Securities Authority Chief Warns Against Institutional Concentration

Asaf Singer, Chairman of the Israel Securities Authority (ISA), has issued a warning against the growing power of institutional investors, suggesting that replacing banking concentration with institutional concentration does not foster competition. Speaking at a conference at Tel Aviv University, Singer expressed concern over the formation of financial conglomerates that would control both banks and insurance companies. He noted that institutional investors currently manage over NIS 3 trillion, with approximately 60% of assets concentrated in the hands of just five entities. Singer cautioned that the creation of additional large financial groups would exacerbate conflicts of interest, harm competition, and make it difficult for the public to compare prices and switch service providers.

The remarks come amid inherent tensions between the ISA, which oversees the stock market, and the Capital Markets Authority, headed by Amit Gal, which regulates institutional investors managing public savings. These two bodies are key players in the capital market, with institutional investors being dominant actors. The friction has manifested in disagreements over institutional activism. While the Capital Markets Authority intervened in August to prevent a move by investment house Meit-Mor to appoint directors at Orion, citing concerns about an institutional investor exceeding its role, Singer has previously emphasized the importance of institutional activism in safeguarding public companies.

A significant point of contention is the arbitrage reform promoted by the Ministry of Finance with ISA support. This reform, detailed in recommendations released in July, proposes a unified investment account for mutual funds, savings policies, and investment provident funds, harmonizing tax conditions and allowing tax-free transfers between investments up to a cumulative benefit ceiling of NIS 200,000. The Capital Markets Authority opposes this plan, arguing it would harm competition, increase costs for savers, and potentially lead to the disappearance of investment provident funds.

In light of these disputes, Singer stated that the structure of financial regulation requires re-examination, leaving open the possibility of merging the two regulatory authorities without explicitly calling for it. He stressed that any changes must be made cautiously, preserving the independence of the regulators.