This document discusses proposed amendments to Israel's Securities Law regarding the regulation of trading platforms. It aims to close a loophole where Israeli trading platforms can offer services to overseas clients without regulation, allowing some platforms to engage in criminal activities like fraud. The proposed amendments would extend regulation to all platforms serving non-Israeli clients from Israel, to better protect overseas investors and improve Israel's reputation in international capital markets.

1. d
Memorandum
of
Law
Amendment
No.
XXXX
to
the
Securities
Law
5777-­‐2017
A.
Name
of
the
proposed
law
Memorandum
of
Securities
Law
(Amendment
No.
XXXX)(….)
5777-­‐2017
B.
Aim
of
and
need
for
the
proposed
law
Chapter
SEVEN
“C”
of
the
Securities
Law
5728-­‐1968
(hereinafter,
“the
Securities
Law”
or
“the
Law”)
concerns
the
regulation
of
"trading
platforms
to
their
own
account"
(hereinafter,
“Trading
Platforms”
or
“Platforms”).
A
Trading
Platform
is
defined
in
Section
44L
of
the
Law
as
a
computerized
system
through
which
a
person
trades
in
a
financial
instrument
with
his
clients
for
his
own
account,
and
also
a
computerized
system
that
enables
clients
to
trade
through
such
a
system.
Sections
44M
and
44O
prohibit
persons
from
managing
a
trading
platform
without
a
license
or
from
offering
to
trade
on
a
trading
platform
that
is
managed
by
someone
who
has
no
license
or
by
someone
who
is
not
exempt
from
the
requirement
to
obtain
a
license.
The
Law
and
the
Regulations
promulgated
under
it
determine
the
qualifications
for
a
trading
platform
license,
and
the
obligations
imposed
on
whoever
receives
a
said
license.
A
large
part
of
the
provisions
are
designed
to
address
the
conflict
of
interest
that
is
an
inherent
element
of
trading
platforms’
operations,
as
they
trade
with
their
clients.
For
example,
the
provisions
prohibit
platforms
from
granting
credit
to
clients,
provisions
that
define
the
permitted
level
of
leverage,
provisions
concerning
conflicts
of
interests
and
adapting
platform
activities
to
clients,
provisions
concerning
platforms’
marketing
and
advertising,
reporting
requirements
to
the
Israel
Securities
Authority
(hereinafter,
“the
ISA”)
and
the
public,
the
information
that
platforms
must
inform
their
clients,
and
provisions
on
how
to
handle
clients’
funds,
provisions
concerning
recording
of
trades,
retention
of
documents,
and
other
related
issues.
Like
all
other
activities
regulated
by
the
Securities
Law,
the
comprehensive
regulation
and
oversight
of
trading
platforms’
operations
is
designed
to
protect
the
investors
in
Israel,
and
therefore
the
territorial
application
of
the
prohibitions
prescribed
in
the
Law
concerning
management
of
platforms
without
a
license,
or
offering
to
trade
on
platforms
operated
by
someone
who
does
not
have
a
license,
refers
to
trading
platforms
that
operate
vis
a
vis
clients
in
Israel.
Consequently,
trading
platforms
are
subject
to
a
licensing
requirement
if
they
offer
access
to
clients
in
Israel,
whether
they
operate
from
Israel
or
outside
Israel.
The
foundation
of
this
principle
is
that
just
as
the
Securities
Law
in
Israel
protects
the
investors
in
Israel
and
applies
to
trading
platforms
that
offer
trading
activities
to
this
public,
other
countries
also
take
action
to
protect
the
investors
in
their
country
and
oversee
trading
platforms
that
operate
vis
a
vis
those
public,
whether
they
operate
in
or
outside
that
country.
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com
The
following
translation
is
intended
solely
for
the
convenience
of
the
reader.
This
translation
has
no
legal
status
and
although
every
effort
has
been
made
to
ensure
its
accuracy,
the
ISA
does
not
assume
any
responsibility
whatsoever
as
to
its
accuracy
and
is
not
bound
by
its
contents.
Only
the
original
Hebrew
text
is
binding
and
reader
is
advised
to
consult
the
authoritative
Hebrew
text
in
.all
matters
which
may
affect
them

2. This
situation
allows
trading
platforms
located
in
Israel
to
offer
overseas
clients
to
trade
in
various
financial
instruments
without
being
subject
to
ISA
regulation
or
supervision
as
long
as
they
deny
access
to
clients
in
Israel.
