These are factual determinations by the Enforcement Committee that do not justify intervention. Moreover, in the circumstances of the case, I am not required to interpret the statements of the lawyers, nor to the meaning that can generally be attributed to them. This is in view of my position that the materiality of the information about the infringement requires an examination of its concrete circumstances. In our case, the attorneys' statements were made when it was not proven that they had all the information about the infringement. Therefore, these statements cannot change my assertions.
- The ISA further claimed that the materiality of the information is also learned from the position of the other officers in the company. It was claimed that they believed that the company should have published an immediate report. This is in light of the immediate report dated February 5, 2019, which included information about the breach, and an additional report from June of the same year, in which the company reported additional violations by the borrower, which on the face of it are similar to the breach that is the subject of this petition. Indeed, it was held that an indication of the materiality of information can be seen where it can be pointed out that the conduct of the company's officers showed their awareness of this materiality (The Matter of the Deskparagraphs 174, 186). However, in our case, it is not possible to make clear findings with respect to the position of the officers, and the Enforcement Committee did not make such determinations. The report of February 5, 2019 was made against the background of the new agreement that was formulated, a fact that makes it difficult to draw conclusions regarding the position of the officers regarding the need to immediately report the violation at the time it occurred. The report from June was made in circumstances the nature of which was not clarified in the course of the proceeding, nor was the position of the directors presented. Therefore, there is difficulty in determining findings regarding the position of the directors on the basis of the existence of later reports.
- In the framework of the petition, the Authority raised additional arguments that were not raised in the petition. One argument is that the quality of the information in our case derives from the importance of disclosure regarding transactions with a controlling shareholder, and this is due to the importance of deterring controlling shareholders and maintaining the public's trust.
However, as stated, the Authority's factual position in the administrative proceeding was that the status of DKMA, the parent company, is only formal and the company should be regarded as the one that gave the loan (page 3 of the minutes of the hearing of July 26, 2022 before the Committee, Appendix 4 to Lorenzi's response). The petition also claimed that the company used the parent company as a "conduit" (paragraph 10 of the petition). There is no argument in our case that the borrower's breach is in any way connected to the action of the controlling shareholder. Hence, it was not clarified how this figure contributes to the determination of materiality in the circumstances of the case.
- The second argument raised by the Authority is that Regulation 37A2 The Reporting Regulations that deal with the obligation to update and amend where there has been a material development in relation to previous reporting, even where the original report was not required by law (The Gabrieli Matter, paragraph 44). The Authority sought to raise this argument before the Committee, but given that it was not raised in the administrative pleadings and in view of Lorenzi's objection, the Chairman of the Panel did not allow it to be raised (page 7 of the minutes of the hearing before the Committee, Appendix 4 to Lorenzi's response). On the merits of the matter, I also did not find that this regulation adds to the matter of determining the materiality of the information. This is because the ISA claims that the matter reported "in the previous report" is the very withdrawal of the funds for the purpose of granting the specific loan to the borrower (the first withdrawal of ILS 4 million and later the supplement to ILS 10 million). In other words, the Authority's argument is that in every case in which a loan is reported, it is required to report any failure of the borrower to comply with one of its conditions. Hence, there is an overlap between her claim and the reasons that in this case establish a duty to report according to Regulation 36(a) and the reasons that establish the obligation to report according to Regulation 37A2. After all, even within the framework of Regulation 37A2 Proof of materiality is required.
- After examining all the circumstances of the case, I have come to the conclusion that I cannot accept the Authority's petition.
Beyond the content of the information provided in the immediate report, the very fact that it is published in this framework is also significant for the investing public. Providing information by way of immediate reporting signals to the "reasonable investor" that this is information that the company believes will have a real chance of influencing his investment considerations in the company. Hence the caution required in determining materiality, whether in narrowing it or expanding it beyond what is appropriate. Expanding it beyond what is appropriate is also liable to harm the rationales underlying the reporting obligation, as well as the ability of investors to plan their steps. Indeed, determining the materiality of information is complex, first and foremost for the company and the officers it requires in the first place. In our case, although we are dealing with information regarding a breach of the terms of a material loan, the concrete circumstances must be examined, including: the scope of the breach that is not material from the quantitative aspect; the strict terms of the loan that were reported to the public and indicate the characteristics of the loan and the loan and the risks that were taken into account in determining its terms; the collateral given to her promise; and the lack of market response to the publication of the information. In the unique circumstances of the case, the totality of the data leads to the conclusion that the enforcement committee lawfully determined that in our case, the burden of proving that the respondents breached the duty to report.