Proposal to amend the Rules applicable to compensation for research papers
12 October 2021
Proposal to amend the Rules applicable to compensation for research papers
(Rules for regulating investment advice, investment marketing and investment portfolio management (receiving benefits for research), 2020)
Dear clients,
The publishing of research papers has recently come under review of the Israel Securities Authority (“ISA“).
As is well known, the purpose of research papers is to serve as a basis for making an investment decision in a corporation’s listed securities or in financial assets.
In order to enable the provision of research papers to investors in Israel, the Investment Advice Law includes an exception to the rule,[1] that precludes analysts from receiving compensation from any person other than the client (the recipient of the research paper). Pursuant to this exception, in specific scenarios, as prescribed by the ISA, analysts and their affiliates would be permitted to receive compensation from persons other than the client. These scenarios were prescribed in regulations that the ISA re-formulated and expanded last year (“Research Paper Rules“)[2].
In this proposed amendment to the Research Paper Rules, it is proposed to permit the provision of research papers to “Sophisticated Investors” only (as opposed to the general public), even before the publication of the first draft prospectus[3]. The Israeli Securities Authority has invited comments to this proposal.
Other than the above-proposed amendment, no other changes are proposed, and all other conditions set forth in the Research Paper Rules, meant to ensure the quality of the research paper, appropriate disclosure, and prevention of conflicts of interests, remain in force. Accordingly, research papers should still be delivered to investors in a reasonable time before the end of the period for submitting orders (10 days) under a prospectus. In addition, in light of the amendment, it is proposed that if the research paper is delivered to investors before the publication of a draft prospectus, and the information in the draft prospectus is materially different from the information underlying the research paper, the research paper shall be updated and delivered to investors in a reasonable time before the end of the period for submitting orders.
For the full text of the publication (in Hebrew) >> click here
Please note that the deadline for submitting public comments to the Securities Authority is October 17, 2021.
Our firm accompanies, as a matter of routine, Israeli and foreign underwriters and even recently accompanied the registration of non-Israeli entities as foreign underwriters, after many years of stagnation in this field. We will be happy to be at your disposal for any issue in these areas, including with respect to your activity as it relates to the Research Paper Rules.
[1] See, in this regard, section 17 of the Investment Advice, Investment Marketing and Portfolio Management Law , 1995 (“Investment Advice Law“).
[2] Rules for regulating investment advice, investment marketing and investment portfolio management (receiving benefits for analytical work), 2020 (“Research Paper Rules“).
[3] In order that the rule according to which a public offer must be made on the basis of a prospectus or the draft prospectus is not violated.
Kind Regards,
Herzog Fox and Neeman
