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
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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.
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Section D: Fund Manager
Licences Committee of the Authority§
12a.
The Authority shall appoint a licences committee, whose members shall be as follows (in this Law – the Licences Committee):
(1)the Chairperson of the Authority;
(2)two members, from among the members of the Authority, who are State employees or employees of the Bank of Israel.
Fund Manager§
13.
(a)A company shall not serve as a fund manager unless it has been approved by the Chairperson of the Authority, after the Chairperson has found that the following provisions are satisfied by the company:
(1)its exclusive business is the management of funds;
(2)its equity capital is not less than an amount prescribed by the Minister of Finance in Regulations;
(3)it holds insurance, a bank guarantee, a deposit or securities in amounts, at rates and on terms prescribed by the Minister of Finance.
(a1)The Chairperson of the Authority shall not refuse to grant approval pursuant to the provisions of subsection (a) to a company that satisfies the provisions of that subsection, unless the Chairperson has referred the application for deliberation before the Licences Committee, and the Licences Committee has decided, after having given the company an opportunity to present its arguments, not to grant such approval on grounds relating to the reliability of the company or to the reliability of any of the following:
(1)a controlling shareholder of the company;
(2)a person who, following the grant of approval, will participate in making decisions relating to the management of a fund under the company's management;
(3)an office holder in the company or in any one of those listed in paragraphs (1) or (2).
(b)(Repealed).
(c)
(1)An employee of a fund manager or a person employed by a fund manager, who participates in making decisions concerning the management of a fund's investment portfolio, shall hold a portfolio manager's licence; an employee or person so employed who is not a resident of Israel, who participates in making decisions relating solely to foreign securities that are not foreign securities issued by companies registered in Israel, shall hold an authorisation under the laws of the state in which the employee resides to engage in investment management on behalf of others, and the provisions of section 2(b) of the Regulation of Practice Law shall not apply to that person;
(2)For the purpose of the proviso of section 2(b) of the Regulation of Practice Law and for the purpose of section 8(a)(5) and (6) of that Law, a fund manager shall be regarded as a company holding a portfolio manager's licence, that has obtained the required insurance and in which the required internship may be completed.
(c1)The Minister of Finance may prescribe eligibility conditions for directors and for members of committees that the board of directors of the fund manager is required to appoint pursuant to this Section, as well as provisions to ensure the effectiveness of the internal control system and the internal enforcement programme and their proper functioning, including provisions regarding the obligation to appoint persons in positions responsible for that system and that programme and their eligibility conditions, and provisions to ensure effective risk management.
(c2)Notwithstanding the provisions of subsection (c)(1), the Minister of Finance may prescribe other conditions for the employment by the fund manager of a person in the management of the fund's investment portfolio or in advising regarding such management.
(d)A company shall not serve as a fund manager if its chief executive officer is also a director or chief executive officer of another fund manager.
(e)(Repealed).
Obligation to Notify the Authority Regarding a Reliability Defect§
13a.
(a)A fund manager shall notify the Authority of the occurrence of any of the circumstances listed in section 9a(a), with respect to each of the following, upon becoming aware thereof and no later than the end of the first business day thereafter:
(1)the fund manager or an office holder therein;
(2)a controlling shareholder of the fund manager or an office holder therein;
(3)a person who participates in making decisions relating to the management of a fund under its management or an adviser to the fund manager.
(b)A notice as referred to in subsection (a) shall not be open for public inspection, unless there is an obligation to submit a report in respect thereof pursuant to section 72(a), in light of the importance of the information contained therein to a reasonable investor considering the purchase or redemption of a unit.
(c)A person who is any of the following shall notify the fund manager of an event as referred to in subsection (a), immediately upon becoming aware thereof; a notice pursuant to this subsection shall include the particulars required by the fund manager in order to fulfil its obligation pursuant to subsection (a):
(1)a controlling shareholder of the fund manager;
(2)a person who participates in making decisions relating to the management of a fund or an adviser to the fund manager;
(3)an office holder in the fund manager or in any one of those listed in paragraphs (1) and (2).
