Regulations on the Organization and Operation of the Israeli Capital Market, Investment Advice and Investment Services, 5771-2011

Regulations on the Organization and Operation of the Israeli Capital Market, Investment Advice and Investment Services, 5771-2011

Regulations on the Organization and Operation of the Israeli Capital Market, Investment Advice and Investment Services, 5771-2011

Regulation 1: Definitions In these Regulations: "The Law" - The Capital Market, Investment Advice and Investment Services Law, 5761-2000; "The Authority" - The Capital Market, Investment Advice and Investment Services Authority; "Investment Advice" - As defined in the Law; "Investment Service" - As defined in the Law; "Portfolio Manager" - As defined in the Law; "Securities Dealer" - As defined in the Law; "Investment Advisor" - As defined in the Law; "Market Participant" - A person licensed under the Law to provide investment services or investment advice; "Client" - A person for whom a market participant provides investment services or investment advice; "Regulation" - These Regulations on the Organization and Operation of the Israeli Capital Market, Investment Advice and Investment Services, 5771-2011.

Regulation 2: Application These Regulations apply to all market participants, except as otherwise specified herein.

Regulation 3: General Provisions (a) A market participant shall act in good faith and with due care, diligence and skill in providing investment services or investment advice. (b) A market participant shall not engage in any act or omission that is likely to mislead the public or clients regarding the nature, risks, or returns of investment services or investment advice. (c) A market participant shall maintain records and documents as required by the Authority and make them available for inspection upon request.

Regulation 4: Licensing and Registration (a) No person shall provide investment services or investment advice in Israel unless they hold a valid license or are registered as required by the Law and these Regulations. (b) An application for a license or registration shall be submitted to the Authority in the form and manner prescribed, including all necessary information and supporting documents. (c) The Authority may grant, deny, suspend, or revoke a license or registration based on the applicant's fitness, including financial standing, reputation, and professional competence.

Regulation 5: Organizational Structure and Internal Controls (a) A market participant shall establish an organizational structure that ensures effective management, supervision, and control of its activities. (b) A market participant shall appoint a compliance officer responsible for monitoring compliance with the Law and these Regulations. (c) A market participant shall implement internal control procedures to prevent and detect violations, including conflicts of interest, money laundering, and fraud.

Regulation 6: Disclosure and Transparency (a) A market participant shall provide clients with clear, accurate, and timely information regarding investment services, risks, costs, and conflicts of interest. (b) A market participant shall disclose any material conflict of interest that may affect its ability to act in the best interests of its clients. (c) Written agreements with clients shall specify the scope of services, fees, and responsibilities of both parties.

Regulation 7: Conduct of Business (a) A market participant shall prioritize the interests of its clients over its own interests. (b) A market participant shall ensure that investment recommendations are suitable for the client's financial situation, investment objectives, and risk tolerance. (c) A market participant shall not engage in unfair practices, such as churning, front-running, or unauthorized trading.

Regulation 8: Record Keeping (a) A market participant shall keep accurate and complete records of all transactions, communications, and client interactions for a period of at least seven years. (b) Records shall be kept in a secure and accessible manner, allowing for easy retrieval and inspection by the Authority. (c) A market participant shall implement systems to ensure the integrity and confidentiality of client data.

Regulation 9: Conflicts of Interest (a) A market participant shall identify, manage, and disclose all actual and potential conflicts of interest. (b) A market participant shall establish policies and procedures to mitigate conflicts of interest, including information barriers and independent supervision. (c) If a conflict cannot be adequately managed, the market participant shall decline to provide the service or advice.

Regulation 10: Supervision and Reporting (a) A market participant shall submit regular reports to the Authority as required, including financial statements, compliance reports, and incident reports. (b) A market participant shall cooperate with the Authority in its supervisory activities, including providing access to premises, records, and personnel. (c) The Authority may conduct inspections and audits of market participants to ensure compliance with the Law and these Regulations.

Regulation 11: Penalties and Enforcement (a) Violations of these Regulations may result in administrative penalties, including fines, suspension, or revocation of licenses. (b) The Authority may impose additional conditions on licenses or require remedial actions to address violations. (c) Market participants shall implement corrective measures promptly upon notification of violations.

Regulation 12: Transitional Provisions (a) Existing market participants shall comply with these Regulations within the timeframe specified by the Authority. (b) Licenses issued under previous regulations shall be deemed valid under these Regulations until their expiration or revocation. (c) The Authority may issue guidelines to assist market participants in transitioning to compliance with these Regulations.

Regulation 13: Amendments and Repeals (a) These Regulations amend and repeal previous regulations on the organization and operation of the Israeli capital market, investment advice, and investment services to the extent inconsistent with these Regulations. (b) References to repealed regulations shall be construed as references to the corresponding provisions of these Regulations.

Regulation 14: Effective Date These Regulations shall enter into force on the date of their publication in the Reshumot (Official Gazette).

Regulation 15: Title These Regulations shall be cited as the Regulations on the Organization and Operation of the Israeli Capital Market, Investment Advice and Investment Services, 5771-2011.

Regulation 16: Interpretation In these Regulations, headings are for convenience only and do not affect interpretation.

Regulation 17: Cross-References References to other laws or regulations shall be construed as references to those laws or regulations as amended from time to time.

Regulation 18: Authority's Discretion The Authority may exercise discretion in applying these Regulations to ensure fairness and consistency in supervision.

Regulation 19: General These Regulations are issued under the authority of the Capital Market, Investment Advice and Investment Services Law, 5761-2000, and aim to enhance transparency, accountability, and investor protection in the Israeli capital market.