In order to protect ordinary investors, the basic position under Israeli law is that the offer or sale of securities to the public may only be made by way of a prospectus whose publication has been licensed by the Israel Securities Authority (“the ISA”).

However, there are various categories of offering which the law does not class as public, meaning that any offerings which fall within these categories would not be required to be made by way of prospectus.

One such category is an offering which is made to no more than a particular number of investors (broadly, to no more than 35 potential investors in any 12 month period).

For the purposes of determining such number, certain types of investors are not taken into account; these include what the Securities Law, 1968, calls Sophisticated Investors (mainly institutional investors and particular high net worth individuals), and companies incorporated outside of Israel which, in the opinion of the ISA, are capable of obtaining the information required in order to make a decision to invest in the securities.

The ISA has now published its opinion as to the types of non-Israeli companies which it would consider to meet such a criterion, being the following:

1) An investor which falls within the definition of Qualified Institutional Buyer pursuant to Rule 144A of the US Securities Act of 1933, and

2) An investor which falls within the first subsection of the first category of the definition of “Professional Clients” in the MiFID Directive – namely “Entities which are required to be authorised or regulated to operate in the financial markets”, as more particularly detailed therein, provided that such investor is indeed so authorised or regulated by the appropriate authority of a country in the EEA,

(such investors “Foreign Institutional Investors”)

provided that the following conditions apply:

a) The offer documents include a provision stating that by responding thereto, the Foreign Institutional Investors will be confirming that they qualify as such; and

b) The distributors of the relevant securities must have confirmed to the offeror thereof that reasonable steps have been taken to ensure that such securities being offered outside Israel are only being offered to Foreign Institutional Investors, and that in any event no purchase orders will be accepted from any entities which do not meet the relevant criteria.

The full text of the opinion (in Hebrew) can be found here.