This article was written by Nir Porat, the Co-Managing Partner at Ben Basat, Porat & Co and David Woliner.
It was recently reported that the Israeli Securities Authority (ISA) initiated an initiative to ban the targeting of foreign citizens by local (Israeli) binary options operators.
Reportedly, the ISA has approached the Attorney General seeking to amend the relevant laws in order to be able to impose this ban. Since the exact terms of the requested amendment were not publicly disclosed, it is difficult to analyze the ISA’s initiative in full.
Considering the involvement of the Attorney General, who typically does not take part in legislative initiatives of the ISA when they involve Securities Laws (for which the ISA is responsible), we can only assume that the initiative includes possible amendments to Israeli criminal legislation and interpretation, as this initiative primarily regards enforcement, with extraterritorial implications.
Nonetheless, we will provide our thoughts on this initiative.
Who should the ISA be protecting?
The ISA’s primary mandate is the protection of investors, as mentioned in section 2 of the Israeli Securities Law of 1968. The ISA’s long time position was to interpret the term “investors” has been interpreted as referring only to Israeli investors. This interpretation was adopted and followed by the ISA in both its supervision and enforcement policies.
The only way for the ISA to contribute to the protection of investors outside of Israel was through the provision of legal assistance to foreign regulators based on an international cooperation framework, mainly the IOSCO Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information.
This initiative shows a major shift in the ISA enforcement policy, as it adds to the ISA's enforcement objectives the need to protect the good repute of the ISA and the State of Israel
FX and binary options providers are referred to in Israeli securities law, starting with amendment 42 to the Securities Law, as trading platforms to their own account. The aim of amendment 42 is to provide for the protection of Israeli investors who are solicited or approached by entities such as binary options providers, by requiring such entities to apply for a license from the ISA, regardless of whether these entities are based in Israel or outside of Israel.
Later on, the ISA issued a staff position as to the territorial applicability of amendment 42 where it clarified that entities such as binary options providers, which are based in Israel but provide their services to foreign customers (customers based outside of Israel) only, are not required to apply for a license from the ISA.
These days however, the ISA seeks to broaden its mandate to protect not only Israeli investors, but investors outside of Israel as well.
This initiative shows a major shift in the ISA enforcement policy, as it adds to the ISA's enforcement objectives the need to protect the good repute of the ISA and the State of Israel. This change of policy, although primarily aimed at binary options providers, may be applied to other sectors and entities under the ISA’s supervision. Thus, this initiative should have every service-providing entity or person under the supervisory mandate of the ISA on alert.
Meanwhile, with the ISA’s new initiative in mind, some binary options providers have already started to take action by relocating their operations outside of Israel with our assistance, including full turn-key legal and operational support.
