Milestones : Israel Loosens Investment Restrictions



Tel Aviv: Aiming for greater integration with world markets.

Israel’s minister of finance Ronnie Bar-On has approved a legislative amendment that will enable foreign portfolio management companies to serve Israeli clients and operate in Israel without the need to obtain a local license. The initiative is designed to give local investors access to investment opportunities through foreign firms. The reform was proposed by the Israel Securities Authority (ISA), which, according to its chairman, Moshe Tery, wants foreign investment houses to be allowed to operate in Israel without a license as the next step in integrating Israel’s financial industry in the global financial market.

Currently, portfolio managers offering management or consulting services in Israel must hold an appropriate license and may not provide any services to investors without such a license, regardless of whether they are operating out of another country and offering the service over the telephone or the Internet—even if the managed account is located outside of Israel. The current law also states that even though Israelis may approach a foreign company, such a firm needs Israeli licensing in order to manage their investment portfolios.

Under the new law, portfolio managers from the United States and the European Union would be able to work directly with Israeli investors as long as these were large private or institutional investors. Portfolio management could be carried out in the manager’s country of origin, leaving just the marketing activity to be handled in Israel.

The Swiss bank Credit Suisse recently opened an office in Tel Aviv. The local subsidiary of the bank holds an Investment Marketing License from the ISA and thus is able to offer a wide range of services and products including equities, bonds, mutual funds, structured products and alternative investments. According to CEO Muli Ravina, the low level of international asset diversification in Israel represents an opportunity for comprehensive advice and sophisticated investment products across all asset classes for individuals.

“It does not make sense from an economic perspective as to why 90% of the portfolio of public assets is invested in the local market,” Ravina says. “Following the deregulation of the financial sector and the recent pension market reform, large outflows of long-term savings will be moving outside of Israel over the next few years requiring the knowledge and understanding of institutional market structures.”

Joel Bainerman