Lapse of Approval§
14.
The validity of an approval granted to a company to serve as a fund manager shall lapse upon the occurrence of any of the following:
(a)after a year in which the company did not serve as a fund manager;
(b)a court Order has been issued for the appointment of a temporary receiver or temporary liquidator for the fund manager, and the Order has not been lifted within 60 days or within a later date determined by the Chairperson of the Authority for special reasons; a fund manager shall notify the trustee and the Authority immediately upon the issuance of a court Order as aforesaid.
Cancellation or Suspension of Approval§
15.
(a)Where the Chairperson of the Authority finds that a provision of the provisions pursuant to section 13 has ceased to be satisfied in respect of a fund manager, or that the circumstances enumerated in the list pursuant to subsection (a1) have been satisfied, evidencing a reliability defect of the fund manager, of a controlling shareholder thereof, or of an office holder in any of them, and considers that the defect is capable of being remedied, the Chairperson may direct that it be remedied within a period the Chairperson shall determine; if the defect was not capable of being remedied, or the period determined by the Chairperson of the Authority has elapsed and the defect was not remedied, the Licences Committee may, after having given the fund manager an opportunity to present its arguments, suspend the approval granted to it to serve as a fund manager or cancel it, by a reasoned decision in writing.
(a1)The Authority shall establish a list of circumstances that are capable of evidencing a reliability defect of a fund manager, of a controlling shareholder thereof, or of an office holder in any of them; such a list shall be published on the Authority's website and shall enter into force upon the expiry of 30 days from the date of publication, provided that an amendment to the list shall not apply to a pending proceeding pursuant to this section; notice of the publication of the list and of any amendment thereto, and the date of their commencement, shall be published in Reshumot (Official Gazette).
(b)(Repealed).
(c)(Repealed).
(d)Where the Authority has cancelled or suspended an approval granted to a company to serve as a fund manager as referred to in subsection (a), or where an approval granted to a company to serve as a fund manager has lapsed as referred to in section 14(b), the company shall transfer the management of the funds to another manager, within a period to be determined by the Chairperson of the Authority.
(e)If the period determined by the Chairperson of the Authority pursuant to subsection (d) has elapsed and the fund manager has not transferred the management of the funds to another manager, the court may, at the request of the Authority, appoint a receiver for the purpose of transferring the management of the funds as aforesaid.
(f)For the purpose of this section, "another manager" means a company that satisfies the conditions of section 13 and is not a company that controls the fund manager or a company controlled by such a company.
Board of Directors of the Fund Manager§
16.
(a)The board of directors of a fund manager shall include at least five directors; for the purpose of the appointment of external directors, the status of a fund manager shall be the same as that of a company whose securities have been offered to the public by means of a prospectus and are held by the public, and the provisions of sections 239 to 249 of the Companies Law regarding the appointment of external directors shall apply, with the necessary modifications, unless otherwise provided pursuant to this Law.
(a1)The external directors shall be appointed by the fund manager after the trustee has examined and confirmed that the eligibility conditions prescribed in section 240 of the Companies Law are satisfied in respect of them; the trustee shall report to the Securities Authority, and in the case of a closed-ended fund – also to the exchange, on the results of the examination.
(a2)A person who controls a significant real corporation, a person associated with such a controlling shareholder, or an office holder in a significant real corporation shall not be appointed or serve as a director in a fund manager that is a significant financial body; the Chairperson of the Authority may issue directions regarding the continuation of tenure of a director during sale proceedings as referred to in section 23b2(d); in this subsection –
"person associated with the controlling shareholder" – a relative or partner of a controlling shareholder, or a person with an affiliation as defined in section 240(b) of the Companies Law, to the controlling shareholder;
"financial body" and "real corporation" – as defined in section 28 of the Law for the Promotion of Competition and Reduction of Concentration;
"significant financial body" – a financial body included in the list of significant financial bodies published pursuant to section 29 of the Law for the Promotion of Competition and Reduction of Concentration;
"controlling shareholder", in a significant real corporation – including a holder of a controlling block as defined in the Companies Law, in a significant real corporation in which there is no other controlling shareholder;
"significant real corporation" – a real corporation included in the list of significant real corporations published pursuant to section 30 of the Law for the Promotion of Competition and Reduction of Concentration.
