Sources inform ''Globes'' that the Bank of Israel opposes a proposal by the Israel Securities Authority to abolish distribution fees for mutual funds (collected from the fund sponsor), and replacing them with buy and sell fees (collected from clients). The Bank of Israel's opposes puts into question implementation of the proposal as the Securities Authority will probably not want to go forward without understandings with the central bank.
The Securities Authority has not yet presented a concrete format for the new model, and the proposal has not even officially presented. Any proposal will probably be coordinated with Supervisor of Banks Rony Hizkiyahu to his satisfaction, after will a hearing for market participants.
The Bank of Israel is concerned about possible harm to consumers if the banks collect buy and sell fees from them, instead of collecting distribution fees. Hizkiyahu believe that the investments houses that produce the mutual funds will not lower their management fees in the amount of the cancelled distribution fees, resulting in higher payments by buyers of mutual funds.
A Bank of Israel source said, "We don’t believe that customers won't be hurt, so we don’t support the proposal."
The Securities Authority declined to comment on the Bank of Israel's position. In contrast with the Ministry of Finance Capital Markets, Insurance and Savings Division, the Securities Authority prefers maximum collaboration with other regulators.
The Bachar capital market reform established the model of distribution fees for mutual funds, with the objective of turning banks into objective advisors. Banks collect the same commission from every mutual fund producer, and the fee is set by the minister of finance, depending on the type of fund. Money market funds charge 0.125% of assets; shekel funds pay 0.25%; equity funds pay 0.8%; and other funds pay 0.4%.
The model also does not link the number of transactions by the customer and the fee paid.
NIS 483 million were collected in fees in 2009, up from NIS 425 million in 2008.
Published by Globes [online], Israel business news - www.globes-online.com - on July 12, 2010
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