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Joint Investments in Trust Law, 5754-1994

חוק השקעות משותפות בנאמנות, תשנ"ד-1994

Published: 1994-08-23Consolidated Hebrew text as of 2026-01-01 · Last amended 2026-08-02✓ Amendment status checked against the Knesset legislation record on 2026-09-28
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Unofficial English translation — for reference only. It may contain errors or omissions and cannot be relied on as a legal text. Only the Hebrew text published in Reshumot is legally binding.More

This English text was translated from the official Hebrew using a range of translation tools, and it undergoes ongoing checks and updates. It is not a certified translation.

Despite these checks, it may contain errors, omissions, or imprecise renderings of legal terminology and cross-references, and it may not yet reflect the latest amendments. It cannot be relied upon as a legal text.

The Hebrew text as published in Reshumot (ספר החוקים) and on the Knesset website is the sole authoritative and legally binding version. In any discrepancy, the Hebrew text prevails.

This translation is provided for informational purposes only and does not constitute legal advice. For use in legal proceedings, request a certified Expert Legal Opinion.

Chapter VII: Principles of Trust

Benefit of Unit Holders§

74.

A trustee and a fund manager shall perform their functions and exercise their powers solely for the benefit of the unit holders, and a fund manager shall not discriminate between the unit holders of one fund under the fund manager's management and the unit holders of another fund under the fund manager's management.

Fiduciary Duty§

75.
(a)In performing their functions and exercising their powers, the trustee and the fund manager shall act with care, in good faith and with diligence.
(b)A trustee and a fund manager shall take reasonable steps to safeguard the assets of the fund and all rights arising from those assets.

Legal Status of Fund Assets§

76.
(a)The assets of a fund shall be conveyed to the trustee for the benefit of the unit holders, shall constitute property separate from the trustee's other property, and if among them there is an asset that is not securities traded on an exchange, shall also be registered in the trustee's name.
(b)The trustee shall grant the fund manager a power of attorney to manage the assets of the fund, including to take legal proceedings for the purpose of safeguarding the assets of the fund and any right arising therefrom.
(c)The trustee shall grant the fund manager a power of attorney to participate in general meetings of a corporation whose securities are held in the fund, or to appoint an agent on the trustee's behalf to participate in such general meetings, for a period to be determined; where the fund manager has appointed an agent, the fund manager shall instruct the agent as to the manner of voting at the general meeting.
(d)A fund manager shall deposit cash constituting part of the fund's assets in an account at a bank in Israel or at a bank outside Israel.

Participation of a Fund Manager in a Holders' Meeting and Additional Proceedings§

77.
(a)The Minister of Finance shall prescribe provisions concerning the participation of a fund manager in a holders' meeting as well as in additional proceedings in which holders of securities are entitled to participate in a corporation whose securities were offered to the public, excluding foreign securities, and were held in a fund under the fund manager's management on the record date for ownership of a share pursuant to section 182 of the Companies Law or for ownership of a debenture pursuant to section 35l24 of the Securities Law, as the case may be; in this section, "holders' meeting" – a meeting of holders of securities in such a corporation, all or some of them, including a general meeting as defined in the Companies Law.
(a1)(Repealed).
(b)(Repealed).
(b1)(Repealed).
(b2)
(1)For the purposes of subsection (a), securities that on the record date for participation and voting at the holders' meeting were on loan from the fund's assets for the purpose of a short sale transaction shall not be regarded as securities held in the fund.
(2)In this subsection –

"record date" – as defined in section 182 of the Companies Law or as defined in section 35l24 of the Securities Law, as the case may be;

"short sale transaction" – as defined in section 63.

(c)A fund manager shall submit a report to the Authority and to the exchange on the manner of the fund manager's voting at a holders' meeting or in additional proceedings in which holders of securities are entitled to participate, in accordance with rules prescribed by the Minister of Finance by Regulations.