For
example,
the
ISA
decision
of
March
2016
—
which
states
that
trading
platform
licenses
will
not
be
issued
to
companies
that
offer
trading
in
binary
options
to
their
clients
—
is
relevant
only
to
trading
platforms
that
offer
access
to
the
public
in
Israel,
and
does
not
apply
to
Israeli
trading
platforms
that
deny
access
to
clients
in
Israel
while
offering
exclusively
to
clients
outside
Israel
to
trade
on
their
platforms,
and
therefore
the
licensing
requirement
does
not
apply
to
them.
Consequently,
the
ISA
and
other
enforcement
agencies
in
Israel
have
begun
to
receive
complaints
concerning
heavy
losses
of
clients
in
other
countries
resulting
from
the
trading
activities
on
Israeli
based
trading
platforms
that
operate
without
being
subject
to
regulation
or
oversight.
In
some
cases,
it
appeared
that
the
trading
activities
offered
on
those
trading
platforms
serve
to
camouflage
criminal
activities
such
as
activities
that
constitute
fraud
and
deception.
This
phenomenon
has
gained
momentum
and
its
current
proportions
are
causing
negative
publicity
that
reverberates
around
the
world,
which
causes
significant
damage
to
Israel’s
image
in
general,
and
to
the
Israeli
capital
market
in
particular.
In
order
to
assist
foreign
Securities
Agencies
that
encounter
activities
of
Israeli
based
trading
platforms,
the
ISA
takes
regular
action
to
assist
in
conducting
judicial
inquiries
and
transfer
information,
based
on
the
powers
granted
to
it
by
law.
Nonetheless,
in
view
of
the
grave
damage
to
Israel’s
image,
as
stated
above,
and
due
to
the
growing
prevalence
of
this
phenomenon,
an
amendment
to
the
law
on
this
matter
is
advised,
extending
the
ISA’s
enforcement
powers
also
to
trading
platforms
that
operate
in
Israel
yet
offer
trading
activities
to
clients
outside
Israel.
C.
Highlights
of
the
proposed
law
To
regulate
the
operations
of
trading
platforms
that
operate
in
Israel
and
offer
trading
activities
exclusively
to
clients
outside
Israel,
it
is
proposed
to
amend
Sections
44M
and
44O
of
the
Law,
to
determine
that
trading
platforms
in
Israel
may
offer
trading
activities
exclusively
to
clients
outside
Israel
only
if
the
person
or
company
holds
a
foreign
license
that
permits
them
to
operate
in
the
country
where
the
clients
are
located,
and
if
they
do
not
offer
to
trade
in
binary
options
or
other
financial
instruments
of
any
type
so
defined
by
the
Ministry
of
Finance,
based
on
the
ISA’s
recommendations
or
in
consultation
with
the
ISA
and
with
the
approval
of
the
Knesset
finance
committee.
In
this
manner,
trading
platforms
that
are
managed
in
Israel
and
operate
without
a
foreign
license
that
meets
the
requirements
of
the
Law,
will
be
prohibited
from
appealing
to
or
trading
with
clients
in
countries
where
managing
a
trading
platform
requires
no
license,
or
in
countries
where
the
trading
platform
does
not
hold
a
license
as
required
by
local
law,
and
will
be
prohibited
from
offering
their
clients
to
trade
in
binary
options
or
other
financial
instruments
that
are
so
determined
by
the
Minister
of
Finance.
It
is
proposed
to
extend
the
prohibition
on
trading
in
binary
options
also
to
trading
platforms
that
appeal
to
clients
in
Israel.
Although,
as
noted
above,
this
prohibition
is
already
in
effect
under
the
ISA’s
decision,
but
it
is
also
proposed
to
establish
it
in
the
Law.
It
is
proposed
that
the
criminal
and
administrative
sanctions
defined
in
the
Law
for
trading
platforms
that
appeal
to
clients
in
Israel
without
being
duly
licensed
or
in
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com

3. violation
of
the
terms
of
their
license,
apply
also
to
trading
platforms
that
appeal
to
clients
outside
Israel
in
violation
of
the
aforesaid
provisions
of
law,
and
platforms
that
offer
clients
to
trade
on
trading
platforms
in
a
manner
that
is
not
consistent
with
the
provisions
of
the
Law.
