For the first time in 50 years: The Israel Securities Authority approves the 'deal permit''

June Green
April 19, 2016   
For the first time since the ISA was established, a staff position has been published that will allow bond buyers to enter into a transaction permit document with them without fear of interest. Chairman of the Securities Authority • The Securities Authority proposes to establish a dedicated website
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The Israel Securities Authority is publishing today (Tuesday) for the first time a staff position regarding a permit for a transaction to invest in bonds, which enables and regulates the existence of the permit, with the aim of allowing the observant public to purchase bonds, without fear of the prohibition of interest. This is the Authority's first reference to the issue since it was established about 50 years ago. According to the position published by the Authority, signed by Attorney Meir Levin and Attorney and CPA Yaakov Yudkowitz, companies will now be able to allow bond purchasers who wish to do so to enter into a transaction permit document directly with them, which will allow bond investors to avoid the fear of interest on the one hand and will not harm other investors who do not want this on the other.  The authority's position states: ""The staff hereby announces that there is no impediment for the corporation to offer the holders to enter into the separate agreement as aforesaid and to enter into this agreement with any holder who so desires. This is provided that the separate agreement determines that its validity will be solely in relation to the holders who entered into it with the company and in relation to the period during which they will hold the debentures, and that its implementation will be carried out directly between these holders and the corporation without the trustee for the holders of the debentures intervening in it.". The Authority added that the solution they published was not intended to cancel or impair the validity of other solutions currently implemented by certain companies. As a practical proposal for implementing the Authority's position on bonds of many companies, the Securities Authority proposes to establish a dedicated website, through which bond investors will be able to obtain a transaction permit agreement for the bonds of a single company or for the bonds of many companies that they wish to participate in. According to the transaction permit, which first appears in the scriptures during the period of the first, the borrower and lender agree that half of the amount will be used as an interest-free loan and the other half will be used as a deposit for a joint investment that carries a certain minimum return at the interest rate. In order to avoid a situation in which the lender loses his money in the event of the failure of the transaction for which the loan was given, the permit document includes strict rules for proving the loss, which include a strict oath. Prof. Shmuel Hauser, Chairman of the Israel Securities Authority, welcomed the move: "The corporate bond market is one of the most prominent investment avenues in the Israeli capital market, but it is inaccessible to a significant portion of the observant public in Israel and around the world. This situation harms both that public and the issuing companies. The publication of the position is therefore expected to benefit both the companies that will make use of the mechanism described in the position and the public that will have additional investment avenues open to them.".   For the first time in 50 years: The Israel Securities Authority approves the “deal permit”

The Israel Securities Authority is publishing today (Tuesday) for the first time a staff position regarding a permit for a transaction to invest in bonds, which allows and regulates the existence of the permit with the aim of allowing the observant public to purchase bonds without fear of the prohibition of interest. This is the Authority's first comment on the issue since it was established about 50 years ago.
According to the position published by the Authority, signed by Attorney Meir Levin and Attorney and CPA Yaakov Yudkowitz, companies will now be able to allow bond purchasers who wish to do so to enter into a transaction permit document directly with them, which will allow bond investors to avoid the fear of interest on the one hand and will not harm other investors who do not want this on the other. 
“The staff hereby announces that there is no obstacle for the corporation to offer the holders to enter into the separate agreement as aforesaid and to enter into this agreement with any holder who so desires. This is provided that the separate agreement determines that its validity will be solely in relation to the holders who entered into it with the company and in relation to the period in which they will hold the bonds, and that its implementation will be carried out directly between these holders and the corporation without the trustee for the holders of the debentures intervening in it,” the Authority’s position reads. The Authority added that the solution they published was not intended to cancel or impair the validity of other solutions currently implemented by certain companies.
As a practical proposal for implementing the Authority's position on bonds of many companies, the Securities Authority proposes to establish a dedicated website through which bond investors will be able to obtain a transaction permit agreement for the bonds of a single company or for the bonds of many companies that they wish to participate in.
According to the transaction permit, which first appears in the scriptures during the Rishonim period, the borrower and lender agree that half of the amount will be used as an interest-free loan and the other half will be used as a deposit for a joint investment that carries a certain minimum return at the interest rate. In order to avoid a situation in which the lender loses his money in the event of the failure of the transaction for which the loan was given, the permit document includes strict rules for proving the loss, which include a strict oath.
Prof. Shmuel Hauser, Chairman of the Israel Securities Authority, welcomed the move, saying that "the corporate bond market is one of the most prominent investment avenues in the Israeli capital market, but it is inaccessible to a significant portion of the observant public in Israel and around the world. This situation harms both that public and the issuing companies. The publication of the position is therefore expected to benefit both the companies that will make use of the mechanism described in the position and the public that will have additional investment avenues open to them.".

The Authority would like to thank the Chairman of the Finance Committee, MK Rabbi Moshe Gafni, for his assistance in promoting the position published today. MK Rabbi Gafni said in response to the publication of the position that "this is a significant and important step by the Securities Authority on behalf of investors, to ensure that all investors from all population groups will be able to act without fear in terms of halachah.".
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