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Knesset Finance Committee Approves ISA Initiative to Reform Investment Advisor, Marketing Agent and Portfolio Manager Licensing Exams

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The Knesset Finance Committee this week approved the proposal submitted by the Israel Securities Authority to reform the framework of the qualifying exams required for obtaining investment advisor, marketing agent and portfolio managers licenses. The Committee also approved the possibility of receiving exemptions from these exams on the basis of accredited academic degrees.
 
Until approval of the reform, regulations stipulated that it is possible to receive an exemption from an exam either on the basis of an academic degree or the completion of courses. This regulation came into force in 1997 at a time when only a limited number of academic institutions were operating in Israel. At that time the name of the course rendered certainty and clarity as to its contents and scope. With the burgeoning of academic institutions in Israel, the picture has changed. Today, each institution defines its own set of courses and syllabi, and it has become increasingly difficult to determine on the basis of the title of the course, which courses qualify according to the regulations for the purpose of granting exemptions to the exam. In addition, it is difficult to create a uniform base of comparison between the various institutions.
 
The proliferation of institutions has also generated a growing number of courses set up exclusively for the purpose of obtaining exemptions. These exemption-oriented courses aim solely at attaining the exemption and are devoid of independent academic content, and as a result, are far more limited in scope than was the original aim of the legislature. Consequently, it is feared that these courses fail to meet adequate academic standards that serve as an alternative to the qualifying exam.
 
Accordingly, the ISA requested that the manner in which exemptions are granted be amended so that only relevant degrees from recognized academic institutions rather than the completion of courses qualify a candidate for exemptions from licensing exams. In addition, the ISA initiated an amendment making the exam in securities law (a core subject for the investment profession and necessary foundation for any licensee) mandatory for all applicants and repealing the option to obtain an exemption from this exam.
The amendment initiated by the ISA also repealed the option to obtain an exemption from the securities and financial instrument analysis and the portfolio management exams. These exams, which reflect the level of professional know-how directly required to engage in investment advice and are based on the basic knowledge acquired from the other exams, will now be mandatory. The exam in securities and financial instrument analysis will be mandatory for all license applicants, while the portfolio management exam will be mandatory only for applicants seeking a portfolio manager license. Today compulsory exams, i.e. without possibility of exemption, apply to the licensing of CPAs and attorneys in Israel. In these professions, relevant education is not considered a substitute for the need to pass exams for professional accreditation.
 
In addition, the Committee approved an amendment, which reconciles the regulations with the newly-created profession which was ushered in with the ratification of the “Bachar Act” (the Law to Encourage Competition and Reduce Concentration and Conflicts of Interests in Israel’s Capital Market (Legislative Amendments) – 2005). Investment marketing is investment advice rendered by one affiliated with a financial asset (e.g. a licensee engaging in advice within the framework of a company affiliated with a mutual fund manager.)

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