Duties and Functions of the Trustee§

78.
(a)The trustee shall supervise compliance with the provisions pursuant to this Law, compliance with the provisions of the fund agreement and compliance with the undertakings pursuant to the prospectus by the fund manager; without derogating from the generality of this provision and from the provisions of sections 74 and 75, the trustee shall do what is necessary to verify that the following are maintained by the fund manager, including by way of conducting an audit at the fund manager:
(1)a proper decision-making process that conforms to a procedure approved by the board of directors;
(2)an internal control system ensuring the proper maintenance of the fund's books as defined in section 129(a);
(3)a system of measures to ensure the management of the fund in accordance with the provisions of this Law, the provisions of the fund agreement and the undertakings pursuant to the prospectus;
(4)the management of the fund's investments is carried out in accordance with the procedures prescribed by the fund manager's board of directors pursuant to section 18(8).
(a1)The trustee shall bring to the attention of the employees of the fund manager, from time to time and as necessary, the provisions pursuant to this Law that relate to the management of a fund.
(b)The trustee may determine which transactions are material to the fund or which types of transactions may involve a conflict of interests, as the meaning of all of these in section 18(6).
(c)A fund manager shall transmit to the trustee, upon the trustee's demand, any document and information required by the trustee for the purpose of performing the trustee's functions.
(d)If the trustee has found that there were deficiencies in the management of the fund, the trustee shall direct the fund manager in writing to remedy them and shall set a date for their rectification; the trustee shall transmit a copy of the trustee's direction to the board of directors of the fund manager.
(e)
(1)The trustee shall submit to the Authority and to the exchange, no later than three months after the end of each quarter, a report in which –
(a)the trustee shall state whether the system of measures pursuant to subsection (a)(3) is sufficient to ensure the matters stated therein;
(b)the trustee shall state that in the inspections carried out by the trustee at the fund manager during the preceding quarter, no breach of the provisions of this Law, of the provisions of the fund agreement or of the undertakings pursuant to the prospectus, or deficiencies in the management of the funds, was found, or shall state that breaches or deficiencies as aforesaid were found and have been rectified; if the trustee has given directions to the fund manager to rectify breaches or deficiencies found and they have not yet been rectified, the trustee shall detail in the report the directions given;
(c)the trustee shall detail the main matters examined by the trustee at the fund manager during the preceding quarter;

for this purpose, "quarter" – a period of three months commencing on 1 January, 1 April, 1 July and 1 October of each year;

(2)Before submitting a report as referred to in paragraph (1), the trustee shall transmit it to the fund manager and shall set a reasonable time for receipt of the fund manager's response; the trustee shall submit the report together with the fund manager's response, if one has been given;
(3)The Minister of Finance may prescribe additional particulars to be included in a report as referred to in paragraph (1).
(f)
(1)The trustee shall notify the Authority of all of the following –
(a)material deficiencies in the management of the fund, immediately upon finding them or upon becoming aware of them;
(b)deficiencies that the trustee has directed the fund manager to rectify within a date set therefor, and that have not been rectified within that date – immediately after the date set;
(c)recurring deficiencies in the management of the fund – within a reasonable time after they occur;
(2)Before notifying as referred to in paragraph (1), the trustee shall give notice thereof to the fund manager and shall set a reasonable time for receipt of the fund manager's response; the trustee shall notify the Authority as aforesaid together with the fund manager's response, if one has been given.
(g)The Authority may, after having afforded the fund manager and the trustee a reasonable opportunity to state their arguments, direct the trustee to submit to the Authority and to the exchange a report on deficiencies as referred to in subsection (f), within a period to be determined by the Authority.
(h)The trustee shall furnish to the Chairperson of the Authority, or to an employee whom the Chairperson has authorised for that purpose, upon demand by either of them, particulars on a matter relating to the fund or its management within a time to be determined by them; the trustee shall transmit to the fund manager a copy of the demand and of the trustee's response to the demand.