D.
Effect
on
the
State
budget
The
proposed
amendments
are
not
expected
to
have
any
impact
on
the
State
budget.
E.
Impact
on
administrative
aspects
and
manpower
The
ISA
will
require
additional
manpower
—
2
professional
full-­‐time
positions
—
to
perform
the
regulatory
and
enforcement
activities.
F.
Effect
of
the
proposed
law
on
existing
laws
Sections
44M
and
44O
and
53
of
the
Securities
Law
5728-­‐1968
shall
be
amended,
Schedule
Four
B
shall
be
added,
and
Schedule
Seven
to
the
Law
shall
be
amended.
G.
The
text
of
the
proposed
law
is
attached.
Government
Bill
Memorandum
of
Securities
Law
(Amendment
No.
XXXX)(….)
5777-­‐2017
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com

4. Amendment
to
S e c t i o n
44M
1. Securities
Law
5728-­‐1968
(hereinafter,
“the
Law”),
in
Section
44M
—
(a) The
following
will
appear
at
the
end
of
sub-­‐section
(a):
“and
he
does
not
offer
binary
options
or
other
financial
instruments
of
the
type
defined
by
the
Minister
of
Finance,
based
on
the
ISA’s
recommendation
or
in
consultation
with
the
ISA,
as
approved
by
the
Knesset
Finance
Committee;
For
this
purpose,
“binary
option”
is
a
financial
instrument
according
to
item
(4)
of
the
definition
of
“financial
instrument,”
the
receipts
and
payments
stemming
thereof
are
a
fixed
amount
or
a
fixed
proportion
of
an
amount
that
was
agreed
upon,
and
according
to
its
conditions
the
holder
of
the
option
is
entitled
to
receipts
if
a
certain
event
occurs
on
the
expiry
date.”
(b) The
following
will
appear
after
sub-­‐section
(a):
“(a1)
No
person
shall
manage
a
trading
platform
exclusively
for
clients
located
outside
Israel
unless
he
meets
the
following
conditions:
(1)
He
holds
a
foreign
license
that
permits
the
management
of
a
trading
platform
in
the
country
where
the
client
is
located;
(2)
He
does
not
offer
financial
instruments
of
the
type
stated
in
the
final
section
of
sub-­‐section
(a).
For
the
purpose
of
this
sub-­‐section
—
“Management
of
a
trading
platform”
includes
each
of
the
following:
(1)
Making
strategic
decisions
for
the
company
that
manages
the
trading
platform;
(2)
Operating
the
trading
platform,
including
through
computer
systems
and
computer
hardware,
customer
service
or
marketing
call
or
online
services,
directly
by
the
company
that
manages
the
trading
platform
or
through
whoever
renders
these
services
on
its
behalf;
“Foreign
license”
–
each
of
the
following:
(1)
A
trading
platform
license
duly
issued
according
to
any
of
the
laws
listed
in
the
Fourth
Addendum
B;
The
Minister
of
Finance
may,
in
consultation
with
the
ISA,
add
additional
laws
to
the
Fourth
Addendum
B,
by
ministerial
order;
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com

5. (2) A
license
that
is
comparable
to
a
trading
platform
license,
to
the
satisfaction
of
the
ISA,
and
was
duly
issued
according
to
a
law
that
sets
provisions
on
matters
listed
in
Sections
44M(b)(5)(a)
and
44CC(2),
(3),
(4),
and
(6).
Amendment
to
S e c t i o n
44O
2. In
Section
44O
of
the
Law,
the
text
shall
be
marked
(a)
and
shall
be
followed
by:
(b)
No
person
shall
offer
exclusively
to
another
person
outside
Israel,
to
trade
on
a
trading
platform,
unless
the
trading
platform
meets
the
conditions
set
forth
in
Section
44M(a1).
