Past Probe May Affect Review of Announced Buyer of Tel Aviv Exchange Stake

A 2013 U.S. Securities and Exchange Commission probe may potentially be considered when an Israeli watchdog reviews a bid by Australian firm Manikay Partners LLC for a stake in the Tel Aviv Stock Exchange. Last week, the exchange announced it approved an agreement to sell 19.9% of its shares to the New York-headquartered fund. To be finalized, the deal would require approval from the Israel Securities Authority (ISA). Alongside the deal with Manikay, 51.8% of the exchange will be sold to five unidentified international investors, but 30% of that will be held by a trustee before being offered in direct placement to the public during the last quarter of 2018.

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Established in 2008, at the height of the financial crisis, Manikay has since invested in several leading exchanges, including London, Toronto, Frankfurt Stock Exchange and Nasdaq Nordic, and has around $2.5 billion in assets under management. It lists Goldman-Sachs as a backer.

In 2013, the SEC fined Manikay $2.65 million for short-selling shares in multinational investment bank Citigroup in 2009. The probe was the result of an SEC crackdown on selling violations, which saw action brought against 22 other U.S.-based companies. Following the decision, Manikay’s co-founders Shane Finemore and Russell Aboud resigned from the board of the Australian Securities Exchange, where they were members for six and eight years, respectively.

According to its website, the ISA can withhold a license to a company “if it believes that circumstances exist which render the applicant unfit to be licensed (fit and proper tests), or such circumstances exist with regard to a director, executive, or controlling shareholder of the company, or if a criminal investigation is being conducted against the applicant.”

A spokesperson for Manikay said that the SEC investigation that led to fine placed on the company in 2013 addressed 23 companies that allegedly participated in secondary offerings in December 2009, and that Manikay’s agreement to waive profits of $1.6 million and pay a fine of $900,000 does not constitute either an admission or a denial of guilt. Bar one, the spokesperson said, all the companies probed agreed to a similar settlement, and Manikay’s co-founders decided to resign from the ASX to avoid any perception problems for the exchange.

A spokesperson for the Tel Aviv Stock Exchange stated the board was made aware of the matter during the decision review process, and did not consider it an issue due to the time that has passed since, the fact that it was a matter of regulatory interpretation that involved multiple companies, and the fact that Manikay will not be a controlling stakeholder.