Drafted the law that banned entire binary options industry

Shmuel Hauser, Israel’s top financial regulator, stepping down mid-term

Israel Securities Authority chief quitting at height of anti-corruption battle; some say he may enter politics; Kahlon nominates Anat Guetta to succeed him

Simona Weinglass is an investigative reporter at The Times of Israel.

Israel Securities Authority chairman Shmuel Hauser, at a Knesset Finance Committee meeting, September 11, 2017. (Miriam Alster/FLASH90)
Israel Securities Authority chairman Shmuel Hauser, at a Knesset Finance Committee meeting, September 11, 2017. (Miriam Alster/FLASH90)

Israel Securities Authority Chairman Shmuel Hauser announced he is to step down from his role as Israel’s top financial regulator at the end of December, more than a year earlier than scheduled. Finance Minister Moshe Kahlon’s nominee to succeed him is Anat Guetta, the former CEO of a company called Entropy Financial Research Services.

Hauser, who announced his decision on Tuesday, has been ISA chairman since May 2011, when he was appointed by then-finance minister Yuval Steinitz. In May 2016, Kahlon asked him to stay for a second term, until May 2019, which he agreed to.

Several financial investment professionals and analysts contacted by The Times of Israel expressed surprise at his decision to step down, since the ISA was perceived to be making progress in tackling the blight of corruption afflicting Israel’s financial sector. Hauser drafted the legislation passed on October 23 that outlaws the widely fraudulent Israeli binary options industry, which has fleeced billions from victims worldwide for the past decade.

Anat Guetta (Courtesy)

“I thought Hauser was making progress,” said Michael Freedman, executive director of Asquith Israel Merchant Bank.

Hauser is leaving as Israel is in the middle of a heightened battle against financial corruption. One analyst recently calculated that between the years 2008 and 2014, Israel’s off-the-books economy soared from approximately 22% to 28% of the country’s GDP. The first figure puts Israel in the company of countries like Italy and Spain; the second resembles economies like those of Romania and Bulgaria.

Golan Hazani, an economics correspondent for Israel’s Calcalist business daily, wrote on Tuesday that “Hauser is stepping down at the peak of both his career and that of the Israel Securities Authority,” referring to several major corruption investigations the Israel Securities Authority has undertaken in recent years, and specifically the investigation into alleged malfeasance at Israeli telecommunications company Bezeq. On November 5, the ISA announced the completion of its investigation into Bezeq, and wrote that there is “sufficient evidence” to indict several senior employees of Bezeq as well as several senior government officials, on fraud, securities fraud and corruption charges. One of these government employees was Netanyahu-appointed Communications Ministry director Shlomo Filber, leading many observers to surmise that the investigation could eventually expand to include the prime minister himself.

“Within four and a half months, the Israel Securities Authority completed its investigation into Bezeq and recommended indictments and at a time when senior police and prosecutors have been investigating the prime minister for years, the ISA carried out its investigation with great efficiency and without leaks,” wrote Hazani.

Other notable anti-corruption moves by Hauser include investigations into IDB chairman Nochi Dankner, the Siemens bribery scandal, and Welfare and Labor Minister Haim Katz (Likud). Hauser is also credited with helping to revive the Tel Aviv Stock Exchange.

Calcalist reported on Tuesday that at least two party heads are considering adding Hauser to their list for the next Knesset elections.

Sharona Mazlian-Levy, the Israel Securities Authority spokeswoman, told The Times of Israel that Hauser informed Kahlon, the leader of the Kulanu party, several months ago that he wished to step down. Kahlon urged him in vain to stay, but then reluctantly agreed and asked him to see out the year.

Asked what Hauser is planning to do next, Mazlian replied “to rest.”

MK Karin Elharar, chair of the Knesset State Control Committee (right), Israeli Securities Authority chief Shmuel Hauser (third from right) and other participants in a session on tackling binary options fraud, January 2, 2017 (Luke Tress/ Times of Israel)

Hauser played a central role in banning the entire binary options industry, a multi-billion dollar fraud highlighted in a series of Times of Israel articles beginning in March 2016. Alerted to the scale of the crime, he said in an August 2016 interview that he was appalled by the fraud, that it was profoundly damaging to Israel’s reputation, and that “any way you look at it, as a human being, as a citizen, as a regulator, as a Zionist, as a father, and as a grandfather, it looks awful to me.” With the massive fraud widely documented by The Times of Israel, alarmed international regulators stepped up pressure on Hauser to take action to tackle the blight.

However, his original draft was watered down under pressure, including from within the industry. At a Knesset Reforms Committee meeting in August, where the truncated bill was debated, some of those in attendance argued that the watered-down bill would allow binary options fraudsters to re-brand their product, offering forex or CFDs or other products instead, and continue to defraud customers abroad with impunity.

A source involved in the legislation told The Times of Israel at the time, “The expanded bill would have been ideal but I do not think it would be able to pass a final Knesset vote, even if the committee approved it. You cannot imagine the amount of pressure being exerted on Knesset members to weaken this bill. The industry has vast amounts of money and is exerting massive pressure.”

Finance Minister Moshe Kahlon at a signing ceremony for an agreement to build thousands of new apartments in Beit Shemesh, April 3, 2017. (Hadas Parush/Flash90)

In a November 28 press release, Finance Minister Kahlon said, “I asked Hauser to stay till the beginning of 2018 to complete some of the important processes he set in motion including a restructuring of the stock exchange, easing regulation on R&D companies, easing the process for new public offerings, enactment of the law to ban binary options, benefits to small and mid-size businesses and strengthening enforcement to gain the public’s trust.”

In the same press release Hauser stated, “I am completing my term with a sense of great satisfaction achieving the goals I set for myself and the ISA and I look proudly at the improving state of the capital markets in Israel.”

Kahlon announced that his nominee for the position is Anat Guetta, the CEO and co-founder of Entropy Financial Research Services, a company that provides advice to Israeli institutional investors.

Several financial industry insiders told The Times of Israel they had never heard of her but that the company she founded, Entropy, is well-respected.

Matthew Salter, president of the Israel Society of Investment Professionals, said that Hauser was generally liked and well thought of in Israel’s investment community.

Asked if Hauser had enemies or people who wanted to see him leave the job, Salter replied, “I think this might just be a case of one smart, competent regulator being replaced by another smart, competent person.”

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