Reform of Israel’s mutual fund market has been completed with the Knesset Finance Committee’s approval of the Israel Securities Authority’s) reform package. The new Mutual Funds Law will come into effect on January 1, 2008, after prolonged debates and protracted bureaucratic delays.
The new law authorizes the entry of new kinds of mutual funds, in addition to the present stock and bonds funds. The new funds include money market funds, funds of funds, leveraged funds, and designated funds, which will invest in hedge funds. The law makes other changes in the sector as well. This is the most significant legislative amendment in the Mutual Funds Law in the past decade.
The reform also affect mutual fund prospectuses, to make them clearer and more user-friendly format.
Under the new law, banks may not charge distribution fees for index mutual funds.
During the Finance Committee discussion, Association of Banks in Israel executive director Moshe Perl expressed concern that a decision by the Knesset Economics Committee to restrict bank fees and to abolish the mutual funds purchase and sell fee would make it more difficult for banks to distribute index funds without receiving compensation. “You certainly don’t expect us to sell these funds without an incentive,” he told Securities Authority chairman Moshe Tery.
The banks’ concern was allayed when the Finance Committee decided, at the end of the discussion, that Perl and Supervisor of Banks Rony Hizkiyahu would work together to settle the matter to allow banks to charge one of the fees.
Published by Globes [online], Israel business news - www.globes.co.il - on October 18, 2007
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