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ISA Annual report for 2007 has been published: main points –continuous growth in capital raising, significant increase in license’ applications, Israel’s improved stand on the international arena


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276 issues were completed; of them 96 were new issues. Total capital raised and allocated has reached more then 119 billion NIS.  
2007 was a record year for the Israeli capital market; continuous growth in capital raising was characterized by increased competition between the banking sector and the capital market in extending credit to local businesses. The number of public issues had reached 276, of which 96 were first time issues initiated by new companies. During the reporting year the business sector raised 58,570 billion NIS, by comparison to
27,717 billion NIS raised in 2006 from 178 issues, of which 69 were first time issues initiated by new companies. According to the ISA annual report for 2007, total capital raised including allocations, convertible securities and bonds issued by Israeli companies had risen from 91,813 billion NIS in 2006 to 119,031 billion in 2007.
The number of active Mutual Funds had reached 1167, in 2007, with total value of assets standing at 120.4 billion NIS, by comparison to 1035 active funds with total value of assets at 111.8 billion NIS in 2006. Furthermore, significant growth has been registered in the number of license’ applications submitted during the reporting year; in 2007 the ISA had examined 8,480 examination units of individual applicants applying for investment adviser’ or portfolio manager’ license, by comparison to 5,397 examination units in 2006. Since 2006, the ISA also examines, and provides exemptions from examinations on the basis of academic studies, persons engaged in pension planning – a new occupation that became regulated under the Bachar Act and comes under the supervision of the Finance Ministry. During the reporting year the ISA had processed more then 1300 applications for pension planning license.        
During 2007 Israel Securities Authority continued working according to the long term strategic plan shaped and the end of 2002. In line with the plan, the ISA is promoting various capital market activities in three main areas: encouraging the entry of new players into the capital market, diversifying financial instruments available to investors, and improving capital market’s infrastructure in both legal and trade areas. Another objective defined by the plan is strengthening public trust in the capital market. The ISA works toward improving enforcement efficiency, with particular emphasis on corporate auditing bodies, improved intelligence gathering, investigations and legal accompaniment.             
One of the more important steps, undertaken for integrating the Israeli capital market with international financial markets was the adoption of the IFRS starting in 2008. The adoption process began in 2005, in cooperation with The Institute of Certified Public Accountants in Israel, while preparations for actual implementation became most intensive during 2007. The ISA had published a ruling regulating gradual transition to international reporting standards and requiring companies to report about their preparations to the aforementioned transition and its influence on their financial statements. Nowadays, when companies began reporting according to the IFRS, it became apparent that all the preparatory work had born fruit and the implementation of the new reporting standards proceeds smoothly, without apparent difficulties.           
The adoption of XBRL, the electronic reporting language, is a complimentary step to implementing the IFRS; it allows investors, worldwide, to read and understand the financial data contained in financial statements issued in Israel. Reporting in the XBRL format becomes obligatory beginning January 2008.     
Other than the aforesaid, the ISA also actively promotes Israel’s standing as the member of the OECD, preparing legislative amendments to existing Israeli legislation in order to “fall in line” with the codes and principals of the this organization. Financial regulation pertaining to liberalization of capital flow is one on the more important criteria taken into consideration during acceptance deliberations into the OECD; the ISA plays a key role in areas related to these regulations. Another important area of consideration, for becoming a member of the organization, is the level of implementation and the suitability of the CG principles in the country applying for membership. As part of the application process an inter-departmental committee, preparing a memorandum for the OECD, was created; during the reporting year the ISA was coordinating the process of writing the chapters related to corporate governance and financial services.               
During 2007, the ISA put particular emphases on increasing the awareness of external directors regarding their responsibility as “gate keepers” of public companies, above all in cases where the Board of Directors is called upon to approve a transaction with the company’s controlling shareholder. The issue is particularly important when salaries and irregular benefit packages are being approved for the company’s senior management. Hence, an internal procedure was devised according to which the ISA can exercise its authority under section 56A of the Securities Law, under certain circumstances, and require external director to submit a report detailing their considerations for approving transactions with controlling shareholders, including the approval of salaries and benefits. In some cases the ISA can require the external director to attend a meeting in its offices, this right was exercised a number of times during the reporting year.
Supervision over corporate auditing bodies and the strengthening of their position have also been part of the ISA’s activities during the reporting year. The ISA acted to invigorate the activities of the aforesaid entities within corporations and by doing so augmented the quality of corporate management. The ISA also increased enforcement in areas related to activities of internal auditors, manning and functioning of auditing committees and directors’ functioning. The supervision was carried out by initiating contacts with corporations and their auditors and, where necessary, auditing the corporations themselves.
“It seems that 2008 will present us with new challenges” wrote the Chairman of the ISA, Prof. Zohar Goshen, in the letter opening the annual report and forwarded to the Finance Minister and the Chairman of the Financial Committee of the Knesset. “At present, the ISA is dealing with local effects of the crisis affecting global financial markets. This crisis requires redeployment of all regulatory bodies worldwide, including the Israel Securities Authority. The ISA is currently in the midst of formalizing the appropriate response to the aforesaid crisis by analyzing the risks stemming from the changes that characterized 2007”.

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