The Israel Securities Authority (ISA) recently published a proposal for amending the Securities Law as to the supervision of underwriters and distributors. The ISA aims to add a section to the law that would authorize it to establish regulations for underwriters and distributors for purposes of supervising their activity, similar to its current authority over investment managers, investment consultants, investment marketers, and trust fund managers.
Currently, the provisions of the law that address the activity of underwriters and distributors relate only to eligibility and registration requirements, limits on activity, and mandatory reporting. However, the Securities Law does not authorize the ISA to establish additional, specific provisions for these bodies.
The ISA reasons that the need to grant it such authority is based on the growing trend of issues by prospectus designed primarily for retail investors, such as real estate investment funds, cannabis companies, and biomed companies. This is contrary to the trend that existed until recently, whereby issues were intended almost exclusively for institutional investors rather than private retail investors.
Therefore, there is a need to regulate the activity of underwriters and distributors in order to protect the retail investor public.
Such authority would enable the ISA to set professional and specific rules for underwriters and distributors. These include instructions about activity and management, officers, the prevention of conflicts, financial management, and deposit requirements for professional liability insurance.
As noted, this is a draft bill. Thus, there are many more steps until its legislation process is completed, if indeed it is completed, or until its final language is settled. However, this bill may be instructive as to the ISA’s future intentions for the expansion of its supervisory powers over different bodies active in the capital market.