Israel: Additional Update Regarding Israel Securities Law And The Capital Market – April 2, 2020

Clarification of Legal Position No. 101-22: Holding of Swap Transactions

Considering the numerous enquiries received from various parties in the capital markets regarding the scope of Legal Position No' 101-22: The Holding of Shares that are part of a Swap Trade dated February 28, 2020 (hereafter: the Position) ¹ , and with the hope to increase financial flexibility in the capital markets in the light of the effects of the coronavirus, on March 30, 2020, the Israel Securities Authority (hereafter: the "ISA") issued a clarification of the Position. According to the clarification, the Position does not apply to swap trades of a purely financial nature. For example, an agreement between two sides in order to simply purchase monetary exposure, according to which each of the sides commit to paying the other an amount derived from the change in the price of the company's shares by a certain date, without either side, or anyone on their behalf, actually holding the shares in the trade.

The ISA laid out additional criteria for transactions that are to be considered to be swaps that are purely financial in nature and that do not bring about a change in the holdings of the parties to the shares transaction: (A) A swap trade does not result in a crossing of the threshold (whether the aforementioned crossing is above or below the threshold) of holdings that is specified in the Securities Law (5%), in the Companies Law (25%, 45% and 90%) or in the Tel-Aviv Stock Exchange rules (regarding the rate of public holdings); or (B) the side acquiring exposure to returns on shares in the swap trade is an institutional entity.²

It should be emphasized that in cases where an interested party is a side to the swap transaction, a disclosure of this is required as part of the reporting of holdings of the interested party, including the rate of the shares in the swap trade and the terms of the trade, even if it does not change the proportion of holdings in the company.

The ISA further clarified that it amends its position so that the Authority will view each of the parties to the swap as "holders", but will not see such parties as "holding together" without any evidence of cooperation between them.

For the full text of the clarification, please see here.

Extension of Deadline to Publish the Quarterly Report for the First Quarter of 2020

In the light of the exceptional circumstances of the Corona crisis, the ISA announced that with respect to reporting corporations, there shall be a 30-day extension to publishing the first quarterly report of 2020, so that its publication date will be no later than June 30, 2020, instead of May 31, 2020. A reporting corporation that chooses to take advantage of such extension is required to publish an immediate report to investors on the date that it is decided not to submit the report by the regular date or by May 31, 2020, whichever is earlier. It should be clarified that the above does not detract from the obligation to submit any other report by its deadline as required by applicable law and on the dates specified in the Securities Law, 5728 - 1968 and its regulations.

For the full text of the Clarification, please see here.

Extension of Period for Shelf Prospectus Filings

The ISA announced that following the approval of Emergency Regulations (Extension of Validity and Deferral of Deadlines), 5780 - 2020 (hereinafter: the "Emergency Regulations"), which stipulate, inter alia, a regulatory approval, including the permit for publication of a shelf prospectus, and approval for the extension of a shelf prospectus for another 12 months (i.e., third year) (according to Paragraph 23A of the Securities Law, 5728-1968) (herein: the "Law"), which has expired or is expected to expire during the period between March 10, 2020 and May 10, 2020 (hereinafter: the "Defined Period"), the expiration date for the aforementioned approval will be postponed for another two months. This means, according to the aforementioned, the validity of a shelf prospectus, which will expire during the Defined Period, will be extended by an additional two months during which it will be permitted to use the shelf prospectus. For example, a shelf prospectus that received an ISA permit on May 9th, 2017 and which was extended for an additional 12 months in May 2019, will be extended by an additional two months and will remain valid until July 9th, 2020.

For the full text of the clarification, please see here.

Footnotes

1. According to the Position, swap transactions are transactions in shares traded on the Tel Aviv Stock Exchange, that is separating between exposure to variable yields for shares and between the rest of the rights that accompany them, for the duration of the transaction, at the end of which financial consideration is made between the parties to the transaction in relation to the difference in return on shares. According to the Position, as is generally the case in such transactions, both parties to the transaction should be considered as "holders" of the shares of the transaction and as "holding together," according to the definitions of these terms in the Securities Law, 5728 -1968 ("the Law"). For the full text of the Position, please click here.

2. The ISA staff will view institutional entities as defined in sections (1)-(4) of the first addendum to the Law, or any other body that they fully own.

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