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How can one signature put you at financial risk?

How can one signature put you at financial risk?

What you need to know about the Qualified Client declaration

Most investors in Israel who were raised in English-speaking countries are familiar with the concept that the professionals they receive financial advice from must be properly trained and be under the supervision of a national regulatory body. That’s the case in Israel too – with licensed practitioners being supervised by the Israeli Securities Authority – but there’s a glaring loophole that many experts fear is being utilised on unsuspecting clients.

 

Under Israeli law, an individual who falls under the Qualified Client rules can be sold investments without receiving advice regarding their suitability. That’s fine if you are a sophisticated investor with considerable experience and an understanding of complex products. But if you aren’t, you can create real problems for the future if you sign the Qualified Client declaration. This is because you are losing the considerable rights and consumer protection that Israel Securities Authority regulated professionals provide.

As Kinneret Razon Picovsky, a leading expert on Israeli investment regulation explains, the Advisory Law is aimed to protect the "regular" investor, and so if one chooses to be considered a qualified client, the law exempts the advisor from many obligations, including the requirement to inform the investor regarding special risks that the investment may involve.

This may not seem like an issue to worry about. However, if the investment proves to be completely unsuitable then the investor has no rights. Quite simply – the Authority won’t be there to protect you.   

Tel Aviv-based attorney, Gidon Cohen, makes a clear comparison. “Seeking financial advice from an unqualified financial advisor is like seeking medical advice from an unqualified doctor. Both are likely to land you in an unhealthy situation”.

Even a good lawyer may not be able to help you if the investment proves inappropriate as advisors in Israel who are not qualified are not obligated to have professional insurance to compensate clients in the event of negligence.

Razon Picovsky points out that, by getting advice from a licensed professional, the client enjoys the full protection of the Advisory Law. She adds that, “the law gives the investor the option – if he suffered loss - to submit a civil claim against the licensee, based on breach of one of the obligations. In addition, the law enables the investor to submit a complaint to ISA against the advisor or manager who will be exposed to disciplinary sanctions if they have breached the rules”.

For individuals navigating the complexities of investing in Israel the message is clear – take advice from an ISA licensed professional and never sign the Qualified Client declaration, if you are not a sophisticated and experienced investor, because if the investment goes disastrously wrong you are on your own…

As published on the Jerusalem Post (18.2.19)


The aforementioned information is not a substitute for personal Investment marketing, which takes into account the particular circumstances and special needs of each person. The views expressed in this article should be considered as market comment for the short term for information purposes only. As such the views herein may be subject to frequent change, are indicative only and no reliance should be placed thereon. This article does not constitute legal, tax or accounting advice, or any investment recommendation, or any offer to buy or sell financial instruments of any kind, and does not take into account the investment objectives or needs of specific investors. Although this article has been produced with all reasonable care, based on sources believed to be reliable, reflecting opinions at the time of its writing and subject to change at any time without prior notice, neither Pioneer Wealth Management nor any other entity or segment within the Pioneer International Group makes any representations or warranties as to the accuracy or completeness hereof and accepts no liability for any loss or damage which may arise from its use. The writer and the company are unaware of any conflict of interest at the time of publishing the above commentary.

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About the Author

Andrew Album

Andrew Album

Senior Wealth Manager

Since 1993 Andrew Album has been advising families in the UK on investment strategies, retirement planning and estate tax mitigation.

Andrew qualified as Chartered Accountant at Price Waterhouse, working for the firm in both Melbourne and London. From 2010 he has been servicing clients as a Senior Partner at St James's Place in the UK.

Andrew made aliyah to Israel in 2007 and his focus at Pioneer is with clients who have made aliyah, those planning retirement in Israel and families with members in both the UK and Israel. 

Andrew holds a BA in Economics from Manchester University, England, is a Chartered Accountant, a qualified financial adviser in the UK, and a a Financial Planner licensed by the Israel Securities Authority.  

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