The Joint Investment Trust Law, which is also known as the "Mutual Funds Law“, regulates the activity of mutual funds in Israel and their offerings to the public. Currently, foreign mutual funds may not be offered directly to Israeli investors. This is due to the difficulty that foreign mutual funds offering their units to Israeli investors would face in complying with all the Israeli regulatory requirements.

In order to allow foreign mutual fund managers to approach Israeli investors, the field of mutual funds in Israel is expected to undergo a fundamental change when Amendment 13 of the Mutual Funds Law will come into force. Under this amendment, Israeli investors will be allowed to purchase different types of international mutual funds, that until now, only institutional investors and a limited number of entities which have financial resources could purchase.

In the framework of the suggested amendment, the Ministry of Finance will be authorized to set criteria, upon the fulfillment of which the Israeli Securities Authority would be authorized to allow the offering of foreign mutual funds in Israel. The basis for the Israel Securities Authority's authority is the approval of the offering of the foreign mutual fund in the relevant foreign jurisdiction. This approval would be given, as aforesaid, if the fund and its management fulfill certain criteria set out in the regulations. It seems that the object of the legislation is to subject the fund to basic requirements only, and that they would be examined relatively technically, as opposed to substantively as previously required under the Mutual Funds Law.

The success of marketing foreign mutual funds in Israel to Israeli investors may depend, among other things, on marketing efforts of banks in Israel, as most Israeli investors still invest in financial products such as mutual funds via their banking services. It is important to note that distribution fees are paid by foreign mutual funds to the banks or other distributors in Israel. The proposed amendment to the Mutual Fund Law provides that the existing arrangement in the regulations regarding distribution fees that Israeli mutual fund managers may pay to Israeli banks shall be applied also to foreign mutual funds. These distribution fees are fixed, as Israeli banks are not permitted to charge more than the fixed amount set out in the regulations.