Common use of Improvement of Internal Enforcement Proceedings in the ISA Law, 5770-2010 Clause in Contracts

Improvement of Internal Enforcement Proceedings in the ISA Law, 5770-2010. The Law for the Improvement of Internal Enforcement Proceedings in the Israel Securities Authority, 5770-2010 (the “Law”), which was approved by the Knesset in January 2011, constitutes a significant change that requires reporting companies to immediately address the requirements of the new Law. The main parts of the Law regulate the establishment of an administrative committee that will deal with violations in the area of securities. If the committee reaches the conclusion that it was proven at the level of proof which is customary in civil law (a probability of more than 50%) that a violation was committed, it will be authorized to institute various means of enforcement against the violating party. The committee will deal with various violations that are related to the Securities Law, 5728-1968 (the “Securities Law”) and other relevant laws. The common feature of such violations is that the mens rea that is set forth therein is at most that of negligence. The means of enforcement that the committee will be authorized to impose will be significant fines, a demand to pay damages to the party injured by the violation, a payment to the State treasury which derives from profits that were generated as a result of the violation, a demand to institute acts to remedy the violation and prevent its recurrence, a prohibition on holding office in certain bodies, a suspension or revocation of a license and suspended punishment. As is known, the Law establishes, inter alia, the strict responsibility of the CEO, due to which enforcement measures can be imposed as set forth in the Law.