In Israeli case law, it is possible to point to two trends that have not yet been explicitly decided in the Supreme Court's ruling. The first supports the application of the "expectancy test", while setting a relatively high threshold so that the duty to report will apply only to the disclosure of facts "in relation to events whose probability of occurrence is very high and whose impact on the company's business is clear and significant" (Ben Dov case, paragraphs 81, 102). According to the second approach, the company must examine whether it is possible to locate a "critical point" after which the chances are that the event will occur, and if it is a material event, there will be a reporting obligation from this point. To the extent that the company reaches the conclusion that the application of the test is not feasible in the circumstances of the case or clearly leads to the absence of reporting of a material detail, it will resort to the use of the "expectancy test" (Malka case, para. 82; Civil Case (Tel Aviv District) 42654-12-16 Gaon v. Spuntech Industries Ltd., para. 191, (February 10, 2019) (hereinafter: the Gaon case)). Even according to this approach, where we are dealing with a future event that, to the extent that it is realized, will have the most material significance in relation to society, it is appropriate to use the expectation test. According to this approach, in such a case, an immediate report should be published even when the probability of its occurrence is not high, provided that it is not negligible (Malka case, paragraphs 80, 91; for further information, see: Ido Baum and Dov Salomon, "Not Only for Mathematicians: The Test of Applicability to the Prohibition of the Use of Inside Information and the Obligation to Report, Law and Business, 24(2), 2022 (hereinafter: Baum and Salomon)).
As stated, the Supreme Court has not yet decided on the question of the proper test for the duty of disclosure and the immediate publication of a report on a forward-looking event, although incidental statements suggest support for the application of the expectancy test (Brandeis case, paragraph 14 of the judgment of the Honorable President (as described at the time) A. Hayut).
- To the complexity of the nature and substance of the information, it should be added that the application of the tests to determine the materiality of the information is done from the point of view of the "reasonable investor" and his investment possibilities (The Baranowitz Matter, p. 837; Crim. Appeal 5640/97 Reich v. State of IsraelIsrSC 35(2) 433, 476 (1999); Tel Aviv (Tel Aviv District) 68338-10-18 Bezeq Israel Communications Company Ltd. v. A.A.D.A. Liad Holdings (2006) Ltd., paragraph 29 (hereinafter: A flash of interest)). The image of the "reasonable investor" was drawn in the case law as one who"Between professionalism and ignorance" (The Matter of Gabor Sabrina, p. 187); Whoever is as a rule"is not a professional with understanding and expertise in the capital market." (The Horowitz Matter, paragraph 38); that is not "... A particularly sophisticated investor, as this does not mean an investor who lacks understanding" (The Baranowitz Matter, p. 836); And "... A virtual investor who is nothing but a weighting of professional components, honesty and integrity, life experience, logic and common sense." (Crim. Crim. 4675/97 Rozov v. State of Israel, Fed 35(4), 337, 355 (1999) (hereinafter: The Rozov Matter); For more information, see Ronen Adini, Securities Law, pp. 30-35).
In case law and literature, questions have been discussed that arise due to the fact that the point of reference of the legislature and the case law is that of the reasonable investor and not of sophisticated investors. This is due, inter alia, to the fact that it is doubtful whether the "reasonable investor", as described in the case law, reads the disclosure documents and possesses tools that enable their analysis and understanding, especially in light of the development of the economy and financial instruments. This is in contrast to sophisticated investors whose ability to process information on a significantly greater scale (see: Bezeq, para. 30; The Ben Dov case, paragraph 73; Gaon case, paragraph 176; Paserman-Josefov, pp. 187-195; and for a different position, R. Amir Licht, "Therefore the public pays – the obligation to respond to the rumors and the image of the investor as a reasonable man," point at the end of a sentence (February 9, 2017)). The courts also noted the problem that can arise due to the fact that an investor who is not sophisticated may also be influenced by information that is in fact not material from the point of view of the company and its officers. This is because it does not possess the expertise held by the officers, nor that of sophisticated investors. In this situation, the publication of the information will not help the reasonable investor to plan his steps and may even mislead him. The proposed solution was to publish the information (given the test of information that may influence an investment decision by a reasonable investor), while clarifying the company's position regarding its impact on the company (Bezeq, para. 30; Passerman Josefov, pp. 199-203).