Editor: Thank you to Dani Schijveschuurder for providing updated information about the exam exemptions.

The ISA homepage is in English, although the English site may not be as detailed as the Hebrew page. There are certain requirements in order to obtain a license, and it is possible to receive exemptions based upon your prior licensing, education and experience. This link will take you to the Investment Advisors and PM section of the website. The ISA is currently deciding on whether the licensing exam can be done in English and you can read more here.

Within this section are the requirements in order to receive one of the aforementioned licenses, and this information is taken straight from the ISA webpage. I will focus only on the Licensing for Individuals. Individual investment advisors can either be self-employed or employees of a licensed advisory firm or a [commercial] banking corporation. In contrast, portfolio managers are entitled to work solely as employees of licensed portfolio management firms.

Licensing of Individuals
Individuals interested in engaging in a licensed investment profession must meet the following criteria:
• At least 18 years of age;
• Citizen or resident of Israel;
• Has not been convicted of a crime (among the crimes stipulated in the law);
• Successfully completed the professional exams administered by the ISA in the following subjects:
1. Securities law and professional ethics;
2. Accounting;
3. Statistics and finance;
4. Economics;
5. Securities and financial instrument analysis;
6. Portfolio management (for portfolio manager applicants only)
• Completed an internship (six months for investment advisors and marketing agents/nine months for portfolio managers)
• Has secured professional indemnity insurance for the minimum stipulated in the law
• In addition, the ISA reserves the right to withhold a license from an individual that meets all the above criteria, if it believes that circumstances exist, which render the applicant unfit to be licensed (fit and proper tests) or if a criminal investigation is being conducted against the applicant.
Licensing of corporations
Only entities legally established in Israel are entitled to obtain a license. Applicant entities must comply with the following requirements:
• It must undertake that it will only employ licensed individuals for the purpose of rendering investment advice, investment marketing or portfolio management services.
• It must undertake that no individual that, to the best of the company’s knowledge, has been convicted of one of the crimes stipulated in the law, or whose license has been either suspended or revoked, serve as an executive or director in it.
• It fulfills minimum capital requirements as stipulated in the Law[ISA1]
• It has secured insurance, bank guarantee or deposit for the sum stipulated in the Law.
• An additional requirement is placed on portfolio management firms. These firms are prohibited from engaging in underwriting and can only engage in investment advice, investment marketing, portfolio management and ancillary activities.
• The ISA is entitled to withhold a license to a company fulfilling all of the above requirements if it believes that circumstances exist, which render the applicant unfit to be licensed (fit and proper tests), or such circumstances exist with regard to a director, executive, or controlling shareholder of the company, or if a criminal investigation is being conducted against the applicant.

Licensing of Individuals
Individuals interested in engaging in a licensed investment profession must meet the following criteria:

  • At least 18 years of age
  • Citizen or resident of Israel
  • Has not been convicted of a crime (among the crimes stipulated in the law)
  • Successfully completed the professional exams administered by the ISA in the following subjects:
    1. Securities law and professional ethics 
    2. Accounting
    3. Statistics and finance
    4. Economics
    5. Securities and financial instrument analysis
    6. Portfolio management (for portfolio manager applicants only)
  • Completed an internship (six months for investment advisors and marketing agents, nine months for portfolio managers)
  • Has secured professional indemnity insurance for the minimum stipulated in the law
  • In addition, the ISA reserves the right to withhold a license from an individual that meets all the above criteria, if it believes that circumstances exist, which render the applicant unfit to be licensed (fit and proper tests) or if a criminal investigation is being conducted against the applicant. 

Licensing of corporations
Only entities legally established in Israel are entitled to obtain a license. Applicant entities must comply with the following requirements:

  • It must undertake that it will only employ licensed individuals for the purpose of rendering investment advice, investment marketing or portfolio management services.
  • It must undertake that no individual that, to the best of the company’s knowledge, has been convicted of one of the crimes stipulated in the law, or whose license has been either suspended or revoked, serve as an executive or director in it.
  • It fulfills minimum capital requirements as stipulated in the Law
  • It has secured insurance, bank guarantee or deposit for the sum stipulated in the Law
  • An additional requirement is placed on portfolio management firms. These firms are prohibited from engaging in underwriting and can only engage in investment advice, investment marketing, portfolio management and ancillary activities.
  • The ISA is entitled to withhold a license to a company fulfilling all of the above requirements if it believes that circumstances exist, which render the applicant unfit to be licensed (fit and proper tests), or such circumstances exist with regard to a director, executive, or controlling shareholder of the company, or if a criminal investigation is being conducted against the applicant.
  • Currently twelve investment advice companies, 19 investment marketing companies and 189 portfolio management firms are licensed to operate in Israel.

