The Israeli Securities Authority contended that a listed company breached its reporting obligation because it did not report to the public a breach of a loan agreement to a third party, where interest on the loan was not paid and it also did not repay another small loan given to it. However, the agreement included many guarantees and the company acted to recuperate the loan.
The Court held that the company did not breach its reporting obligation. A listed company is subject to a disclosure obligation designed to protect investors and the efficiency of the capital market and to prevent fraudulent transactions. The reporting obligation may be in the form of periodic, quarterly, or immediate reports when necessary. In addition, there is an obligation to report any event that has, or may have, a material impact on the corporation or the price of its securities. The materiality test is reviewed from both a quantitative and qualitative perspective. Here, the scope of the breach is not material in relation to the company's data and therefore quantitative materiality has does not exist. From a qualitative perspective, the scope of the breach, the risk that it derives from it to the full repayment of the loan given the existence of collateral, the terms of the loan, the source of the loan repayment, and the company's actions to recuperate the law, indicate that even in this respect, information is not material from that perspective either. Therefore, the company did not breach its reporting obligation.