Come the Netanyahu revolution

1 The Israel Securities Authority: Many violations of the securities rules remain entirely bereft of handling. They are not sufficiently enforced," begins the text, rather redundantly. "That situation, exacerbated by the absence of effective private enforcement mechanisms in Israel, such as class-action motions, entrenches the situation in which certain violations of securities laws are not effectively handled." (If said once, perhaps better said twice, eh?)

"The complexity and clumsiness of the criminal processes (pursued by the Israel Securities Authority) and their unsuitability to certain violations lead to a situation of lack of enforcement and consequently to insufficient deterrence. Moreover, the protraction of the legal process often draws out the legal process to an unfair degree."

Biting words, to be sure. A savage critique. Surely Zohar Goshen, chairman of the maligned securities watchdog, does not like them at all.

Where do these words appear? In the draft of the next state comptroller's report, perchance? In an external opinion delivered to the ISA's internal auditor?

No. They appear in a bill that bears a name almost as awkward as the above text: "The Law of Supplementary Enforcement to the Israel Securities Authority (Legislative Amendment) 2009". And who is behind this legislative attempt? None other than ISA chairman Goshen.

His fond hope is that the law will give the ISA teeth by giving it regulatory enforcement powers. In English - more aggressive ways to enforce regulation of the capital market. The law would give the ISA chairman broad powers, beyond the broad powers he already possesses - which boil down to investigating cases of suspected malfeasance and pressing criminal charges.

Most of the public's assets have been moved to the wide-open capital market, which is rife with conflicts of interest. Not only that, the global economic crisis brought into sharp focus just how desperately the financial markets need better regulation, worldwide and in Israel, too. If even the leader of the watchdog organization feels that the state of enforcement is so pitiful, clearly something must be done.

The bill that Goshen is promoting would give the ISA three parallel avenues of enforcement.

1. It could impose heavy fines for infractions that are relatively easy to elucidate.

2. It would set up an administrative enforcement committee, headed by the ISA chairman himself, that could hand down penalties - some of them heavy ones - in the case of violations whose proof requires a substantial investigative process. This, however, does not include the most serious offenses involving deliberate intention.

3. The third avenue is the criminal process that exists today, which is for the most serious cases. Penalties can involve fines and hard time. The criminal procedure is the most severe and the greatest deterrence, but its implementation often fails because of the difficulty in achieving convictions.

Goshen proposes that the administrative process involve heavy sanctions against violators, including barring investment managers from the profession.

There is no question that regulation of the capital market needs to be better enforced and that the ISA needs more effective tools. Goshen deserves applause for his initiative.

But the inauguration of administrative procedures and the augmentation of the ISA chairman's powers provoke concern at two levels. One is that the chairman would become too strong. The other is that the criminal process would be weakened.

To assure everyone that his legislative drive would improve the capital market, Goshen needs to explain the checks and balances in the administrative process he proposes. He must shine light on the process of decision-making and supervision at the ISA itself, making the organization completely transparent.

It is far from clear that the current structure of the ISA serves these purposes. Above all, the more power an official has, the more transparently he must operate and the more open he should be to criticism.

Strengthening the ISA while ramping up supervision over it could be a good first step in the revolution that Prime Minister Benjamin Netanyahu could lead with Israel's other economic leaders.

Some settled for explaining why the public needs it, others even had ideas, though not any that would advance the greater good of the public.

Collecting NIS 700 million a year or more in television tax (the agra) plus revenues from advertising on Channel 1 television and Israel Radio, and squandering the money on special projects and pension payments for IBA retirees does not serve the public. Public broadcasts are supposed to focus on the public good, whether by providing news or cultural content. They aren't supposed to advance the interests of people dear to the IBA leaders or politicians, or to squash their enemies.

Israel's newspapers are owned by various business tycoons, which underscores the need for independent public broadcasting. The growing proportion of reality shows on television heightens the need for another sort of television, one that doesn't brandish the sword of daily ratings over its authors.

Professional, attractive and meritocratic broadcasting, free of the constraints that shackle commercial broadcasting and the press, requires that the IBA be recreated from scratch. It must be an independent, effective body - efficient and transparent. It needs to be led by people who can focus entirely on the public interest. The current IBA can't and will never fit that bill, not only because politicians rule the roost, but mainly because it has been imbued with a political organizational culture over decades.

If Israel wants public broadcasting, the IBA must be dismantled. A new authority must be created. Like the ISA, it should be a public, transparent body in whose leadership any observer could put his faith, secure in the knowledge that the people in charge are pursuing only the public good.

Who said that? The ministry's internal controller? The state comptroller? No. It was the CEO of one of the telecom companies.

Communications is an exploding industry, thanks to the Internet. The importance of competition and service in the telecom market will only grow. The government's ability to impose policy that will ensure that the market serves the people, not just a handful of business sharks, is becoming ever more critical.

We should therefore applaud Communications Minister Moshe Kahlon for his announcement that he wants to close down his own ministry and found an independent authority.

By the way, the principle of eradicating the Communications Ministry and depoliticizing the sector isn't a new one. The idea has been around for years. But when Ehud Olmert took over the ministry, he put his personal interest over the public one and shrugged off the concept.

Just like the ISA and IBA, the future Communications Authority must be powerful, independent and equipped with teeth, while being subject to supervision and disclosure. Then everyone, from the companies to the consumers, can rest assured that the authority's chairman and his people are committed to the public good, and nothing but.

But while the people in charge of the ISA, IBA and the communications portfolio sound like they'd like to institute positive change, neither the incumbent industry minister nor his predecessor seem concerned about appearances.

The former one, Eli Yishai, twiddled his thumbs for two years about forming a fair trade authority. Then he tried to appoint a crony to lead the endeavor. The current minister, Benjamin Ben-Eliezer, tried to appoint a political hack devoid of true experience, a person the civil service commissioner ruled out.

Even if the next candidate to lead a fair trade authority is worthier, the intentions of the minister in charge haven't changed. He doesn't want a body that would spearhead a consumer revolution in the telecom market, one that could stand strong against some of the most powerful forces in the economy.

Instead of jousting with the Finance Ministry over how many billions to invest in the rail system, which is of dubious value to the economy, Netanyahu could order his people to make over Israel's independent enforcement bodies. By the end of the year he could build these four institutions into powerful entities to protect the public interest.

No ribbons would be cut. There wouldn't be any photo-ops with outsized checks. But the Israeli economy would rest on more solid, fairer foundations.