A question commonly asked may be; what is the difference between an IA and a PM? An IA can disseminate advice to clients but cannot act in a discretionary manner with client funds, but a PM has the discretion. It is important to pay attention to the semantic difference between PM in Hebrew and PM in English. A PM in the US, UK, etc is a fund manager, whereas a PM in the ISA lexicon is simply a Financial Consultant for individuals..

Exemptions: If you have a CFA, Series 7, MBA or another type of license from overseas, how can you leverage these into a license from the ISA?

The ISA have just published (February 2015) updated guidelines as to what is acceptable to gain exemptions from the exams. In short, a candidate who has passed all 3 levels of the CFA, ABROAD, and has 2 subsequent years of relevant experience abroad after having received the CFA, will be exempt from ALL of the exams (as well as the internship) with the exception of the Ethics exam. Meanin, a CFA charter holder need only take one of the 6 exams, which would be sufficient to gain him a license from the ISA.

The exams: It is critical to know that each of the exams are offered only twice a year, with a May/June sequence and November/December sequence. This means advance career planning may be required. Ethics and the other pre-requisites are given in the first month, and Miktzoet A and B are given the following month, within a few days of each other. Dates change sequence to sequence. Ethics is 25 and Miktzoet a 20 multiple choice question paper, whereas Miktzoet B is essay style, not necessarily 20 questions and can be answered in English. Otherwise, all exams are in Hebrew, with an option for an ISA-provided translator. At the time of this post, the translator costs 1500 NIS, and that will be divided by the number of examinees using him/her. Anyone using a translator will be tested in a separate room. Regarding the sequence of the exams, it seems that one cannot take Aleph and Bet until passing Ethics. As this can cause a 6 month delay in testing, unless the ISA agrees to change their sequencing, it is best to study adequately in order to guarantee passing the Ethics exam.

Allotted time for the exams: The ISA exams are 2.5 hours. If using a translator, an additional 20 minutes will be allotted, but from my experience in Ethics and Miktzoet A, this is a grossly insufficient figure when one considers how much time can be required just for translation.

Studying for the exams: With the exception of Ethics, there is no English study material to be found for the ISA exams. Private teachers and self-study are the only options, but if you know the type of material that will be on the exam, that will be helpful. In my preparation for Aleph, which can be heavily quantitative, I watched many videos on the website www.khanacademy.org. It isn’t an MBA, but Sal intelligently touches on the basics of many related topics. There are two private tutors that I am aware of teach at Tel Aviv University: Shlomi Ben Yehuda, shlomi.by1@gmail.com and Tal Mofkadi, mofkadi.tal@gmail.com.

Regarding Ethics, it is possible to study in English with the law firm KRP. Kinneret, kinneret@krp.co.il can be found at: http://www.krp.co.il/en/exams/ If you wish to study independently and save money, I believe all of the ISA laws can be found right here on their website, but you will not have the guidance of professionals that are well-versed in what is of primary importance to the ISA and what is secondary:http://www.isa.gov.il/Default.aspx?Site=ENGLISH&ID=1485.

Topics that may be covered on Miktzoet Aleph: It seems to be about 1/3 options (know your Greeks and Put-Call Parity well), 1/3 fixed-income, including calculations for duration, YTM et al, and a jumble of mutual funds, futures, equities and so on. Miktzoet Bet seems to be more heavily skewed towards Portfolio Allocation and understanding the global market environment. Be sure to be on top of your macro game and your understanding of all types of relationships between asset classes (e.g. changes in interest rates and duration).

Prepare to pay fees to the ISA for everything, whether applying for an exam, applying for an exemption to the exam, applying for your license after passing the exams, and so on. Their email address is licensing@isa.gov.il and they can guide you towards any specific pages you will need and will answer any questions you will have.

Tips:

  • Do not back down from them. Even if you are given an answer that you do not like, and you feel you deserve a certain right or exemption, make that clear. Be a ‘Nudnik’.
  • Try to get your Hebrew reading comprehension to a respectable level. It will be very helpful for studying and taking the exams, even with a translator.
  • Get a letter from your prior employer stating what your job position was and how long you were employed by them.They will require that.
  • They may want a copy of your transcript as proof that  you have a business degree, in the case of pre-requisite exemptions.
  • They will always respond to your emails in Hebrew, even if you write in English. Also, they generally don’t allow you to call them.
  • As I said, advanced planning is required with them, so if you are thinking of requesting exemptions, apply as far in advance as possible to the upcoming sequence of exams. They have committee meetings regarding  Olim cases very infrequently, so don’t put added pressure on yourself by missing deadlines while waiting interminably for an answer from them.
  • Regarding the required internships, impress upon them that your experience, if applicable, is more than sufficient. Finding a job is difficult, finding one that will be willing to offer even a low-paying internship makes it that much tougher. If you are experienced in the financial markets, make sure the ISA knows it and fight for the exemption. Employers like knowing you do not need to do a stage and are ready to go.

Thanks to Keith Resnick for this article.

Updated: May 2015

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