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Supervisor of Banks Daniel Hahiashvili: “In recent years, there have been many changes in the financial world that also impact the compensation and fee models in the capital market. As a result, there is a need to examine the collection mechanisms that were established years ago in a different economic reality, and to assess whether they are suitable for the types of services and the nature of customer activities. The public call that we published today, in collaboration with the Budget Department of the Ministry of Finance and the Israel Securities Authority, is another step towards formulating a policy that will increase transparency in service pricing for customers, while promoting a competitive environment and making the capital market more accessible to the general public.”
Israel Securities Authority Chairman Effi Zinger: “The Bank of Israel, the Budget Department of the Ministry of Finance, and the Israel Securities Authority have issued a call for public participation in a thorough examination of the existing compensation and fee models related to the management of securities portfolios. The aim is to develop a comprehensive solution within the framework of a joint working group that will benefit all customers and market participants. Two decades after the Bachar Committee and the evolution of the financial market, the current reality requires us to ask whether the existing compensation and fee models align with the services provided to customers and ensure a competitive and transparent environment.”
Budget Director Yogev Gradus: “Further to the many steps being taken to increase competition in the banking system, a joint team, including the Budget Department of the Ministry of Finance, the Bank of Israel, and the Israel Securities Authority, is working to formulate a fees model for public activities in the capital market. Our goal is to create a uniform model that will provide certainty regarding the total fees involved in capital market activities, improve the ability to compare different value propositions, and consequently increase customers' bargaining power. Now, as part of the team's work, we are issuing a call for the market and its customers to participate in shaping the model.”
An interministerial team, including the Bank of Israel, the Israel Securities Authority, and the Budget Department of the Ministry of Finance, today issued a call for public feedback regarding possible changes in the fee and compensation structure for public activities in securities. This initiative is intended to increase transparency, promote competition, and improve services for customers operating in the capital market.
The team, established in February 2024 following a discussion in the Knesset Economics Committee, identified several key challenges in the current situation: difficulty in comparing costs between different service providers due to variations in fee structures, limited accessibility to investment advisory services, and a lack of alignment between the services provided and the payment for them.
In its work, the team defined four main principles that will form the basis of the planned reform:
- Promoting competition through simple and clear cost models that will improve the ability to compare different service providers and enable optimal pricing by the customer.
- Creating alignment between the actual service provided and the compensation for it.
- Standardizing similar products and increasing the transparency of pricing models to enhance customer transparency and reduce potential conflicts of interest.
- Increasing the capital market’s accessibility to the public through professional and licensed financial intermediaries by creating incentives for the provision of advisory services, maintaining and strengthening existing frameworks, and creating the infrastructure for new business models for intermediation by licensed investment advisors or marketers.
As part of the public call, the team seeks public feedback on various issues derived from these principles, including the structure of securities deposit management fees, differentiation between products with regard to purchase and sale commissions, compensation models for investment advisory services, distribution fees in mutual funds, costs charged by financial asset manufacturers, and the possibility of creating structured investment tracks at a fixed cost for investors.
The joint team aims to formulate a comprehensive proposal that addresses the main challenges in the compensation mechanisms for activities in the Israeli capital market. The thorough examination of the fee and compensation model is intended to increase transparency for customers, streamline the incentive system in the market, and improve competition among service providers for the benefit of the investing public. This will be done while maintaining market stability and ensuring its continued development for the benefit of all participants—investors, institutional bodies, and licensed investment intermediaries. The public is invited to submit feedback until December 27, 2024. Feedback can be sent to the following email addresses:
Pikuah_directive_drafts@boi.org.il
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