Amendment
to
Section
53
3. In
Section
53(b)
of
the
Law
—
(1)
In
paragraph
(6a),
instead
of
“in
violation
of
the
provisions
of
section
44M,”
the
following
will
appear:
“or
offer
binary
options
or
other
financial
instruments
of
the
type
defined
by
the
Minister
of
the
Finance,
in
violation
of
the
provisions
of
Section
44M(a),
or
managed
a
trading
platform
for
clients
outside
Israel
in
violation
of
the
provisions
of
Section
44M(a1)”;
(2)
In
paragraph
(6b)
the
words
“44O(a)
or
(b)”
shall
replace
the
words
“44O”.
Addendum
of
S c h e d u l e
Four
B
4. The
following
shall
appear
after
Schedule
Four
A
to
the
main
law:
“Schedule
Four
B
(Section
44M(a1)
1.
National
Laws
of
the
European
Union
countries
that
implement
Directive
2004/39EC
of
the
European
Parliament
and
of
the
Council
of
April
21,
2004
on
markets
in
financial
instruments,
or
Directive
2014/65/EU
of
the
European
Parliament
and
of
the
Council
of
May
15,
2014
on
markets
in
financial
instruments,
as
amended
from
time
to
time,
all
pursuant
to
the
decision
of
the
competent
legislative
bodies
of
the
European
Union.
2.
The
Securities
Exchange
Act
of
1934
or
the
Commodity
Exchange
Act
of
1936
as
amended
from
time
to
time
by
a
resolution
of
the
competent
legislative
bodies
of
the
United
States
of
America.
Amendment
to
Schedule
Seven
5. In
Part
Three
to
Schedule
Seven
to
the
main
law
—
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com

6. (1)
In
item
(5),
instead
of
“in
violation
of
the
provisions
of
section
44M”,
the
following
shall
appear:
“or
offered
a
binary
option
or
another
financial
instruments
of
the
type
determined
by
the
Minister
of
Finance,
in
violation
of
the
provisions
of
Section
44M(a)
or
managed
a
trading
platform
for
clients
outside
Israel
in
violation
of
the
provisions
of
Section
44M(a1).
(2)
The
following
will
appear
after
litem
(5):
"(5a)
offered
a
client
outside
Israel
to
trade
on
a
trading
platform
in
violation
of
the
provisions
of
Section
44O(b)”;
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com

7. Explanation
General
Chapter
Seven
C
concerning
the
regulation
of
the
operations
of
trading
platforms
to
their
own
accounts
(hereinafter,
“Trading
Platforms”
or
“Platforms”)
was
added
to
the
Securities
Law
5728-­‐1968
(hereinafter,
“the
Securities
Law”
or
“the
Law”)
as
part
of
Amendment
no.
42
to
the
Securities
Law
in
2010.
This
amendment
came
into
effect
on
May
26,
2015,
when
the
Securities
Regulations
(Trading
Platform
to
its
Own
Account)
5775-­‐2014
came
into
effect
(hereinafter,
“the
Regulations”).
Section
44L
of
the
Law
defines
platforms
as
computerized
systems
through
which
a
person
trades
in
financial
instruments
with
clients,
for
his
own
account,
and
computerized
systems
that
enable
clients
to
trade
through
such
systems.
Sections
44M
and
44O
of
the
Law
prohibit
persons
from
managing
a
trading
platform
without
a
license
or
from
offering
others
to
trade
on
a
platform
that
is
managed
by
someone
who
does
not
hold
a
license
or
who
is
not
exempt
from
the
licensing
requirement.
The
Law
and
the
Regulations
determine
the
qualifications
for
a
trading
platform
license,
and
the
obligations
imposed
on
anyone
who
receives
a
said
license.
A
large
part
of
the
provisions
are
designed
to
address
the
conflict
of
interest
that
is
an
inherent
element
of
trading
platforms’
operations,
as
they
trade
with
their
clients.
For
example,
the
Law
and
the
Regulations
contain
provisions
that
prohibit
platforms
from
granting
credit
to
clients,
provisions
that
define
the
permitted
level
of
leverage,
provisions
concerning
conflicts
of
interests,
provisions
concerning
adapting
platform
activities
to
clients,
provisions
concerning
platforms’
marketing
and
advertising,
provisions
in
the
matter
of
reporting
requirements
to
the
Israel
Securities
Authority
(hereinafter,
“the
ISA”)
and
the
public,
provisions
concerning
the
information
that
platforms
must
convey
to
their
clients,
and
provisions
on
how
to
handle
clients’
funds,
provisions
concerning
recording
of
trades,
retention
of
documents,
and
other
related
issues.
