Securities Disputes in Israel

The Israeli securities market has experienced substantial growth over the past several years, making it an attractive destination for both local and international investors. With this growth, however, comes an increased potential for disputes between parties involved in securities transactions. In this article, we will explore the legal landscape of securities disputes in Israel, delving into the key laws and regulations that govern this area and providing a thorough understanding of the mechanisms available for resolving these disputes.

Legal Framework for Securities Regulation in Israel.

Securities Law, 1968.

The primary law governing securities in Israel is the Securities Law, 1968. This comprehensive piece of legislation outlines the rules and regulations pertaining to the issuance, registration, and trading of securities in Israel. The law aims to protect the interests of investors and maintain the integrity of the securities market.

Israeli Securities Authority.

The Israeli Securities Authority (ISA) is the primary regulatory body responsible for overseeing the securities market in Israel. Established under the Securities Law, the ISA is tasked with enforcing the provisions of the law, issuing regulations and guidelines, and ensuring compliance by market participants.

Companies Law, 1999.

The Companies Law, 1999, is another crucial piece of legislation that has a significant bearing on securities disputes. The law governs the establishment and operation of companies in Israel, including provisions related to corporate governance, shareholders’ rights, and disclosure requirements.

Rules and Regulations Issued by the Tel Aviv Stock Exchange.

The Tel Aviv Stock Exchange (TASE) is the primary stock exchange in Israel. It has issued various rules and regulations that govern the listing and trading of securities on the exchange. Compliance with these rules is crucial for companies listed on the TASE, and breaches may lead to securities disputes.

Types of Securities Disputes.

Insider Trading.

Insider trading is a major type of securities dispute in Israel, as it is in many other jurisdictions. The Securities Law prohibits individuals with access to non-public, material information from trading securities based on that information or disclose it to others. Violations of insider trading laws can lead to severe penalties, including imprisonment and fines.

Market Manipulation.

Market manipulation is another common form of securities dispute in Israel. Market manipulation occurs when an individual or entity intentionally manipulates the price or trading volume of a security to create a false or misleading impression of the market. This practice is strictly prohibited under the Securities Law.

Disclosure Violations.

Companies listed on the TASE are required to make periodic disclosures to the public, including financial statements and material information about the company’s operations. Failure to make timely and accurate disclosures can lead to securities disputes, as investors may claim that they were misled or deprived of the material information necessary to make informed investment decisions.

Shareholder Disputes.

Shareholder disputes are another prevalent type of securities dispute in Israel. These disputes typically arise from disagreements between shareholders regarding the management and operation of the company, the exercise of shareholder rights, or the distribution of profits. The Companies Law and the company’s articles of association often serve as the basis for resolving these disputes.

Mechanisms for Resolving Securities Disputes.

Litigation.

Litigation is the most common method of resolving securities disputes in Israel. Parties can bring a lawsuit before the civil courts, which have jurisdiction to hear securities disputes. The Israeli court system comprises three levels: Magistrate Courts, District Courts, and the Supreme Court. Depending on the nature and value of the dispute, a case may be heard in either the Magistrate or District Court, with the possibility of appealing to the Supreme Court.

Arbitration.

Arbitration is an alternative dispute resolution (ADR) mechanism that is gaining popularity in Israel for resolving securities disputes. Parties can agree to submit their disputes to a neutral arbitrator, who will render a binding decision after reviewing the evidence and hearing the parties arguments. Arbitration can be a faster and more cost-effective alternative to litigation, particularly for complex securities disputes. The Israeli Arbitration Law, 1968, governs the arbitration process in Israel and sets forth the requirements for the enforceability of arbitration agreements and awards.

Mediation.

Mediation is another ADR mechanism that parties may choose to resolve their securities disputes. In mediation, a neutral third party, the mediator, assists the parties in reaching a mutually agreeable resolution. Mediation can be particularly beneficial in shareholder disputes, where maintaining ongoing business relationships is often a priority. While mediation is not binding unless the parties reach an agreement, it offers a flexible and confidential process that can help preserve relationships and avoid the expense of litigation.

Regulatory Enforcement Actions.

The ISA has the authority to initiate enforcement actions against individuals and entities who violate securities laws. These actions can result in a range of penalties, including fines, disgorgement of profits, and even imprisonment in severe cases. Regulatory enforcement actions serve as a deterrent for potential wrongdoers and help maintain the integrity of the Israeli securities market.

Key Considerations in Securities Disputes.

Choice of Law and Jurisdiction.

In cross-border securities disputes involving parties from different jurisdictions, the choice of law and jurisdiction can have a significant impact on the outcome of the case. Parties should carefully consider the implications of their choice of law and jurisdiction, taking into account factors such as the enforceability of judgments and the procedural rules of the chosen forum.

Statute of Limitations.

Securities disputes in Israel are subject to a statute of limitations, which sets forth the time frame within which parties must bring their claims. Under the Israeli Civil Wrongs Ordinance, the general statute of limitations for civil claims is seven years from the date the cause of action accrued. However, specific statutes of limitations may apply to certain types of securities disputes, such as insider trading or market manipulation.

Class Actions.

Class action lawsuits are increasingly common in Israel, particularly in the context of securities disputes. The Israeli Class Action Law, 2006, allows multiple plaintiffs with similar claims against a common defendant to join together and pursue their claims collectively. This can be particularly advantageous for individual investors who may not have the resources to pursue a claim independently.

Conclusion.

Securities disputes in Israel can be complex and challenging, requiring a thorough understanding of the legal landscape and the various mechanisms available for resolving these disputes. By familiarizing themselves with the relevant laws and regulations, as well as the intricacies of the Israeli court system and ADR options, parties involved in securities disputes can better protect their interests and achieve the most favorable outcomes. As the Israeli securities market continues to grow and evolve, it is essential for investors, issuers, and other market participants to remain vigilant and well-informed about their rights and obligations under the law.

Eli Shimony – Israeli Corporate Attorneys represent clients on all legal matters in Israel. For any questions please contact us and we will be happy to assist.
By email: [email protected], By phone: +972-52-2769773, +972-3-5507155.
The above is only general information and does not replace legal advice which is usually necessary before taking legal proceedings.