(b)The number of directors of a fund manager who also serve as directors of another fund manager, a provident fund, a provident fund management company, a company managing investment portfolios on behalf of others, an investment advisory company, an insurer as defined in the Insurance Business Supervision Law, 5741-1981, or an underwriting company, all except a company that controls the fund manager and a company controlled by such a company (in this Law – an investment management company), shall not exceed one-third of the total number of directors.
(c)A director of a fund manager shall not serve as a director in more than two additional investment management companies at the same time, except in cases permitted by the Minister of Finance in Regulations.
(d)The number of directors who are employees of a fund manager or are employed by a fund manager shall not exceed one-third of the total number of directors.
(e)When appointing the board of directors of a fund manager, the composition of the board of directors shall be determined in a manner that enables the board of directors to fulfil its functions.
Chairperson of the Board of Directors§
16a.
Without prejudice to the provisions of section 16(e) –
(1)the board of directors of a fund manager shall elect one of its members to serve as chairperson of the board of directors;
(2)the chief executive officer of the fund manager, a person subordinate to the chief executive officer, directly or indirectly, or a relative of the chief executive officer, shall not serve as chairperson of the board of directors;
(3)the powers of the chief executive officer or the powers vested in a person subordinate to the chief executive officer, directly or indirectly, shall not be conferred upon the chairperson of the board of directors or upon a relative of the chairperson; the chairperson of the board of directors shall not serve as another office holder of the fund manager, except as a member of a board of directors committee that is not an audit committee.
Meetings of the Board of Directors§
17.
(a)Meetings of the board of directors of a fund manager shall be held at least once per quarter; the period between one meeting and the next consecutive meeting shall not exceed four months.
(b)A majority of the directors shall constitute a quorum at meetings of the board of directors, provided that –
(1)an external director was present at the meeting;
(2)the number of directors who serve as directors of more than one investment management company, who were present at the meeting, shall not exceed one-third of those present.
(c)Minutes shall be kept at meetings of the board of directors, in which the names of those present, the main points of the discussion and the decisions taken shall be recorded.
(d)If an external director is absent from four consecutive meetings of the board of directors, that director's tenure shall lapse.
Functions of the Board of Directors§
18.
The functions of the board of directors of a fund manager shall include, inter alia:
(1)to determine the investment policy of the fund, as shall be defined in the fund agreement and in the prospectus, and also to determine material changes to such policy in accordance with its discretion;
(2)to appoint a chief executive officer;
(3)to supervise the performance of the chief executive officer and to examine the manner of implementation of the decisions of the board of directors by the chief executive officer;
(4)to examine the results of the fund's activity, including the return achieved and the changes in the composition of the fund's assets and liabilities, on the basis of reports to be submitted to it by the chief executive officer upon its demand;
(5)to approve the internal control system and the internal enforcement programme;
(5a)to appoint an internal auditor in accordance with the proposal of the audit committee as referred to in section 20a(a), to approve the internal auditor's work plan in accordance with the recommendation of the audit committee, and also to deliberate on defects of material importance to the activity of the fund manager and on ways to remedy them;
(5b)to deliberate on the fund manager's compliance with the conditions of the approval to act as a fund manager as prescribed in section 13;
(6)to deliberate on a transaction that the Minister of Finance has prescribed in Regulations as being of a type of transactions that are material to the fund, or as being of a type of transactions that may involve a conflict of interests; for this purpose, "material transaction" – by reason of its size relative to the size of the fund, the risk involved therein, or the type of asset that is the subject of the transaction; "conflict of interests" – between the interests of the unit holders and the interests of one or more of the following: unit holders in another fund under the management of the fund manager, the fund manager, a person employed by the fund manager, an interested party in any of them and a company controlled by such an interested party;
