Financial Services Regulation News

From expertise to suitability: future changes in the pre-appointment screening criteria for policy-makers of financial undertakings will enter into force on 1 July 2012

On 3 February 2012 the Royal Decree (the “Decree”) establishing the date of entry into force of the new “suitability” requirements for daily policy-makers and supervisory officers of financial undertakings was published in the Dutch Government gazette (Staatscourant). Pursuant to that decree, the new rules holding, inter alia, replacement of the current “expertise” (deskundigheid) criterion by a “suitability” (geschiktheid) criterion will enter into force on 1 July 2012. According to the explanatory statements to the relevant legislative proposal, the “suitability” criterion is broader than the “expertise” criterion, because it encompasses not only the knowledge and experience of the relevant person, but also the person’s overall skills and professional behavior.

The Decree contains different transitional provisions with respect to persons that are already in office at the time of entry into force of the Decree. The applicable transitional regime depends on the function of the relevant person and on the type and size of the relevant financial undertaking.

The Dutch Authority for the Financial Markets concludes that the information provision by providers of consumer credit and intermediaries should be improved.

An EU-wide investigation of websites offering consumer credit has taken place to assess whether consumers receive the information to which they are entitled before signing a consumer credit contract. The investigation has been initiated in order to assess how the market is applying the Consumer Credit Directive (as implemented in the national legislation), which aims to make it easier for consumers to understand and compare credit offers. Subsequently, the Dutch Authority for the Financial Markets (“AFM”) has conducted research with regard to the information provided on the websites offering consumer credit. One of the goals was to check if the websites did not contain misleading advertisement for consumer credit. Furthermore, the AFM has assessed whether the credit table (which provides information regarding debit interest rate or other information regarding credit costs) included in the advertisement regarding consumer credit was complete and correct.

According to apress release of the AFM of 10 January 2012, , the information provided by a number of providers of consumer credit and intermediaries is currently insufficient. The most prominent insufficiencies were the credit tables that were incorrect or even had no reference to the availability of standard information. This conclusion was based on a research conducted by the AFM amongst forty-five websites related to consumer credit regarding the information provided on the relevant websites. The AFM has been requested to report back regarding its findings to the European Commission by autumn 2012.

How much do you want it? Ministry of Finance publishes regulation on the costs of supervision for 2012

On 4 January 2012 the 2012 regulation on (one-off and ongoing) supervision costs was published in the Dutch government gazette (Staatscourant).

Exempted offerings after 1 January 2012: increase of exemption threshold from EUR 50,000 to EUR 100,000 and new ‘visual’ warning requirements for exempted offerings

As of 1 January 2012 the conditions for reliance on the ‘minimum amount’ and the ‘minimum denomination’ exemption for offerings of individual investment objects, participation rights in collective investment schemes and securities in the Netherland have been tightened. These changes have been implemented through amendment of the Exemption Regulation to the Dutch Act on Financial Supervision (Vrijstellingsregeling Wft). As a result, the minimum investment thresholds resulting in exemption from the relevant licensing and/or prospectus requirements have been increased to EUR 100,000 instead of EUR 50,000. The new stricter rules apply in any event to all offerings taking place after 1 January 2012. Certain transitional provisions have been enacted for: (a) parties merely managing individual investment objects offered before 1 January 2012 under the EUR 50,000 exemption; and (b) collective investment schemes offered before 1 January 2012 in reliance on the 50,000 exemption. Further explanation concerning those changes and the transitional provisions can be found in a letter from the Dutch Minister of Finance (Dutch only) and on the AFM website (Dutch only). In connection with the above change the relevant definition of “Professional Market Parties” has been amended so as to only cover parties from whom deposits or other forms of repayable funds are attracted for an amount of at least EUR 100,000 (rather than 50,000).

In addition to the above, as of 1 January 2012, new mandatory warning rules (so-called “Wild West sign”) apply to advertisements, offering and marketing documentation relating to exempted offerings of individual investment objects, participation rights in collective investment schemes and securities (i.e. less than one hundred offerees, minimum investment > EUR 100,000, etc.).

Inclusion of such warning is not required is for exempted offerings of securities targeting exclusively “qualified investors” as defined under Dutch regulations.

Exempted offerings after 1 January 2012: increase of exemption threshold from EUR 50,000 to EUR 100,000 and new ‘visual’ warning requirements for exempted offerings

As of 1 January 2012 the conditions for reliance on the ‘minimum amount’ and the ‘minimum denomination’ exemption for offerings of individual investment objects, participation rights in collective investment schemes and securities in the Netherland have been tightened. These changes have been implemented through amendment of the Exemption Regulation to the Dutch Act on Financial Supervision (Vrijstellingsregeling Wft). As a result, the minimum investment thresholds resulting in exemption from the relevant licensing and/or prospectus requirements have been increased to EUR 100,000 instead of EUR 50,000. The new stricter rules apply in any event to all offerings taking place after 1 January 2012. Certain transitional provisions have been enacted for: (a) parties merely managing individual investment objects offered before 1 January 2012 under the EUR 50,000 exemption; and (b) collective investment schemes offered before 1 January 2012 in reliance on the 50,000 exemption. Further explanation concerning those changes and the transitional provisions can be found in a letter from the Dutch Minister of Finance (Dutch only) and on the AFM website (Dutch only). In connection with the above change the relevant definition of “Professional Market Parties” has been amended so as to only cover parties from whom deposits or other forms of repayable funds are attracted for an amount of at least EUR 100,000 (rather than 50,000).

In addition to the above, as of 1 January 2012, new mandatory warning rules (so-called “Wild West sign”) apply to advertisements, offering and marketing documentation relating to exempted offerings of individual investment objects, participation rights in collective investment schemes and securities (i.e. less than one hundred offerees, minimum investment > EUR 100,000, etc.).

Inclusion of such warning is not required is for exempted offerings of securities targeting exclusively “qualified investors” as defined under Dutch regulations.

As of 1 January 2012, new rules have been introduced affecting the remuneration of providers, advisors and intermediaries within the meaning of the Dutch Act on Financial Supervision

As of 1 January 2012, offerors, intermediaries and advisors are no longer allowed to charge turnover related fees with regard to non-life insurances. According to the legislator, said fees are likely to cause financial service providers to be product driven rather than client driven. As a result, these fees may cause the financial service provider to lose sight of the client’s best interest. Hence, bonus fees (bonusregelingen) and turnover fees (omzetprovisies), which are linked to the production numbers of intermediaries, are no longer allowed.

Providers, intermediaries and advisors are still allowed allowed to charge one-off fees (afsluitprovisies) and continuing brokerage fees (doorlopende provisie) with regard to non-life insurances. The above is in line with the prohibition that was already in place with regard to complex financial products, mortgage credit, payment insurance and funeral insurance contracts that were entered into as of 1 January 2009. Additionally, an open standard has been introduced with regard to the direct remuneration of intermediaries and advisors.

Intermediaries and advisors are allowed to agree with their clients a fee for the services provided unless said fee can be considered unreasonable due the nature and size of the service provided. The reasonableness of the remuneration will be determined by the characteristics of each individual service that has been provided. However, remuneration regarding transactions that are executed for the sole purpose of generating additional income will in any case be considered unreasonable.

When validating the reasonableness of a remuneration policy, the Dutch Authority for the Financial Markets considers, amongst others, the following items:

1. the fees charged by the intermediary or advisor compared with the actual hours spent;
2. the hours spent on the relevant advice relating to the scope of the advice;
3. the scope of the advice compared to the request made by the client; and
4. the hourly rates charged by the intermediary or advisor compared to their level of expertise.