Dear clients and friends,

We would like to bring to your attention that on the 7^th of September, the Finance Committee of the Knesset approved new Regulations for the Supervision of Financial Services (Regulated Financial Services) (Exemption from Licensing Obligation), 2022 (“Exemption Regulations” or “Regulations”) replacing the Regulations for the Supervision of Financial Services (Regulated Financial Services) (Exemption from Licensing Obligation)(Temporary Order), 2018 (“Temporary Order”), which expired on 31 December 2021.

A number of changes and updates were made in the Regulations, as compared to the Temporary Order and to the draft regulations published for public comments in December 2021.

According to the latest draft of the Regulations available to us, the exemption that applies to corporations that provide credit to commercial corporations only, in transactions of at least NIS 3 million each, was not cancelled and remains unchanged. In addition, under a temporary provision, valid until 1^st of January 2024, payment service providers licensed and regulated in the USA, the EU or in England, which are subject to anti-money laundering regulation in such country (applicable also to its activity in Israel), may provide payment services in Israel, without requiring a local Financial Asset Services license, as well as extend credit incidental to such services (as such term is defined under the laws of its country of regulation)(and, in respect of such credit, only if it has an address for service of process in Israel and that the Fair Credit Law, 1993 will apply to such credit), provided it is permitted, pursuant to its license, to provide such services, that its activity in Israel is regulated by its home country regulator, and, in all cases, excluding services in digital assets which are not permitted.

Additionally, the new Regulations set a temporary measure regarding entities that are currently exempt from the licensing obligations pursuant to the Temporary Order, as follows –

1. Any person or entity required to obtain a license pursuant to the law and who was exempt from the licensing obligation pursuant to the Temporary Order on the eve of the commencement of the new Exemption Regulations (a “Dealer“), can continue to operate its business without a license, provided it submits an application to receive a license within 60 days of the publication of the new Regulations and the Supervisor approved the submission of the application, and so long as a decision with respect to the application has not been made.
2. Without derogating from subsection (a) above, a Dealer that was exempt from the licensing obligation pursuant to the Temporary Order will not be required to obtain a license with respect to transactions such Dealer carried out on the eve of the publication of the new Exemption Regulations, provided that the transactions come to an end no later than seven years from the date of publication.

The Regulations will come into effect retroactively on the 1^st of January 2022, upon their publication in the official gazette.

To read our previous client update with respect to the draft Regulations  >> Press here.

Our office has extensive expertise and many years of experience in the field of financial regulation.
We monitor and follow all regulatory developments in this field, assisting and advising leading entities in Israel and around the world.

We would be happy to be at your disposal and assist in any issue relating to any related matter, including with respect to the Exemption Regulations, as well as in any question or clarification in this context.

Herzog Fox & Neeman