Alleged irregularities put publicity-shy dynasties in spotlight

Assaf Goldberg and Danny Tocatly  credit: Gil Gibli
Assaf Goldberg and Danny Tocatly credit: Gil Gibli

The Goldberg and Tocatly families discreetly dominated stock market operations systems for half a century, but a problematic venture into provident funds has brought unwelcome attention.

2024 should have been a special year for the Goldberg family. Exactly fifty years ago ,in 1974, Shimon Goldberg founded FMR, which became a dominant company in the provision of trading systems to financial institutions in Israel, among them operations and back-office services, the technological backbone of the institutions’ financial activities. A year later, he was joined by Avinoam Tocatly, who ran insurance company Aryeh, founded by his father Yehuda Tocatly and later sold to Clal Insurance. Since then, the Goldberg and Tocatly families have held 50% each of FMR.

In the past few months, however, the two families, which had always kept out of the public eye, have been on the receiving end of unfavorable publicity, after the Capital Markets, Insurance and Savings Authority and the Israel Securities Authority opened an investigation into irregularities in the tens of millions of shekels in another company that they hold jointly, namely provident fund management company Slice.

Slice is 51% owned by the Goldberg family. Shimon Goldberg’s son Assaf Goldberg was CEO when the affair broke, while he and another son, Shai, were directors of the company.

The suspicions of the regulators of irregularities at Slice are so severe that at the end of last year the Capital Markets, Insurance and Savings Authority decided to take the management of the company out of the Goldberg family’s hands (even the decision by the company’s board to replace Assaf Goldberg as CEO was of no avail) and to appoint a special manager to put its affairs in order. The Authority chose Ephy Senderov, CEO of Amitim Pension Funds, for the task.

The Tocatly family’s holding in FMR is currently identified with Danny Tocatly, son of Avinoam, known as an investor in venture capital and real estate, and a member of a group of businesspeople close to Leader of the Opposition Yair Lapid. Danny Tocatly began his professional career in investment houses in the US, where he accumulated his initial wealth. Later, on returning to Israel, he entered into several investments, among them the founding of Magma Venture Partners (formerly known as Magnum) with Zvi Limon, Ron Zuckerman, and Shaul Shani. The fund made a very successful exit with semiconductor company DSPG. Another investment that did well for Tocatly was in real estate company Brack Capital, headed by his fiend Shimon Weintraub.

In the mid-2010s, FMR decided to apply the know-how it had acquired in forty years of business to running provident funds. The company says that the accounts of some 750,000 savers are managed via its systems, the main customer being More Provident Funds.

Looking for growth

According to market sources, the move into provident funds came after changes in the market that affected FMR. The services it sold to financial institutions still made plenty of money for the Goldberg and Tocatly families, but a sort of pincer movement pushed them into looking for additional sources of income.

"They have gradually found themselves in a more competitive situation than in the past, for two reasons," a market player says. "The first is that the number of members of the stock exchange shrank because of mergers in the sector. It was no longer a growing business for FMR. The second reason is that there are two more alternatives for provision of operations services, and Psagot, for example, and Altshuler Shaham, which became a stock exchange member last September, turned to the competitors. So the combination of stock exchange members that are not necessarily going with them, and the mergers that have reduced the number of potential customers, create a situation in which they looked for other growth areas."

That, apparently, is the reason why the Goldberg and Tocatly families decided to become not just operations services providers in provident funds, but producers as well. They formed Kal Gemel in 2012, but the big leap came in 2020, when they changed the name to Slice and went into alternative investments. According to the financial statement’s published by the special manager, the controlling shareholders in Slice are Shimon Goldberg, who holds 25%, and his two sons Assaf and Shai, who hold 13% each. The Tocatly family holds the remaining 49%.

In 2021, the two families took a further step in expanding their business when they set up Fair, a digital platform for comparing and investing in mutual funds without paying a direct commission. Fair’s business model is based on a distribution commission paid by the mutual funds companies, not from the customer.

Less than four years after entering the money management market with a bang, the result is certainly not what the Goldberg and Tocatly families would have wished: negative coverage almost daily in the financial press and media and de facto loss of management control of their provident funds company, which specializes in managing personal funds (IRA). They certainly would not have expected a situation in which the special manager appointed to Slice asks the court for approval for selling the funds to competitors, and even halts withdrawals of money by savers for six months (so far), and the filing of a complaint with the police against Slice by the Capital Markets, Insurance and Savings Authority.

A different world

At the end of last month, the special manager filed an affidavit in the court setting out his findings to date, among them errors in the calculation of returns on investment tracks, and failure to return in cash direct expenses overcharged to savers’ accounts. This was despite the fact that it declared that it had done so after the Capital Markets, Insurance and Savings Authority obliged it to return NIS 2 million to savers (Slice claims that the money in question was kept separately for the savers).

The special manager also found that for several years no reconciliation had been carried out between money received by the fund management company and investments, and that discrepancies amounted to millions of shekels.

In the examination by the special manager and the Capital Markets, Insurance and Savings Authority, the reason for the irregularities will of course be checked, and if management deficiencies are found, those who ran the company and served as company officers will be investigated. It should be made clear that if the reason for the irregularities turns out to be a lack of control, this will be a lighter kind of responsibility, but if damage was caused as a result of negligence, or worse, knowingly, the situation is liable to be different.

"I don’t know how far they took into account the repercussions of being a regulated entity that’s in the public domain and provides services directly to end customers and not just to stock exchange members, but it’s a completely different world," a capital market source says. "We’re talking about people who took fervent care to have no interaction with the media, and now they are being outed from anonymity because of what happened at Slice."

Goldberg family: We reported suspicions immediately

The Goldberg family said in a statement: "Shai Goldberg and his father Shimon Goldberg, who founded FMR, have invested and are investing all their efforts and experience in proving computing services through the company to the leading financial entities in the capital market. They have been doing that honestly and unimpeachably for nearly 50 years.

"When Shimon and Shai discovered the suspicions of deficiencies at provident fund company Slice, which operates in a different market from that of FMR, they immediately reported them to the relevant authorities and welcomed the appointment of the authorized manager. They will continue to cooperate with the authorized manager and his work, all with the aim of protecting the savers’ investments."

"Globes" approached Danny Tocatly, but no response was forthcoming.

Published by Globes, Israel business news - - on May 12, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

Assaf Goldberg and Danny Tocatly  credit: Gil Gibli
Assaf Goldberg and Danny Tocatly credit: Gil Gibli
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