Legal Updates

A license application for Financial Services Providers may be denied solely based on confidential intelligence information

March 22, 2021

The Israeli Capital Market Authority rejected a license application for a financial services provider due to confidential intelligence information from the Israeli Police regarding involvement in money laundering offenses.
The Supreme Court held that the intelligence information raised concerns for public safety, justifying the rejection of the license application. The Israeli Law’s main objective is to prevent crime in the financial services providers market. For purposes of furthering this objective ,the Capital Market Authority is entitled to deny a license application even when the conditions set in the law are complied with, subject to balancing between considerations of public safety and the possible infringement on one’s freedom of occupation, while also referring to his past activity as a currency services provider; the type of the intelligence information, the nature of the information, the timeline on which it revolves as well as the financial services provider’s conduct. With regard to the right of hearing, there is no obligation for the hearing to be held orally, and a decision may be based solely on written arguments. Here, the Capital Market Authority reviewed the intelligence information, raising concerns about damage to public safety, while the financial services provider received a general picture as to the nature of the suspicion raised towards it. On the other hand, the infringement on the freedom of occupation is not permanent, because one may re-apply for a license in the future, and the damage is economic and therefore compensable. Thus, the Capital Markets Authority was entitled to refuse to reissue the license.