Extension of the Regulations regarding Exemption From Licensing requirements for the Provision of Credit and Financial Asset Services
4 November 2020
Financial Services Regulation| Extension of the Regulations regarding Exemption From Licensing requirements for the Provision of Credit and Financial Asset Services
Approval of an amendment to the Supervision on Financial Services (regulated financial services) (exemption from licensing obligation), pursuant to which the regulations will remain in force until the end of December 2021
Dear Clients and Friends,
On October 27, 2020, the Knesset’s Finance Committee approved the extension of the Supervision on Financial Services (Regulated Financial Services) (Exemption from Licensing Obligation) (Temporary Order) Regulations, 2018 (“Exemption Regulations” or “Regulations“) until December 31, 2021. The regulations exempt certain entities that meet the conditions set forth therein from the requirement to hold a license to provide financial asset services or a license to provide credit, as applicable, as required pursuant to the Supervision on Financial Services (Regulated Financial Services) Law, 2016 (the “Law“).
The Exemption Regulations were enacted due to the broad definition in the Law of the terms “extension of credit ” and “providing financial asset services”, and in order to exempt from the licensing obligation set forth in the Law certain entities to which the underlying rational for the licensing requirements does not seem to apply, such as:
- Corporations that were incorporated in an OECD member state and were granted a banking license, an insurer license or a license to engage in the provision of securities trading services by an OECD member state;
- Entities that enter into transactions which include the extension of credit but which are carried out in a relatively sophisticated market, by sophisticated borrowers and lenders, and as part of specific investments in specific ventures;
- Entities in respect of which the provision of the financial asset service is ancillary to the service provided by those entities to their clients. For example, the management of a trust account by an attorney or an accountant for his clients or currency exchange transactions made by a hotel for visitors, in accordance with the conditions set out in the regulations.
It should be noted that the Exemption Regulations were originally established as a temporary provision until December 31, 2019, and due to the dissolution of the Knesset, were automatically extended until June 16, 2020. Moreover, during November 2019, the Capital Market, Insurance and Savings Authority (the “Authority“) published draft regulations extending the validity of the Exemption Regulations until the end of 2021, accompanied by a letter from the Authority’s Legal Adviser stating that the Authority will not enforce the licensing obligation regarding entities that will act in accordance with the draft regulations.
It should further be noted that during the discussion of the extension to the Regulations in the Knesset’s Finance Committee, the committee requested that the Authority complete the examination regarding the necessity of licensing entities listed in the Exemption Regulations, and bring to the approval of the Committee permanent regulations.
As aforementioned, the validity of the Regulations was extended, so that they will stay in force until December 31, 2021.
Our firm has extensive expertise and many years of experience in the fields of financial regulation in all its forms. We accompany and monitor all regulatory developments in these areas, assist and advise leading financial entities in Israel and around the world, whether in an ad hoc or regular advice, providing opinions on complex issues, inquiries to the regulator and more. We will be happy to be at your service and assist with any issue in these areas, including in connection with the abovementioned publication, as well as in any questions or clarifications.
Sincerely
Financial Services Regulation Department and Banking Department
Herzog Fox & Neeman
Neta Dorfman-Raviv l Partner
Financial Services Regulation
