Final CMISA Opinion with respect to License Requirement in Connection with Cross-Border Credit Activity
The RFSL imposes a license requirement on a person who engages in credit activity in Israel. On January 1, 2018, the CMISA published a final opinion setting out the circumstances in which the RFSL and the license requirement thereunder would not apply to credit activity. In some respects, the final position is more rigid than CMISA’s draft opinion, which was published in May 2017.
1. The Israeli Supervision of Financial Services (Regulated Financial Services Law) of 2016 (the “RFSL”) imposes a license requirement on the activity of credit extension.
2. In May 2017, the Capital Market, Insurance and Savings Authority (the “CMISA”), which is the authorized regulator of the RFSL, published a draft opinion with respect to the territorial application of the RFSL (the “Draft Opinion”). The Draft Opinion provided certain conditions with respect to cross-border credit activity. For further details, please refer to the GKH Client Update dated November, 2017 (the “November Client Update”).
3. On January 1, 2018, the CMISA published a final opinion with respect to the territorial application of the RFSL (the “Cross Border Position”). The conditions set forth in the Cross Border Position (which, if met, the RFSL would not apply to credit activity and therefore the license under the RFSL will not be required) are more rigid than those set out in the Draft Opinion.
4. Pursuant to the Cross Border Position, engaging in extension of credit, which is rendered entirely outside of Israel, is not subject to the license requirement under the RFSL, subject to the fulfilment of all of the following conditions:
• The finance documents between the lender and the borrower (excluding security interests) are drafted in a language other than Hebrew, and such documents are signed outside of Israel and governed by non-Israeli law.
• The borrower’s accounts with respect to which the credit is extended are maintained in financial institutions outside of Israel.
• The lender does not contact any prospective clients in Israel, including by way of marketing, advertising or on boarding by any means whatsoever.
• The lender does not meet its clients in Israel.
5. We note that the Cross Border Position is relevant in the event that no exemption from the license requirement under the RFSL can be obtained. In 2017, the CMISA published draft regulations according to which banks in an OECD member country (incorporated and holding a banking license obtained from a supervisory authority in an OECD member country), as well as certain other entities, are exempt from the license requirement. For further details, please refer to the November Client Update.
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For more information please contact your GKH attorney, Adv. Ofer Hanoh, Partner and head of the Banking and Insurance Department (Ofer@gkh-law.com), Adv. Yigal Binyamini, Partner (YigalB@gkh-law.com) or Adv. Ido Amir, Partner (IdoA@gkh-law.com).
