Israel Securities Authority Warns Israel Railways Over Governance Failures Threatening Bond Trading

The Israel Securities Authority (ISA) issued a stern letter on Monday to the board of Israel Railways, warning that the absence of external directors is freezing the approval of the company's financial reports and endangering the trading of its bonds. The company currently holds about 70 million shekels in tradable bonds. The ISA's letter, addressed to acting chairman Avner Flor and acting CEO Avshalom Almaliach, highlights that Israel Railways is failing to meet corporate governance requirements as a reporting corporation.

The external directors Ruth Dahan Portnoy and Sarah Frish have left the board, leaving only seven members, none of whom are independent or possess accounting and financial expertise. This situation has paralyzed oversight processes, as audit, compensation, and financial reporting committees cannot convene without external directors. The ISA warns that these violations could have severe consequences, including jeopardizing the continued trading of the company's securities on the stock exchange and potentially triggering immediate bond repayments.

This warning comes amid a management crisis at Israel Railways, following the departure of Chairman Moshe Shimoni in early July and the absence of a permanent CEO for nearly a year. The company has also experienced a series of operational failures affecting passengers, such as freight train accidents damaging electrification infrastructure, prolonged escalator outages at major stations like Tel Aviv HaShalom, and severe disruptions on high-demand lines.

Israel Railways recently filed an unprecedented petition with the Supreme Court against Transportation Minister Miri Regev and Minister for Regional Cooperation Dudi Amsalem, demanding they exercise their authority to promptly appoint new directors. The ISA stresses that without immediate ministerial intervention to fill the board vacancies, the ongoing corporate governance deterioration at this state-owned company will directly harm investors financially.