(7)to deliberate on a transaction that the trustee has determined pursuant to section 78(b) to be material to the fund or to involve a conflict of interests;
(7a)to deliberate on an off-exchange transaction or a transaction outside a regulated market, which the Minister of Finance has prescribed as being of a type of such transactions that must be deliberated upon;
(8)to establish procedures designed to ensure –
(a)a proper process of decision-making in connection with the fund's investments;
(b)the conduct of internal control over investment management;
(c)the management of the funds under the fund's management without discrimination between them;
(d)the management of the fund's risks in accordance with the policy that has been determined;
(e)the proper conduct of the work of the board of directors and its committees;
(f)emergency preparedness and ensuring business continuity;
(9)to establish a procedure for engaging with a trading company as referred to in section 69(a), and also to deliberate on the engagement with the trading company by means of a tender, as referred to in section 69(b), or without a tender, as referred to in section 69(d);
(10)to deliberate on any matter of material importance to the activity of the fund manager or to the supervision and control thereof.
Committees of the Board of Directors§
19.
(a)The board of directors of a fund manager may delegate its authority, except pursuant to section 18(1) to (5b), to a committee the majority of whose members are directors, including an external director, and among whose members there may also be persons who are not directors (hereinafter – a board committee).
(a1)The board of directors of a fund manager shall determine the composition of the board committee in a manner that enables the board committee to fulfil its purpose.
(b)The board of directors of a fund manager may delegate its authority, as detailed below:
(1)pursuant to section 18(6), (7), (7a) and (9) – to the audit committee or to a board committee that it establishes specifically for that purpose;
(2)pursuant to section 18(5) – to the audit committee, provided that it receives from the audit committee an update on a decision made by the audit committee pursuant to the said paragraph that is of material importance to the activity of the fund manager, promptly after the decision is made, and also receives from the audit committee, at least once a year, a review on the matters listed in that paragraph.
(c)A quorum at a meeting of a board committee shall be at least three members, including an external director; if an external director who is a member of the committee is unable to participate in the meeting, another external director may take that director's place at that meeting.
(d)Minutes shall be kept at meetings of the board committee, in which the names of those present, the main points of the discussion and the decisions taken shall be recorded; the minutes shall be available for inspection by every director of the fund manager.
Investment Committee§
20.
(a)The board of directors of the fund manager shall appoint a board committee for investments (hereinafter – the investment committee).
(b)The functions of the investment committee shall include, inter alia:
(1)to determine the manner of the fund's activity within the framework of the investment policy determined by the board of directors;
(2)to guide the chief executive officer in implementing the fund's investment policy in accordance with the decisions of the board of directors and with its own decisions.
(b1)The number of members of the investment committee of a fund manager who also serve as members of the investment committee of another investment management company shall not exceed two-thirds of the total number of members of the investment committee of the fund manager.
(b2)A member of the investment committee of a fund manager shall not serve as a member of the investment committee of more than two additional investment management companies at the same time.
(c)Meetings of the investment committee shall be held at least once a month.
(d)Without prejudice to the provisions of section 19(c), the number of members of the investment committee present at a meeting who also serve as members of the investment committee of another investment management company shall not exceed two-thirds of the members of the investment committee present at that meeting.
Audit Committee§
20a.
(a)The board of directors of a fund manager shall appoint from among its members an audit committee (in this Law – audit committee).
