New bill proposes more transparency at investment houses

Privately-owned investment houses will be required to disclose information and comply with the standards for corporate reporting and governance, according to a private member's bill submitted by MK Amnon Cohen (Shas) and MK Fania Kirshenbaum (Israel Beiteinu). Later, they may be required to publish full financial reports and the salary details of their five top paid executives, as already required by privately owned banks and insurance companies.

Privately-owned investment houses manage NIS 196 billion in public assets. Companies include Psagot Investment House Ltd., Altshuler Shaham Ltd., and Meitav Investment House Ltd., Tamir Fishman Ltd., and Infinity Private Equity. Other investment houses are subsidiaries of public companies, such as Epsilon Investment House Ltd., owned by Koor Industries Ltd. (TASE:KOR), and Migdal Capital Markets Ltd., owned by Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL).

Cohen said, "The Companies Law does not stipulate special arrangements for private companies that manage the public's money. However, given the fact that these companies, even though they are private, manage billions of the public's money, they should comply with some of the corporate governance rules that apply to public companies."

Cohen and Kirshenbaum submitted the bill to the Knesset this week. In October, when the Knesset returns from its summer recess, the bill will be submitted to the ministerial legislative committee. Cohen said that discussions were already underway with committee members to obtain a major in favor of the bill. He believes that the government will support the bill.

Cohen added that he was in contact with Supervisor of Capital Markets, Insurance and Savings Prof. Oded Sarig to obtain Ministry of Finance support for the bill. "Sarig supports part of the bill, but disagrees with other parts," said Cohen, who promised that the bill would go forward with full support from Sarig and the Ministry of Finance.

Cohen and Kirshenbaum's bill proposes that a private company that manages more than NIS 100 million in the public's assets must comply with certain proper disclosure. The investment houses will not be required at this stage to publish financial reports or meet stricter disclosure rules. The bill also requires that private investment houses appoint an audit committee that will approve parties at interest deals.

Psagot is Israel's largest investment house, both public and private, with NIS 78.2 billion in assets under management. The second largest private investment house is Meitav, with NIS 20.5 billion in assets under management, followed by Altshuler Shaham, with NIS 13 billion.

Migdal Capital Markets is the largest private investment house owned by a public company, with NIS 24.3 billion in assets under management, followed by Menorah Mivtachim Holdings Ltd. (TASE: MORA) unit Menorah Finances Ltd., with NIS 18.2 billion in assets, and Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) unit Harel Finance Ltd., with NIS 17.7 billion.

Delek Group Ltd. (TASE: DLEKG) unit Excellence Investments Ltd. (TASE: EXCE) is the largest public investment house with NIS 33.7 billion in assets under management, followed by DS Apex Holdings Ltd. (TASE:DSAP) with NIS 30.6 billion in assets, and IBI Investment House Ltd. (TASE:IBI) with NIS 11.5 billion.

Published by Globes [online], Israel business news - www.globes-online.com - on July 26, 2010