Like
all
other
activities
regulated
by
the
Securities
Law,
the
comprehensive
regulation
and
oversight
of
the
operations
of
trading
platforms
is
designed
to
protect
the
investors
in
Israel,
and
therefore
the
territorial
application
of
the
prohibitions
prescribed
in
the
Law
concerning
management
of
platforms
without
a
license,
or
offering
to
trade
on
platforms
operated
by
someone
who
does
not
have
a
license,
refers
to
trading
platforms
that
operate
vis
a
vis
clients
in
Israel.
Consequently,
trading
platforms
are
subject
to
a
licensing
requirement
if
they
offer
access
to
clients
in
Israel,
whether
they
operate
from
Israel
or
outside
Israel.
The
foundation
of
this
principle
is
that
just
as
the
Securities
Law
in
Israel
protects
the
investors
in
Israel
and
applies
to
trading
platforms
that
offer
to
trade
to
this
public,
other
countries
also
take
action
to
protect
the
investors
in
their
country
and
oversee
trading
platforms
that
operate
vis
a
vis
those
public,
whether
they
operate
in
or
outside
that
country.
This
situation
allows
trading
platforms
located
in
Israel
to
offer
overseas
clients
to
trade
in
various
financial
instruments
without
being
subject
to
the
ISA’s
regulation
or
supervision
as
long
as
they
deny
access
to
clients
in
Israel.
For
example,
the
ISA
decision
of
March
2016
—
which
states
that
trading
platform
licenses
will
not
be
issued
to
companies
that
offer
trading
in
binary
options
to
their
clients
—
is
relevant
only
to
trading
platforms
that
offer
access
to
the
public
in
Israel,
and
does
not
apply
to
Israeli
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com

8. trading
platforms
that
deny
access
to
clients
in
Israel
and
offer
exclusively
to
clients
outside
Israel
to
trade
on
their
platforms,
and
therefore
the
licensing
requirement
does
not
apply
to
them.
Consequently,
the
ISA
and
other
enforcement
agencies
in
Israel
have
begun
to
receive
complaints
concerning
heavy
losses
of
clients
from
other
countries
resulting
from
the
trading
activities
on
Israeli
based
trading
platforms
that
operate
without
being
subject
to
regulation
or
oversight.
In
some
cases,
it
appeared
that
the
trading
activities
offered
on
those
trading
platforms
even
serve
to
camouflage
criminal
activities
such
as
activities
that
constitute
fraud
and
deception.
This
phenomenon
has
gained
momentum
and
its
current
proportions
are
creating
negative
publicity
that
reverberates
around
the
world,
which
causes
significant
damage
to
Israel’s
image
in
general,
and
to
the
Israeli
capital
market
in
particular.
In
response
to
the
requests
of
foreign
Securities
Agencies
that
encounter
activities
of
Israeli
based
trading
platforms,
and
in
order
to
assist
them,
the
ISA
regularly
takes
action
to
assist
in
judicial
inquiries
and
in
transferring
information,
based
on
the
powers
granted
to
it
by
law.
Nonetheless,
in
view
of
the
grave
damage
to
Israel’s
image,
as
stated
above,
and
due
to
the
growing
prevalence
of
this
phenomenon,
an
amendment
to
the
law
on
this
matter
is
proposed,
to
extend
the
ISA’s
enforcement
powers
also
to
trading
platforms
that
operate
in
Israel
yet
offer
trading
activities
to
clients
outside
Israel.
Section
1
Amendment
to
Section
44M
Section
44M
of
the
Law
provides
that
no
person
shall
operate
a
trading
platform
unless
he
holds
a
platform
license
and
conforms
to
the
conditions
of
the
license.
It
is
proposed
to
amend
Section
44M
to
the
effect
that
sub-­‐section
(a)
prohibits
platforms
from
offering
financial
instruments
of
the
binary
option
type
or
other
financial
instruments
of
any
type
so
defined
by
the
Minister
of
Finance,
according
to
the
ISA’s
recommendation
or
in
consultation
with
the
ISA,
as
approved
by
the
Knesset
Finance
Committee.
