Securities Authority: Mutual funds will be required to examine investment in bonds of foreign companies – the capital market

The Securities Authority will instruct mutual funds to begin examining bonds of foreign companies according to international ratings, and to stop examining them according to local ratings. This is due to the increase in issues and listing for trading of bonds by foreign companies with no affiliation to Israel.

This morning, the Authority issued a draft directive directing mutual funds to examine their investment policies in bonds of foreign companies with no affiliation to Israel. The rating adjustment is intended to match the composition of fund assets to the potential risk of bonds issued by companies with no affiliation to Israel, based on the global rating scale, as is customary in investing in bonds traded abroad.

The foreign companies are ranked by the Israeli rating companies according to a local scale and not according to a global scale. In other words, the rating reflects the credit risk assessment of a debtor in relation to all debtors in Israel only. Those bonds with no affiliation to Israel are ranked locally, despite their global characteristics and the risks associated with their activities. The majority of these companies were incorporated in the British Virgin Islands, (BVI companies) while their activities focused on the United States.

Chairman of the Securities Authority, Anat Guetta: “Capital market risk pricing is a basic condition for investment decisions. The Authority operates the tools at its disposal and one of them is the directive for mutual funds which states that they must address the global rating of foreign companies and take into account the potential risk level of bonds issued by said companies. The composition of their assets.

I expect capital market activists, including officers and board members, to act in accordance with their responsibilities and legal duty to the investing public. “Naturally, enforcing enforcement overseas is complex in relation to enforcement in Israel, and yet wherever it is appropriate, we will activate the enforcement arm of the authority.”