israeli prospectuses to (i) list their shares on any regulated stock exchange within the European Union ("EU") and/or (ii) make an offer to the public of their shares within the EU. Israel is the first country outside the EU to be recognised by ESMA in this way.
An Israeli company seeking to list on an EU regulated stock exchange or make a public offer within the EU will no longer need to produce an additional prospectus but instead will be able to use its Israeli prospectus, together with a wrap containing 15 additional disclosure items required by ESMA (the additional information to be included is available here). This will reduce costs and simplify the process and will allow Israeli companies to increase their exposure to a wider set of investors in Europe and raise additional capital.
This is part of a wider move by ESMA to provide a mechanism for issuers from countries outside the EU to make their prospectuses compliant with the requirements of the European Prospectus Directive (2003/71/EC), allowing those prospectuses to be passported throughout the EU for listings and public offers.
The next step for the ISA is to conclude a series of bilateral mutual recognition agreements with national regulators. According to the director of the ISA, London will be the primary focus, followed by other major EU markets.
ESMA was created as an EU competent authority on 1 January 2011 (taking over the responsibilities of the Committee of European Securities Regulators) in order to safeguard the stability of the EU’s financial system by ensuring the integrity, transparency, efficiency and orderly functioning of securities markets, as well as enhancing investor protection.