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The chairman of the Israel Securities Authority, Moshe Terry, yesterday slammed Monday's court decision clearing Discount Investments on charges of intentionally misleading investors (known as the Iscar affair).

"This ruling could have very dangerous implications on the Securities Law and on ensuring the public's investments ... and could severly harm the orderly working of the capital market."

In its majority decision, the Tel Aviv District Court overturned a 2002 decision by the Tel Aviv Magistrates' Court that had found Discount Investment Corporation, its former CEO Dov Tadmor, and four other executives - Amos Bankirer, Shlomo Cohen, John Book and Yaakov Eshel - guilty of incorporating misleading information in the company's statements from 1990 to 1995. All were sentenced, and Tadmor actually served his six months' community service at Tel Hashomer hospital.

The panel of judges based its decision to clear the five on all charges on the lack of evidence. "Regarding some of the factual findings by the court, it is not clear to us on what they relied," the judges wrote. In addition, the panel rejected the lower court's misconstruing absent corporate reporting on Discount Investments' affiliated companies as "misleading investors." However, the judges distinguished between shareholders and the Israel Securities Authority (ISA), which the lower court had not. The defendants may or may not have misled the ISA, the panel ruled, but that did not necessarily mean they misled the public.

Terry did not agree. "The message drawn from this is that not all information in the hands of the company needs to be reported to the public. The court has essentially turned the duty of full disclosure on its head. The ruling also attacks the symmetry of the public's access to information, and the role of the ISA is to ensure this symmetry. In effect, a significant part of the authority's function has been taken away."

The authority is now considering appealing to the High Court.