Israel Securities Authority chairperson Anat Guetta, who told "Globes" that she wanted to attract more foreign investors to the Tel Aviv Stock Exchange (TASE) and hailed the arrangement between the TASE and the Singapore Exchange, yesterday published draft regulations enabling TASE-listed companies to switch to English for their reporting. "Giving listed companies in Israel the option to report in English would seem to be in line with prevailing practice in international markets, and will make the local capital market more accessible to foreign companies and international investors," Guetta said.
The Securities Authority explains, "The option to report in English is designed above all to connect the Israeli market to the international arena… Important developed markets in the world allow reporting in English instead of the original language, even when it is not the native language of the companies' existing investors."
The Securities Authority therefore proposes applying the rule in general, although it also proposed separate rules for new companies offering their shares and already-listed companies. The new situation will apply to new companies from the beginning, with their reporting language being determined in their prospectus, while a language switch for existing public companies will be contingent on "approval by the company's board of directors and a meeting of holders of all types of the company's securities by a majority that does not include its controlling shareholders."
"Dual-listed companies were legally excepted"
"At present, except for dual-listed and high-tech companies, the binding reporting for corporations reporting in Israel is reporting in Hebrew," the Securities Authority said.
There are currently 60 dual-listed companies on the TASE. The dual-listing arrangement on the TASE includes stock exchanges in the US, the London Stock Exchange, the Singapore Exchange, the Hong Kong Stock Exchange, and the Toronto Stock Exchange. In addition, there are high-tech companies of which the Securities Authority says, "From their first day, they typically aim at the global market in both regulatory approvals and future financing, merger or sale of the company, and in a future offering on Nasdaq, known as an attractive stock exchange for high-tech companies. The product market for many high-tech companies is also a global market, and in many cases they therefore open overseas branches at relatively early stages in their activity. In view of this pattern, almost all of these companies conduct their business in English."
In this context, the Securities Authority notes, "The Securities Authority is striving to obtain 'reverse' recognition of Israeli law from foreign regulators that will enable Israeli companies to be traded on foreign markets on the basis of Israeli disclosure and reporting rules. Such arrangements will assist development of the Israeli capital market in the international arena, while enhancing the presence of both Israeli and foreign international companies on the TASE." The Securities Authority adds, "This process can naturally be expected to also increase the number of companies reporting in English, as is necessary in the case of dual-listed companies."
At the same time, the Securities Authority is aware that "A decision to change the reporting language is likely to have important consequences, especially for investors, which should be addressed," among other things, "among the various parties involved in preparing or reading the reports, such as law firms, accountancy firms, underwriters, investors, investment institutions, etc. " The Securities Authority adds, "Another argument that arose is a degree of concern that reporting in English, when it is not the investors' native language, can be misused, so that difficult-to-understand or complicated descriptions will make it possible to blur significant information or conceal it from investors."
Published by Globes, Israel business news - en.globes.co.il - on December 10, 2018
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