A recently proposed bill aims to ease the requirements for defining an “accredited investor” in Israel. It’s time to align with global standards and allow a wider group of Israeli investors to access a range of vetted, high-quality investment opportunities that have become an essential part of modern investment portfolios.
Various developments – both in discussions held by the Israeli Securities Authority and in the aforementioned bill – indicate an emerging intention to at least examine, if not implement, changes to the current criteria defining an accredited investor in Israel.
As of today, the definition, set in the first version of the Securities Law, imposes exceptionally strict conditions and metrics, far more rigid than those accepted globally. As a result, only a minuscule segment of the local market qualifies – both in absolute and relative terms
In practice, the authority assumes that only individuals with at least NIS 9 million in liquid assets – a threshold updated earlier this year according to a formula indexed to inflation over the past three years – possess the skills, tools, and capacity to independently evaluate private investments and thus do not require tight regulatory protection.
The rationale behind such limitations is clear: protecting the broader investing public from unsuitable investments and, worse, from fraud, while ensuring that only high-net-worth individuals are exposed to non-tradable investments, which usually come with specific restrictions, such as lack of liquidity and fixed exit windows.
But the central question remains: Are these unusually rigid limitations really effective safeguards – or might they sometimes do more harm than good?
Accredited does not mean immune
Strict rules that define accredited investors only by their liquid assets and income are not the best way to protect investors. Here’s a simple example: Imagine a person who owns several apartments and has invested most of their money in different places. If they don’t currently have a few million shekels in cash and don’t earn more than NIS 1.5 million a year, they won’t be considered a qualified investor – even though that doesn’t really make sense.
Does this rule really protect investors, or does it unfairly block people from accessing good investment opportunities that could help grow and diversify their portfolios? The answer is clear.
The newly proposed bill seeks to significantly revise the criteria for defining an accredited investor in Israel. Under the proposal, meeting any one of the following conditions would suffice to qualify:
Ownership of over NIS 2m. in liquid assets, an annual income exceeding NIS 500,000 for each of the past two years, or a household income above NIS 750,000.
The bill’s explanatory notes emphasize the goal of aligning Israel’s standards with international norms, expanding public access to complex financial investments while avoiding excessive paternalism by the state.
To understand just how different Israel’s current requirements are compared to other developed countries, like the US definition of an accredited investor, one only needs a brief comparison: while Israel’s income test requires roughly eight times the average wage, the US threshold is only about four times the average.
Furthermore, Israel applies its asset test solely to liquid assets, whereas the US includes all investment assets (excluding one’s primary residence), providing a more holistic view of an investor’s financial standing.
In effect, despite the noble intention of protecting investors through strict standards, the regulator is “throwing out the baby with the bathwater” by excluding too many investors from a vital investment avenue.
The logic behind these requirements is hard to find, but their impact is clear: they dramatically shrink the pool of qualified investors in Israel compared to the relative proportion in other developed markets.
This distortion stands in contrast to global trends, where more and more investors are increasing their allocation to alternative assets in order to diversify and hedge their portfolios. In Israel, for many, this goal remains frustratingly out of reach.
In conclusion, non-tradeable investments are not suitable for every investor, and indeed, a certain level of wealth, expertise, and understanding is required. At the same time, regulators should seriously consider revising Israel’s asset-based qualification tests to align them with international norms.
Such a move would enable a broader group of investors to access off-exchange investments, while ensuring a regulated and closely monitored market that deters bad actors from exploiting loopholes in the alternative investment space by offering ventures that are almost certain to fail.
The writer is chairman and owner of Gsharim Funds.