Sources and Reasoning:
Is There a Prohibition of Ribbit in Purchasing Shares in the S&P 500 Index?
The S&P 500 is a securities index comprising shares of 500 corporations, the overwhelming majority of which are American, aside from several individual companies.
Therefore, when considering whether money may be invested in ETFs that purchase shares in this index, we must discuss whether this involves prohibitions of ribbit. We must likewise consider whether the investor participates in any prohibition committed through the activities of the companies in which he invests.
Although it is permitted to lend to a non-Jew with interest, even ribbit prohibited by the Torah, as ruled by the Shulchan Aruch, Yoreh De’ah, siman 159, סעיף 1, there is room for concern in the case at hand, since several Jewish shareholders own shares in the companies in this index. It is prohibited to lend to a Jew with interest, especially since in this case it is at times fixed interest, such as through the purchase of securities and the like. Although unquestionably the overwhelming majority of shareholders are non-Jews, there is nevertheless a minority of Jews.
However, see Responsa Har Tzvi, Yoreh De’ah, siman 126, which states that one may be lenient regarding any loan to large entities or banks whose majority is non-Jewish, even without a heter iska. These are his words there: “Regarding receiving money from a bank of any company and paying interest, or depositing money in a bank in order to receive interest: if the loan is without a heter iska and the bank belongs to Jews, this is fixed interest and is prohibited by the Torah. If the bank is a partnership of Jews and non-Jews, see Responsa Beit Yitzchak (Yoreh De’ah, vol. 2, Kuntres Acharon, siman 32), who does not permit a loan with interest unless the majority of the partners are non-Jews, or at least half and half.”
There is, however, an additional reason to say that there is no concern of ribbit in our case, since all the corporations in the S&P 500 index are limited-liability companies and not private individuals. Many poskim maintain that there is no prohibition against lending with interest to companies that are not private individuals, since this is not ribbit from borrower to lender.
Responsa Teshuvot VeHanhagot, vol. 2, siman 421, writes similarly. The basis of their words is one: one may be lenient wherever the majority are non-Jews, particularly as these are investments in limited-liability companies. The poskim have already written that this is not ribbit from borrower to lender, since a limited-liability company is not owned by a private individual, but is an independent entity subject to the limited ownership of its shareholders.
Nevertheless, in order to avoid every concern, the above-mentioned Responsa Teshuvot VeHanhagot recommends that the investor write a document in the following wording:
“I hereby undertake, with my signature being as one hundred witnesses, that if I lend to a bank (or government) with interest, and there is a concern of ribbit because Jews are partners, then the Jews are exempt from paying interest in proportion to their partnership share, for the money in their partnership share is not given as a loan, but rather as an ‘iska,’ in accordance with the wording of the general heter iska explained in the book Ta’am Ribbit, in the cited booklet on the laws of ribbit. I have no claims or demands against them concerning claims of interest, for I exempt them from every obligation except in accordance with the wording of the aforesaid heter iska; and one may act to benefit a person in his absence, to exempt them from payment other than in the above manner.”
However, this specific wording is not necessary. Rather, one may sign any general heter iska document that provides a solution to all issues and concerns of ribbit, even for transactions that have not yet been made and have not yet come into existence.
Although a waiver is ineffective regarding something that has not yet come into existence, as explained by the Rema, Choshen Mishpat 209:4, this is due to a lack of settled intent. In our case, however, where the purpose is to avoid the prohibition of ribbit, he certainly has settled intent. This is similar to what we find in the words of the poskim, that an agency appointment for the sale of chametz not yet in existence is effective. Although something not yet in existence involves a lack of settled intent, nevertheless, because of the prohibition of bal yera’eh, one resolves to sell the chametz even though it is not yet in existence.
Nevertheless, since it is easy to arrange a general heter iska, it is recommended to do so, as written in the above-mentioned Responsa Teshuvot VeHanhagot.
The Rishon LeTzion, HaGaon Rabbi Yitzchak Yosef shlit”a, likewise wrote this in an article he authored as part of his approbation for the book Rosh Yosef—Ribbit. There he wrote as stated above: according to the basic halachah, any investment in a limited-liability company does not involve a prohibition of ribbit, since it is money without known owners. This includes loans made with banks in Israel, which do not involve the essential prohibition of ribbit; only as an added precaution was it instituted that they be conducted through a heter iska. The view of Rashi, who maintains that this is not ribbit coming directly from borrower to lender, may also be joined, and the Rema mentions that one may rely upon this in a case of need. Although, in practice, we follow the opinion of Maran the Shulchan Aruch, who did not rely upon this leniency, it may nevertheless be combined in this case, where the investment of money is open throughout the world and the majority are non-Jews. In such a case, we say, “yesh bereirah,” as above.
Is It Permitted to Purchase Shares in Companies That Do Not Observe Shabbat and Whose Activities Involve Torah Prohibitions?
Regarding the other prohibitions found in these companies, there is likewise no impediment to investing in shares in this index. Despite the purchase of shares, shareholders have neither the ability nor the right to express an opinion regarding the companies’ operations. Even a shareholder with voting rights has no meaningful ability to influence them, unless he is a shareholder holding significant percentages in a particular company and is able to determine matters concerning its operations.
As Responsa Igrot Moshe, Even HaEzer, vol. 1, end of siman 7, writes: “Regarding purchasing shares in companies that perform work and commerce on Shabbat, we see that the practice has become widespread to permit this. The reason is simple: purchasers of shares should not be considered owners, for they have only a minimal portion of the business and have no opinion whatsoever concerning the business, even regarding their share. This is unlike a partial partnership, in which one has an opinion as an owner. Moreover, the purchaser of shares does not wish to be an owner of the business and does not wish to purchase anything in the business; rather, he merely purchases the profit and loss that will be in the business in accordance with the amount he purchased. It appears even more that there is no legal acquisition involved, since it is an acquisition of something not yet in existence, but only under the laws of the המדינה.
“The fact that, under the terms of sale, the shareholder has a say in electing a president is merely empty words, for in practice they retain more than a majority for themselves, so that others cannot express an opinion. The purchasers also do not wish to express an opinion on this, because they have no intention of purchasing that. Therefore, in my humble opinion, one need not be concerned with what the owners of the companies do, since it does not concern them.
“Even if there are Jews among the owners, this should not be considered assisting transgressors, for the business would continue even if he did not purchase their shares, since there is no shortage of those who will purchase shares. The purchaser buys only for his own benefit. Therefore, there is no prohibition in this, as many people, including those who fear sin, customarily purchase them. However, one who purchases such a large quantity that his opinion will be taken into account must certainly be prohibited from doing so, even in a factory or business of non-Jews, since they did not make the stipulation required when a Jew enters into a partnership with a non-Jew, as stated in the Shulchan Aruch, Orach Chaim, siman 245.”
This response was translated automatically from Hebrew and has not yet been reviewed by a person. Therefore, it may contain inaccuracies and should not be considered a definitive reference.
