New Regulations on Public Offerings made by Foreign Funds Enter into Force
On November 5, 2016 new Regulations issued by the Securities Authority entered into force.  These regulate the terms according to which it will be possible to offer in Israel units of a foreign fund.  A foreign fund is defined in the Joint  Investment Trust Law, 5754-1994, as an arrangement or entity, whose purpose is the joint investment in securities and the production of joint profits from their holdings and all transactions therein, which is established in a foreign country and in accordance with that country's laws.  The new Regulations provide that the Securities Authority is authorized to permit the manager of a foreign fund to offer units of that fund to the Israeli public provided certain cirteria as set forth in the Regulations are met.

For example, the total value of the assets managed by the foreign fund must be at least 20 billion US Dollars; the foreign fund manager manages no less than 5 foreign finds the units of which have been offered to the public for no less than 5 years, and the total value of the assets held in each fund is at least 500 million US Dollars, the net asset value of the foreign fund is at least 50 million US Dollars and its units have been offered for purchase in Europe of in USA for at least one year, the foreign fund does not specialize in investments in Israel, if the fund is a traded fund, the offered units are listed for trading on a foreign stock exchange, the unit prices of the foreign fund are regularly published on a website, the rights of a unit holder of the foreign which are to be purchased in Israel are identical to the rights of any unit holder of the foreign fund, the foreign fund manager deposited a bank guarantee for a sum of at least NIS 1 million or made an alternative deposit, such other criteria as are set froth in the Regulations.   An additional central criterion deals with the application of laws to the foreign fund.  The foreign fund should operate according to the EU Directive on UCITS or according to the American Investment Company Act 1940.

The Regulations detail the manner in which an application should be filed by the manager of foreign fund with Securities Authority and by terms of which the foreign fund asks to offer in Israel units of the fund.  For example, an affidavit should be attached together with a prospectus and foreign regulatory approvals.  The foreign prospectus can be filed in the English language.  The public offering requires the appointment of a representative in Israel who will act as the contact person between himself and the Securities Authority and as between himself and the holders of units in Israel.   The public offering of a foreign fund is to be carried out according to the foreign prospective of the fund which was filed with the Securities Authority.  It is possible to first offer units of a traded fund within 30 days of the approval of the Securities Authority.

Our firm is currently involved in responding to approaches made to us on this matter from foreign funds.   We hope that these Regulations will indeed realize their aim:  the entry of foreign funds to the Israeli capital market and the encouragement of investment in foreign funds by the Israel public, a possibility which until now was mainly the reserve of sophisticated investors who were able to invest directly overseas. 

References: Joint Investment Trust (Foreign Fund Unit Offerings) Regulations, 5776-2016.