The Israel Securities Authority (the “ISA”) updated its staff position re parties to a SWAP transaction, according to which, the parties to SWAP transactions that are solely financial in nature shall not be considered both “holders” and “co-holders”.

According to a previous ISA staff position, all parties to a SWAP transaction shall be considered as “holders” and “co-holders” of the shares held as part of the transaction, as such terms are defined in the Israeli Securities Law 1968.

Pursuant to inquiries received by the ISA regarding the scope of application of the staff position, and in an attempt to increase financial flexibility in the capital markets in light of the COVID-19 pandemic, the ISA has clarified that the staff position shall not apply to SWAP transactions that are solely financial in nature (a “Financial SWAP“).

Generally, a SWAP shall be considered a Financial SWAP, and as such does not entail a change of the holdings in the underlying asset of the parties to the SWAP transaction, given, inter alia, one of the following:

1. The SWAP transaction did not result in the crossing of the holdings thresholds set in the Securities Law (5%), the Companies Law (25%, 45% and 90%) or in the Stock Exchange by-laws (with respect to the public’s holding share). Therefore, even if the shares which are part of the SWAP transaction are to be taking into consideration, this shall not result in crossing the aforementioned thresholds; or
2. The party exposed to returns due to the shares which are part of the SWAP transaction is an institutional body (as defined in the staff position).

​The ISA has also amended the original staff position, so that each party to a SWAP transaction which is not a Financial SWAP will be regarded a shareholder, although not a co-holders in the absence of any indications of cooperation between the parties to the SWAP.

Moreover, the ISA has stressed that if a Financial SWAP transaction is made by an interested party in a company, the company has to file a report about the transaction as part of an interested parties report, which will include the percentage of shares underlying the SWAP transaction and the terms of the transaction. However, the party’s percentage of holdings in the company will remain the same.

We would be happy to be at your service regarding any inquiry in the related matters, such as the classification of a SWAP as a Financial SWAP and the level of disclosure required in SWAP and Financial SWAP transactions including the disclosure required of interested parties.

we wish you the best of health and are at your service at any time

Corporate, Securities & Capital Markets Department
Herzog Fox & Neeman