Last week the ISA had published guidelines, requiring companies to disclose additional details pertaining to the authorization process of bonuses, to senior corporate officers, for public comments. Lately, this subject was in the center of public debate in connection with bonuses recently approved by Bank Hapoalim and by Bank Discount. Bonuses, awarded to senior questions as well as process authorization the regarding questions raised have officers, corporaterelated to disclosure of said authorization, its influence on the company’s business and considerations pertaining to the effectiveness and appropriateness of the aforesaid bonuses.
This guideline is a direct result of the capital market reform, which led to the removal of provident and mutual trust funds from under the management of banking corporations and the transfer of said management to private institutions, a step that initiated the pursuit of investment advisers, employed by the banks. Investment managers, in private institutions, try to reach investment adviser employed by the banks, to persuade them to advise their clients to purchase assets under their management or issued by them – mainly regarding mutual trust funds’ units.
Once the Bachar Act and the Regulations under amendment 10 to the Investment Advice Law went into effect, a question arose regarding what is permissible and what is prohibited as part of the marketing interaction developing between producers of financial products and investment advisers employed by the banks. Along with the assumption that managers of private institutions have to be allowed to market their products to investment advisers employed by the banks, the question is – where does the border line between legitimate marketing and offer of incentives to investment advisers, pass?
During the last few weeks, a number of cases suggesting that managers of private institutions made use of inappropriate marketing means, including provision of various bonuses to investment advisers, were brought to the attention of the Israel Securities Authority. The Investment Advice Law explicitly forbids accepting bonuses or incentives, by investment adviser, from anyone other then his client. The new guidelines come to clarify this point of the law. As aforesaid, the guidelines preclude investment advisers from accepting bonuses and incentives from producers of financial products, regardless of whether the incentives are personal or distributed to all employees of the branch where the aforesaid adviser is employed. This prohibition is unequivocal and applies to all types of incentives, whether it is a present, tickets to a show, financing of social activities – including trips, evenings of social integration, meals in restaurants, recreational activities, etc.
However, investment adviser is allowed to participate in general events that are not aimed at investment advisers in particular and are sponsored by one of the financial institutions. He is also allowed to participate in professional conferences organized by the managers of financial products, but only when we are talking about strictly professional conferences, without spouses, entertainment, restaurant meals, etc. This restriction does not apply to conferences where the participant carries the costs of the trip and accommodation.