Disclosure Requirements - Israel
Disclosure Category: 2
Investors that hold Israeli securities are required to report the crossing of thresholds.
CBL will also, from time to time, disclose customer information upon request of Israeli authorities.
To comply with the legislation, customers holding Israeli securities or entering into transactions in the Israeli domestic market must consent and are hereby deemed to consent to the required legal disclosure. Such consent includes the appointment of the requestor (for example, the issuer or its agent) as their attorney-in-fact, under power of attorney, to collect from CBL the required information to be disclosed. Customers not willing to give this consent cannot hold such securities/financial instruments in their accounts with CBL.
Israeli law places a number of restrictions on the ownership of Israeli equities. See the section on Investment regulation in the Market Profile - Israel.
Note that CBL’s depository and its affiliates may also transfer and/or disclose, from time to time, information referring to the customer, received at CBL’s depository or at any of the depository’s affiliates in the course of providing services or accounts to the customer, including, inter alia, any information classified by law or by the customer as confidential or information that a reasonable person would regard as information of a confidential nature, to any governmental, judicial, regulatory, taxation or investigating authority, whether in Israel or abroad.
Background and legal basis
The Securities Law 1968 (5278-1968) (the “Securities Law”) governs the disclosure requirements whilst the reporting requirements are dictated by the Companies Law 5759-1999, Section 33 of the Securities (Periodic and Immediate Reports) Regulations 1970 and Section 3 of the Securities (Dates for Filing Notice of Principal Shareholder) Regulations 2003.
CBL will not be responsible for any penalties or sanctions or associated costs that could be imposed upon CBL’s safekeeping account with its appointed custodian due to a customer's failure to comply with one or more disclosure requirements. Such penalties, sanctions or associated costs will be automatically passed on to the failing customer.
Obligation to report threshold crossings
Any acquisition or disposal of shares, either by a natural person or legal entity or by two or more natural persons or legal entities acting together, that results in exceeding or falling below the threshold of 5% ownership of a public listed company must be reported to the issuer, the Tel Aviv Stock Exchange (TASE) and the Israeli Securities Authority (ISA).
According to Securities Law 1968 (5728-1968) (the “Securities Law”) governing disclosure requirements, any Interested Party1 is required to report their interest in an Israeli public company to the company secretary no later than one trading day after acquiring the interest or after any increase or decrease in their interest. The company secretary, in turn, informs the TASE and the ISA.
There may be additional reporting requirements to different institutions, based on industry; for example, banking, communications and defence industries may require advance approval from the relevant ministry.
Note: The obligations of an interested party1 are outlined in the Securities Law, the text of which can be found at: www.isa.gov.il/Download/IsaFile_3660.pdf.
The definition of an Interested Party/Principal Shareholder1 is presented in Section 1 of the Securities Law. The obligations of the Principal Shareholder are described in Section 37 of the Securities Law.
Reporting requirements are dictated by Companies Law 5759-1999, the text of which can be found at: http://www.icnl.org/research/library/files/Israel/CompaniesLaw.pdf
The timing according to which the issuer must publish a report of Principal Shareholders is set out in Section 33 of Securities (Periodic and Immediate Reports) Regulations 1970, which can be found at: www.isa.gov.il/Download/IsaFile_4948.pdf.
The time limit within which the Principal Shareholder must report to the issuer is set out Section 3 of the Securities (Dates for Filing Notice of Principal Shareholder) Regulations, 2003, which can be found at: www.isa.gov.il/Download/IsaFile_919.pdf.
Method of reporting disclosures
Reporting is the responsibility solely of the investor/beneficial owner. Neither CBL nor its subcustodian bears any legal obligation to report the crossing of thresholds on behalf of investors.
Reports must be submitted in writing to the issuer no later than one trading day after the holder has become (or ceased to be) an Interested Party/Principal Shareholder1. The investor should coordinate with the issuer to obtain and complete the required documentation.
Note: Forms can vary based on the different regulators involved and most are drafted in Hebrew. Based on market experience, investors who reach threshold reporting levels are advised to use a local law firm to handle all their reporting requirements for them.
Failure to meet the required disclosure or reporting obligations entailed by the crossing of a threshold may result in penalties, including warnings and loss of rights and/or fines, as per the applicable regulator (that is, one or all of the TASE, the ISA and the designated regulator for the industry sector). CBL will not be responsible for any such penalties or sanctions or associated costs that could be imposed upon CBL’s safekeeping account with its appointed custodian due to a customer’s failure to comply with one or more disclosure requirements. Such penalties, sanctions or associated costs will be automatically passed on to the failing customer. Specific sanctions are set out in the applicable regulations referenced in “Background and legal basis” above.
1. “Interested Party” (also referred to as “Principal Shareholder”) is generally defined as a person who holds 5% or more of a company's share capital and/or is involved in the directorship of the company.