Although
this
prohibition
already
exists
under
the
ISA
decision,
but
it
is
proposed
to
be
established
in
the
Law,
without
detracting
from
the
ISA’s
authority
under
Section
44M(d)
of
the
Law.
On
this
matter,
it
is
proposed
to
define
“a
binary
option”
and
determine
that
it
is
a
derivative
financial
instrument,
in
line
with
item
(4)
of
the
definition
of
a
"financial
instrument”
that
appears
in
Section
44L
of
the
Law
(an
agreement
or
arrangement,
the
value
of
which
is
derived
from
the
value
of
the
currencies,
commodities,
interest
rates,
exchanges
rates,
indices,
or
other
financial
instruments),
the
receipts
and
payments
stemming
thereof
are
a
fixed
amount
or
a
fixed
proportion
of
an
agreed-­‐upon
amount,
and
which
entitles
the
holder
of
the
financial
instrument,
according
to
its
terms,
to
receipts
upon
the
occurrence
of
a
specific
event
on
the
expiry
date.
A
binary
option
is
a
financial
instrument
which
belongs
typically
to
the
options
type.
Typical
binary
options
entitle
the
holder
to
receive
a
pre-­‐determined
amount
on
the
expiry
date
if
a
specific
event
occurs,
or
entitles
him
to
receive
nothing
if
the
said
event
does
not
occur
—
which
is
the
source
of
the
name
of
the
option
(these
options
are
also
known
as
"digital
options"
or
"all-­‐or-­‐nothing
options").
Trading
in
binary
options
on
trading
platforms
is
characterized
by
insufficient
information,
which
impairs
an
investor’s
ability
to
make
an
informed
decision.
In
view
of
this
fact
and
the
similarity
between
the
cash
flows
of
binary
options
and
the
results
of
a
coin
toss,
in
March
2016
by
the
power
vested
in
it
in
Section
44M(d)
of
the
Law,
the
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com

9. ISA
decided
to
prohibit
trading
platforms
that
submitted
applications
for
a
license
as
the
law
requires,
from
trading
in
binary
options.
Among
its
reasons,
the
ISA
noted
that
the
complexity
of
binary
options
and
the
challenges
in
pricing
them
on
the
one
hand,
and
the
absence
of
a
multilateral
market
that
creates
a
market
price
on
the
other
hand,
do
not
allow
the
ISA
to
approve
trading
in
binary
options
on
trading
platforms.
The
ISA
also
noted
in
its
reasons
that
due
to
the
features
of
binary
options
and
the
features
of
trading
platforms,
the
continued
activity
on
trading
platforms
involving
binary
options
could
not
only
harm
platform
clients,
but
also
damage
the
reputation
of
the
entire
market.
In
this
manner,
the
Law
will
prohibit
trading
platforms
that
operate
vis
a
vis
clients
in
Israel
from
offering
their
clients
trades
in
binary
options
or
other
financial
instruments
of
such
types
as
the
Minister
of
Finance
determines,
due
to
their
destructive
potential.
Although,
as
noted
above,
the
ISA
already
decided
in
March
2016
to
prohibit
trading
platforms
that
submitted
an
application
for
a
trading
license
as
required
by
the
Law,
from
trading
in
binary
options,
by
the
power
vested
in
it
in
Section
44M(d)
of
the
Law,
yet
it
is
proposed
to
establish
this
prohibition
in
the
Law
itself.
It
should
be
stressed
that
this
amendment
does
not
detract
from
the
ISA’s
authority
to
define
the
types
of
financial
instruments
in
which
licensed
trading
platforms
may
trade,
as
stated
in
that
Section.
Since
it
is
impossible
to
foresee
all
possible
scenarios
in
advance,
and
since
new
types
of
financial
instruments
with
similar
destructive
potential
may
be
offered
in
the
future,
it
is
proposed
to
authorize
the
Minister
of
Finance
to
extend
the
list
of
financial
instruments
prohibited
for
trades
on
trading
platforms,
according
to
the
ISA’s
suggestion
or
in
consultation
with
the
ISA.