(b)The functions of the audit committee shall be –
(1)to propose to the board of directors a candidate for the position of internal auditor, to discuss the work plan proposed by the internal auditor and to submit its recommendations to the board of directors with respect to the plan;
(2)to identify deficiencies in the activities of the fund manager, through the internal auditor and other control and supervision bodies, to determine ways of correcting such deficiencies that are not of material importance to the activities of the fund manager and to propose to the board of directors ways of correcting deficiencies that are of material importance to its activities;
(3)to examine the internal audit system of the fund manager and the performance of the internal auditor, and also whether the resources and tools necessary for the performance of his functions are available to him;
(4)to decide whether to approve the acts of the fund manager in respect of which the Minister of Finance has prescribed by Regulations that they shall require the approval of the committee;
(5)to discuss the engagement with a trading company by way of tender, as referred to in section 69(b), or without tender, as referred to in section 69(d).
(c)The number of members of the audit committee shall not be less than three; all the external directors shall be members thereof and they shall constitute a majority of its members; the chairperson of the committee shall be an external director.
(d)The chairperson of the board of directors of the fund manager and any director who is employed by the fund manager or who regularly provides it with services, as well as the controlling shareholder of the fund manager or his relative, shall not be members of the audit committee.
(e)The internal auditor shall receive notices of the holding of meetings of the audit committee and shall be entitled to participate therein.
(f)The internal auditor may demand that the chairperson of the audit committee convene the committee for deliberation on a matter he has specified in his demand, and the chairperson of the audit committee shall convene it within a reasonable time from the date of the demand, if he sees reason to do so.
(g)At least once a year the audit committee shall hold a meeting with the internal auditor alone.
(h)Meetings of the audit committee shall be held at least once per quarter; the period of time between one meeting and the next following meeting shall not exceed four months.
(i)The quorum at meetings of the audit committee is at least three members, including an external director; however, in urgent cases in which a director is prevented from participating in a meeting of the audit committee and as a result a quorum is not present at the committee meeting, the quorum at that meeting shall be at least two members, including an external director; the minutes of such a meeting shall contain an explanation of the urgency of holding the meeting.
(j)Minutes shall be prepared at meetings of the audit committee, in which the names of those present, the main points of the deliberation and the decisions taken shall be recorded; the minutes shall be available for inspection by every director of the fund manager.
Personal Restrictions on a Director and Employee of a Fund Manager§
21.
(a)A director of a fund manager, or a member of an investment committee –
(1)shall not purchase or sell a security traded on an exchange except during exchange trading, pursuant to a written instruction given at least one day before the purchase or sale is carried out;
(2)shall give his instructions as referred to in paragraph (1) through one exchange member only; if that exchange member has more than one branch – he shall give the instructions at one branch only, at which his securities account is managed.
(b)The Minister of Finance may prescribe by Regulations additional conditions under which a director of a fund manager or a member of an investment committee may purchase and sell a security traded on an exchange, including by way of a blind trust; in this Law, "blind trust" – the management of a securities portfolio on behalf of another by a trustee, at the trustee's sole discretion, in accordance with rules prescribed by the Minister of Finance.
(c)An employee of a fund manager –
(1)shall not purchase securities except of the types and under the conditions prescribed by the Minister of Finance by Regulations, generally or for an employee of a fund manager in a position he has prescribed, including by way of a blind trust;
(2)shall notify the trustee of one of the funds managed by the fund manager, within seven days after the commencement of his employment, of the securities held by him or his spouse; he shall also notify the trustee, within seven days, of every security he has purchased or sold other than by way of a blind trust; the trustee shall retain, for a period of at least seven years, all documents relating to this matter.
(d)The provisions of subsection (c) –
(1)shall also apply to a member of an investment committee and to a person employed by a fund manager, who participate in the making of decisions relating to specific securities;
(2)shall not apply to an employee of a fund manager, a member of an investment committee and a person employed by a fund manager, who are not residents of Israel and who participate in the making of decisions relating to foreign securities only, that were issued by companies not registered in Israel.
(e)For the purposes of this section, "director", "member of an investment committee", "person employed by a fund manager", and "employee" – include the spouse of each of these.
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