The Knesset Finance Committee on Monday approved a measure cutting the distribution fees banks collect from mutual funds by 20%, a move that is expected to cost the banks a combined NIS 100 million in revenue annually.
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"We are talking about addressing the most anticompetitive fees out there," Securities Authority Chairman Shmuel Hauser told the committee, which proposed the fee cut. "Since the time of the Bachar committee [on capital market reform], the banks have been charging the same maximum distribution fees for mutual funds. We have a kind of monopoly here on everything connected with fund distribution fees."
Hauser noted that Israel's1,280 mutual funds wrangle with each other, forcing them to lower their management fees to 1.25% from 2%. With some NIS 180 billion under management, they serve as the most popular way for small investors to put money into the capital markets.
Only 13 of the committee's 17 members appeared for the vote, and 11 voted in favor. Among them were Chairman Moshe Gafni (United Torah Judaism), three Yesh Atid lawmakers, two from Labor and one each from Habayit Hayehudi, Meretz and Shas and one from Hatnuah. The two Likud Beiteinu lawmakers, Robert Ilatov and David Rotem, abstained.
The Banks Association retained the lobbying firm Policy, whose representative did not attend the Finance Committee's deliberations but was seen talking in the Knesset cafeteria with Ilatov beforehand. Other lobbyists, however, did appear, including three from Goren Amir, which represents the Mutual Funds Association; two from Preminger Consulting; and one from Cohen Rimon Sheinkman.
All told, there were was one lobbyist for every two Knesset members.
Some of the lawmakers questioned whether cutting the distribution fees, which banks charge funds for marketing their investment products to their clients, was enough of a move to pass the savings on to investors.
"I have no interest in seeing the banks earn less while [only] the funds benefit. My concern is the consumer," said Amnon Cohen (Shas).
Gafni said he would only bring up the issue of reducing management fees if he felt there was a majority in favor. Hauser said he believed the savings from the distribution fee cuts would, in fact, be passed on to the investors.
"Distribution fees constitute the main obstacle to lowering management fees to the investors," he said. Hauser said the funds had promised to lower their charges by a proportional amount for at least six months, in the event distribution fees were lowered.