You know the type — not any specific individual, but the pattern. A senior figure with a name that opens doors in Herzliya and a CV that fits comfortably on a glossy fund brochure. A retired central banker, perhaps. A former regulator. An academic with a long publication list. He sits on the advisory board — sometimes as “founding partner” — of a boutique investment vehicle he did not structure, does not run, and has not bothered to license. His role is to be photographed at the launch dinner. His fee is paid quarterly. And when the fund collapses, as several Israeli boutique funds have collapsed in recent years, his name is the last thing investors remember and the first thing he wishes they would forget.

This is the quiet scandal at the heart of Israel’s slow-motion boutique fund crisis, and it is the reason the Israel Securities Authority (ISA) has now adopted its most aggressive enforcement posture in a decade.

The structural problem is almost embarrassingly simple. Israel’s regulatory architecture for private funds rests on a Partnerships Ordinance that predates the State of Israel itself. Lacking a modern Alternative Investment Fund Managers Directive equivalent, the ISA has historically policed the sector through restrictions on distribution rather than fund supervision: who you may pitch to, how many offerees you may approach in a rolling twelve-month window, whether your marketers hold a licence under the 1995 Advice Law. The fund itself can be set up by almost anyone, provided the marketing stays inside the exemption corridor. That corridor became a highway. Dozens of boutique vehicles sprang up promising private credit, real estate debt, litigation finance, and small-business lending — typically dressed in the language of “uncorrelated returns” and “institutional-grade discipline,” typically marketed with high........

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