Charge (Security Interest) over Fund Assets§

79.

Fund assets are not subject to attachment; a fund manager shall not pledge or create a charge (security interest) over the fund's assets except for the purpose of executing a transaction on behalf of the fund, in accordance with conditions prescribed by the Minister of Finance by Regulations.

Expenses to be Paid from Fund Assets§

80.
(a)The expenses to be paid from the assets of a fund shall be only the following –
(1)the remuneration of the trustee and the fund manager, as prescribed in the fund agreement and in the prospectus or in a report submitted by the fund manager pursuant to this Law;
(2)commissions and other expenses incidental to the execution of transactions on behalf of the fund, as detailed in the prospectus or in a report submitted by the fund manager pursuant to this Law;
(3)taxes applicable to the fund, its assets, its income and transactions effected in its assets.
(a1)The Minister of Finance may prescribe additional categories of expenses that a fund manager is entitled to pay from the assets of a fund, generally or in respect of a high-technology fund, and may also prescribe maximum amounts or rates for expenses that may be paid from the assets of a fund as aforesaid pursuant to the provisions of this section and the dates for their payment.
(b)Notwithstanding the provisions of subsection (a), a fund manager, with the approval of the trustee, and a trustee through the fund manager, may recoup from the assets of the fund an expense incurred in the performance of their functions, otherwise than in the ordinary course of the management of the fund, provided that the expense is in a reasonable amount.
(c)Where a fund manager or trustee has decided to recoup from the assets of a fund pursuant to subsection (b), the fund manager or trustee shall immediately submit a report thereon to the Authority and to the exchange.

Expenses for Correction of an Error§

80a.

A distributor shall not charge a unit holder for the expenses of correcting the records maintained by the distributor, in respect of the correction of an error that occurred in a unit price or in a redemption price.

Prohibition on Receipt of Benefits§

81.
(a)A fund manager shall not receive any benefit whatsoever in connection with the management of the fund, other than –
(1)fees and remuneration, as prescribed in accordance with the fund agreement and the prospectus;
(2)services and accommodation from a person who controls the fund manager or from a company controlled by such a person.
(b)A person who controls a fund manager and a company controlled by such a person shall not receive any benefit whatsoever in connection with the management of the fund, other than from the fund manager.
(c)A director of a fund manager, a member of a board of directors committee who is not a director, and an employee or person engaged by a fund manager, shall not receive any benefit whatsoever in connection with the management of the fund, other than from the fund manager; for the purposes of the provisions of this subsection, "engaged" – including a person who controls the engaged person or a company controlled by such a person.
(d)The trustee shall not receive any benefit whatsoever in connection with the performance of the trustee's functions as trustee of a fund, other than remuneration as prescribed in the fund agreement and in the prospectus, which shall be paid from the assets of the fund.

Abstention of a Director from Voting§

81a.

A director of a fund manager or a member of a board of directors committee shall not be present and shall not vote in a deliberation on the matter of approving a transaction in securities issued by a corporation in which the director or member is an interested party; if either of them was present or voted in respect of the approval of such a transaction, the Authority may, after having afforded the director or member, the fund manager and the trustee a reasonable opportunity to state their arguments, apply to the court to remove the director or member from office.