Furthermore,
it
is
also
proposed
to
add
sub-­‐section
(a1)
to
Section
44M,
which
will
define
a
corresponding
prohibition
on
managing
Trading
Platforms
that
trade
exclusively
with
clients
outside
Israel,
unless
the
following
two
conditions
are
obtained:
.1The
trading
platform
holds
a
foreign
license
that
permits
it
to
manage
a
trading
platform
in
the
country
where
the
client
is
located.
It
should
be
noted
that
the
proposed
prohibition
will
also
apply
to
trading
platforms
operating
in
a
foreign
country
that
has
no
licensing
requirement
for
such
activities
under
the
law.
.2The
trading
platform
does
not
offer
its
clients
to
trade
in
financial
instruments
of
the
type
noted
at
the
end
of
sub-­‐section
(a),
as
proposed
above.
In
view
of
the
features
of
binary
options
and
trading
in
binary
options,
as
described
above,
they
may
serve
as
fertile
grounds
for
activities
that
are
damaging
to
clients.
Therefore
it
is
proposed
to
prohibit
trading
platforms
from
offering
financial
instruments
of
the
binary
option
type
even
when
they
operate
exclusively
vis
a
vis
overseas
clients
and
are
therefore
not
subject
to
a
licensing
requirement
in
Israel.
It
is
important
to
note
that
other
countries
such
as
Belgium
and
the
United
States
have
applied
various
restrictions
on
binary
option
trading,
and
additional
countries
are
considering
similar
restrictions.
Therefore
it
is
proposed
to
extend
the
prohibition
of
offering
clients
to
trade
in
binary
option
or
in
other
financial
instruments
as
determined
by
the
Minister
of
Finance,
according
to
the
ISA’s
recommendation
or
in
consultation
with
the
ISA,
as
proposed
above,
which
applies
to
trading
platforms
that
offer
trading
to
clients
in
Israel,
also
to
trading
platforms
that
offer
trading
exclusively
to
clients
outside
Israel.
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com

10. In
the
matter
of
this
sub-­‐section,
it
is
proposed
to
define
the
terms
“trading
platform
management”
and
“foreign
license.”
Regarding
the
term
“trading
platform
management,”
it
is
proposed
to
determine
that
any
connection
of
a
platform’s
operations
to
Israel
will
be
considered
management
of
a
trading
platform
in
Israel.
For
this
purpose
it
is
proposed
to
determine
that
any
of
the
following
activities
constitutes
management
of
a
trading
platform
which
requires
a
license
as
described
above:
.1the
company’s
strategic
decision
making;
.2the
trading
platform
is
operated,
including
by
computer
equipment,
information,
and
software,
or
by
online
or
human
service
or
marketing
call
centers,
directly
by
the
company
that
manages
the
trading
platform
or
any
party
that
renders
such
services
on
its
behalf.
In
the
matter
of
“foreign
license,”
it
is
proposed
to
define
that
a
foreign
license
is
each
of
the
following:
.1A
trading
platform
license
issued
according
to
the
laws
listed
in
Schedule
Four
B.
It
is
further
proposed
to
authorize
the
Minister
of
Finance,
to
add
additional
laws
to
Schedule
Four
B,
in
consultation
with
the
ISA.
.2A
license
that
is
comparable
to
the
trading
platform
license,
as
determined
by
the
ISA,
and
is
issued
by
a
law
that
defines
provisions
on
the
matters
listed
in
Sections
44M(b)(5)(a)
of
the
Law
(Provisions
in
the
matter
of
equity,
liquid
assets,
and
deposits)
and
Section
44CC(2)
of
the
Law
(prevention
of
conflicts
of
interest
between
a
company
holding
a
platform
license,
its
employees,
service
providers
acting
on
its
behalf,
its
controlling
owner,
and
its
clients),
Section
44CC(3)
of
the
Law
(handling
clients’
funds),
Section
44CC(4)
of
the
Law
(information
that
the
company
must
convey
to
its
clients,
including
information
concerning
the
trading
platform,
the
financial
instruments
traded
on
it
and
their
prices,
and
related
transactions)
and
Section
44CC(6)
of
the
Law
(the
company’s
obligation
to
examine
the
activities’
compatibility
with
the
client,
including
the
client’s
comprehension
of
the
risks
and
chances
that
his
activities
on
the
platform
entail).
