Kasam Mutual Funds Fined $270,000 Over Employee Trading Fraud

Israel's Securities Authority has imposed a NIS 1 million (approximately $270,000) fine on Kasam Mutual Funds following a settlement agreement concerning failures in oversight and control over a former employee's trading activities. The authority alleges that between 2021 and 2024, the employee, along with an external individual, engaged in fraudulent and criminal activities within the funds managed by Kasam.

The employee was responsible for trading substantial sums, and their actions allegedly violated the fund manager's directives and procedures. The Securities Authority stated that these unusual activities put unit holders' money at risk and should have triggered Kasam's internal control mechanisms in real-time. However, the company failed to adequately supervise the employee's trading, and even when the irregular activity was eventually detected, it was significantly delayed.

A subsequent investigation by the authority found Kasam's internal review to be incomplete. The authority concluded that sufficient controls and checks on employee compliance with fund regulations could have identified and stopped the unauthorized activity sooner. The employee's misconduct reportedly continued for over three and a half years.

As part of the settlement, approved on September 7, 2026, by the Administrative Enforcement Committee, Kasam acknowledged the agreed-upon facts but not that they constituted a violation. The company has since taken remedial actions, including cooperating with the authority, enhancing its monitoring systems, and compensating unit holders approximately NIS 1.3 million (around $350,000) for the damages incurred.

The committee found the settlement reasonable and balanced, accepting the authority's position that the fund manager did not take adequate measures to fulfill their duty of care. The committee highlighted the prolonged period of the employee's misconduct and the fact that the irregularity was discovered by the Securities Authority, not internally by Kasam.