Prohibition of Granting a Benefit§

82.
(a)No payment or other benefit shall be offered in connection with the purchase, redemption, sale or holding of units; the provisions of this Section shall not apply to the following:
(1)the granting of a discount on the addition, on terms determined by the fund manager in a prospectus or report, which shall not be subject to the fund manager's discretion;
(2)the payment of a distribution commission to a distributor who is an investment marketer as defined in the Regulation of Investment Advice Law (in this subsection – marketer);
(3)the payment of a distribution commission to another distributor in accordance with the conditions under this Section;
(4)the payment of a salary or commission by a marketer, distributor or fund manager to their employee or to a person employed by them; if a licensing obligation under the Regulation of Investment Advice Law applies to an employee or a person so employed, that person shall be a licence holder, and if such person engages in an occupation that does not require a licence under section 3 of that Law – within the scope of their occupation under that section;
(5)a payment by a distributor to a person who holds units through them, in an amount not exceeding the amount of the distribution commission that the distributor collects from the fund manager in respect of the holding of those units through them, and in respect of a trust fund for which it has been determined under the provisions of section 3(a)(12) of the Regulation of Investment Advice Law that investment advice or investment marketing in relation thereto does not require a licence – also a payment to a person to whom the right to receive such payment has been assigned by a unit holder;
(6)a payment to a market maker or underwriter of the fund's units, for market-making or underwriting activity; for this purpose –

"market maker" – a person who has undertaken, during every day on which trading takes place on the exchange, to submit orders to buy units and orders to sell units, in accordance with rules determined by the exchange, and also to publish a price at which they undertake to buy the unit and a price at which they undertake to sell the unit;

"underwriter" – a person who has undertaken to purchase units offered under a prospectus if the public does not purchase them, or an undertaking to purchase units offered under a prospectus in order to sell them to the public;

(7)a payment or the granting of another benefit by a fund manager, at a rate not exceeding the rate of the fund manager's fee, to a person who holds units of a fund under their management, all in accordance with conditions determined by the Minister of Finance, generally or for types of funds.
(b)The rate of the commission collected by a distributor, in connection with the sale, redemption or holding of units of funds, shall not change by reason of its being collected from different fund managers.
(c)The Minister of Finance, on the proposal of the Authority or after consultation with it, and with the approval of the Finance Committee of the Knesset, may determine, subject to the provisions of subsection (b), generally or for types of funds, conditions under which a fund manager is permitted to pay a distribution commission to a distributor, and provisions regarding the maximum rate of such a commission and the manner of its calculation.

Liability of Fund Manager§

83.
(a)A fund manager is liable to a unit holder for damage caused to them by reason of the fund manager's breach of a provision under this Law, a provision of the prospectus or a provision of the fund agreement; the said liability shall also apply to the directors, to members of a board of directors committee who are not directors, and to the general manager.
(b)The trustee is liable to a unit holder for damage caused to them by reason of the trustee's failure to comply with the provisions of sections 74, 75 and 78(a); the said liability shall also apply to the directors and to the general manager.
(c)The liability under subsections (a) or (b) shall not apply –
(1)to a person who has proved that they took all appropriate measures to prevent the breach;
(2)to a person who has proved that they did not know and were not required to know, or could not have known, of the breach;
(3)against a person who has proved that they acquired the units at a time when they knew of the breach.
(d)Where two or more persons are liable under this Section, they are jointly and severally liable to the injured party; among themselves they bear liability in accordance with the rules applicable to liability in torts.

Savings of Laws§

84.

The provisions of section 83 do not derogate from any remedy available to a unit holder under any other law.

Admissibility of Judgment§

85.

The findings and conclusions of a final judgment in a petition against a decision of the Authority under section 15(a) shall be admissible in civil proceedings against the fund manager as prima facie evidence of their contents, and the provisions of sections 42b, 42c and 42e of the Evidence Ordinance [New Version], 5731-1971, shall apply with the necessary modifications.

Prohibition of Delegation of Powers§

86.

A trustee or fund manager may not delegate any of their powers or transfer any of their duties under this Law; the employment of a person by a trustee or fund manager shall not be regarded as a delegation of powers or a transfer of duties, and shall not derogate from their liability to unit holders.

Unlawful Profit§

87.

Where a court has determined, on the application of a unit holder, fund manager or trustee, that a fund manager or trustee, in the course of performing their duties, derived a profit or collected payments unlawfully, or paid expenses from the fund's assets unlawfully or in an unreasonable amount, the court may order that they indemnify the fund, the unit holders or persons who were unit holders, in the amount and in the manner that it directs.

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