For
Section
2
Amendment
to
Section
44O
Section
44O
provides
that
no
person
shall
propose
to
another
to
trade
on
a
trading
platform
unless
the
company
that
operates
the
trading
platform
has
a
platform
license.
It
is
proposed
to
mark
this
as
(a)
and
add
a
sub-­‐section
(b)
that
provides
that
no
person
shall
propose
to
another
person
outside
Israel
to
trade
on
a
trading
platform
unless
he
meets
the
conditions
set
forth
in
Section
44M(a1),
as
proposed
above.
It
should
also
be
noted
here,
in
line
with
the
explanation
for
the
amendment
to
Section
44M,
that
the
proposed
prohibition
should
apply
even
if
there
is
no
licensing
requirement
in
the
foreign
country.
For
Sections
3-­‐5
Amendment
to
Section
53,
addition
of
Schedule
Four
B
to
the
Law
and
amendment
to
Schedule
Seven
to
the
Law
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com

11. Section
53(b)
of
the
Law
defines
the
criminal
offenses
that
will
be
subject
to
a
sentence
of
two
years
imprisonment
or
a
fine
equal
to
two
and
one
half
times
the
fine
stated
in
Section
61(a)(4)
of
the
Penal
Law
5737-­‐1977.
If
the
offender
is
a
corporation,
said
fine
is
doubled
twelve
and
one
half
times.
The
offenses
listed
in
this
Section
include
the
offense
of
managing
a
trading
platform
without
a
license
or
in
violation
of
the
terms
of
the
license
(paragraph
(6a)
of
the
above
Section)
and
offering
others
to
trade
on
a
trading
platform
in
violation
of
Section
44O
of
the
Law
(paragraph
(6b)
of
the
above
Section).
Paragraph
3
proposes
to
also
add
to
said
criminal
offenses
in
Section
3
the
prohibitions
proposed
in
the
Memorandum
of
Law,
that
is,
offering
others
to
trade
in
binary
options
or
other
financial
instruments
determined
by
the
Minister
of
Finance;
management
of
a
trading
platform
for
clients
outside
Israel
in
violation
of
the
provisions
of
Section
44M(a1)
of
the
Law,
in
the
format
proposed
in
Section
1
of
this
Law;
and
offering
others
to
trade
on
a
trading
platform
in
violation
of
the
provisions
of
Section
44O(b)
of
the
Law,
in
the
format
proposed
in
section
2
of
this
Law.
Nothing
in
the
above
shall
prevent
the
enforcement
of
other
criminal
offenses
committed
as
part
of
activities
to
operate
a
trading
platform.
Paragraph
4
proposes
to
add
Schedule
Four
B
after
Schedule
Four
A
to
the
main
Law,
which
will
list
the
foreign
laws
under
which
a
trading
platform
license
may
be
obtained
and
be
recognized
as
a
“foreign
license”
according
to
the
definition
proposed
in
Section
44M(a1)
of
the
Law,
as
stated
above.
In
this
list
of
laws
it
is
proposed
to
state
the
laws
of
the
members
of
the
European
Union
that
implement
Directive
2004/39EC
of
the
European
Parliament
and
of
the
Council
of
April
21,
2004
on
markets
in
financial
instruments,
or
of
Directive
2014/65/EU
of
the
European
Parliament
and
of
the
Council
of
May
15,
2014
on
markets
in
financial
instruments,
as
amended
from
time
to
time,
all
pursuant
to
the
decision
of
the
competent
legislative
bodies
of
the
European
Union,
and
the
Securities
Exchange
Act
of
1934
or
the
Commodity
Exchange
Act
of
1936
as
amended
from
time
to
time
by
the
legislative
bodies
of
the
United
States
of
America.
In
paragraph
5,
it
is
proposed
to
add
to
Part
Three
of
Schedule
Seven
to
the
Law,
which
provides
the
list
of
administrative
offenses
in
respect
of
which
an
offender
may
be
subject
to
administrative
prosecution
before
the
administrative
enforcement
committee,
the
administrative
offense
of
the
provisions
of
Sections
44M
(a),
44M(a1)
and
44O(b)
of
the
Law,
in
the
format
proposed
in
Sections
1-­‐2
of
this
Law.
Memorandum of Securities Law – Translated and Provided by ISA for publishing on AtoZForex.com