Financial Markets Amendment Bill 2013

  • The majority of provisions of this bill came into force on 1 January 2013, introducing the following substantive changes:
  • The public offer rules are amended on a few points
  • Based on a new second subsection of section 5:4 FMSA, the Netherlands Authority for the Financial Markets (AFM) can rule that the "conversion exception" does not apply.
  • The bill provides a basis for further regulating the remuneration or fees of financial service providers and for prohibiting certain types of commission (see also the Financial Markets Amendment Decree 2013). Disclosure requirements have also been tightened and made mandatory for all distribution channels.
  • The bill incorporates the moral-ethical statement (banker's oath).
  • A number of provisions taking effect on 1 July 2013 relate to the solvency requirements for premium pension institutions and the requirement that these institutions have professional liability insurance.
  • The new requirement that a shareholder requesting discussion of an agenda item should disclose its entire beneficial interest in shares to the company will also come into force on 1 July 2013.

See Financial Markets Newsletter of July 2012 for a longer summary of the Financial Markets Amendment Act 2013.

Financial Markets Amendment Decree 2013This decree also took effect on 1 January 2013. The majority of its provisions relate to the supervision of conduct at financial enterprises:

  • Product development process

The AFM has been given powers to supervise and regulate the product development process in financial undertakings.

  • Ban on commissions

From 1 January 2013, the consumer or client should pay for advice on and mediation in certain financial products on a direct basis. This concerns payment protection, complex products, mortgage credit, income insurance, death-related risks insurance, funeral insurance and other designated financial products. If a financial services provider advises on or mediates in simple non-life insurance, remuneration by way of a commission will continue to be permitted, provided that the provider meets the commission rules in effect since 1 January 2012.

  • Services provision document

Before a financial services provider offers a financial service, the consumer or client must first be provided with a services provision document. This document should be tailored to the consumer's or client's request. It should contain standardised and comparable information about the nature and scope of the services provided, the interests of the financial service provider and the costs of the financial services. The changes to the services provision document will take effect on 1 July 2013. The AFM is holding a consultation about the new draft document until 1 February 2013.

  • New competence requirements

These requirements for financial services providers have been updated. They will become effective on 1 January 2014. All employees who are involved in advising customers must have a diploma showing their competence. The competence requirements for proxies have also been tightened.

  • Dispute resolution

Dispute resolution bodies will have to meet stricter criteria in order to be recognised under the FMSA. There will be additional requirements for governance, sharing information, expertise, and representation. Internal complaints procedures of financial undertakings will also be subject to further requirements.

  • Transparency of offerors of mortgage credit

The Netherlands Competition Authority concluded in a 2011 review that consumers wishing to change mortgage lenders experience a number of restrictions, in particular after the end of the fixed interest period. The new Decree contains a number of provisions aimed at increasing transparency with regard to mortgage credit.

  • Ban on investment in cluster munitions

Companies have an obligation to avoid providing direct aid to a (foreign) company that produces, sells or distributes cluster munitions. The ban is included in the Market Abuse Decree and applies to parties which regularly deal on the financial markets, such as institutional investors and offerors of investment products. It also applies to branches of Netherlands enterprises abroad. The scope of the ban is limited to new investments. The ban took effect on 1 January 2013, and the provision concerning enforcement of the ban will take effect on 1 April 2013.

  • Changes to integrity testing

Integrity testing will from now on include tax offences. A provision is also introduced that a person's integrity is not beyond doubt if he or she has been convicted for an offence and less than eight years have passed since the conviction became final. In the case of offences of more than eight years ago or where a conviction has not yet become final, the supervisor may take the specific circumstances into account. These changes are aimed at promoting legal certainty and limiting any potential differences of view between the AFM and DNB.

See Financial Markets Newsletter of July 2012 for a longer summary of the Financial Markets Amendment Decree 2013.

Implementation Solvency II Directive

The bill implementing the Solvency II Directive has been published in the Official Gazette. The Solvency II Directive amends the prudential supervision on insurance companies and provides for maximum harmonisation of solvency requirements. The Directive applies to life insurers and non-life insurers with a gross annual premium income of more than EUR 5 million or those which outline a total technical provision on their balance sheet of more than EUR 25 million. The Directive also applies to reinsurance companies and insurers covering liability, credit and suretyship.

Three sections of the implementing act came into force on 1 January 2013. These allow provisions of the Directive to be implemented by ministerial regulations. The other sections will take effect at a later date. The deadline for transposition of the Directive is 30 June 2013, the deadline for its application 1 January 2014.

Act on funding of financial supervision

This Act came into force on 1 January 2013 and provides for how the costs of the AFM and DNB are financed. The new funding system is based on a fixed contribution to the costs of financial supervisors. To determine how supervisor costs are charged, the supervised institutions are divided into categories. A percentage-based share in the funding will be set for each category. A Decree contains further rules on this.

Corporate governance

The Act implementing recommendations of the Monitoring Commission Corporate Governance Code will take effect on 1 July 2013.

The Act relates to listed companies and introduces the following changes:

  • The threshold for the right to request an item to be added to the agenda of the general meeting will be increased from 1% to 3% (a lower threshold may be set in the articles of association).
  • The threshold for the notification of a stake is lowered from 5% to 3%.
  • (Gross) short position must be notified to the AFM.
  • Provisions are introduced for the identification of shareholders in Dutch issuing institutions.
  • An investor alone or with other investors holding a stake of at least 1% of the issued share capital or (depositary receipts for) shares representing a joint market value of at least EUR 250,000 has the right to ask the company to pass information on to other shareholders before a shareholders meeting.

Amendment of Act to prevent money laundering and financing of terrorism

The amendments came into force on 1 January 2013. The changes implement recommendations made by the FATF, in particular concerning:

  • client due diligence
  • notification of unusual transactions
  • criminal and civil indemnification of institutions that have notified the authorities of suspicious activities

The bill anticipates expected changes to European rules following recent recommendations of the Financial Action Task Force.

Enforcement of EU financial market regulations

Pursuant to a new decree that took effect on 1 January 2013, the AFM and DNB may impose a fine or issue an order with penalties for non-compliance if they find that provisions from EU regulations have been violated.

Banker's oath

Rules on the banker's oath took effect on 1 January 2013. The oath (or promise) has to be taken by persons who are tested on integrity. These are the policy makers and members of the supervisory body in the financial undertaking. Those who were already performing work for the undertaking on 1 January 2013 will have to take the oath or make the promise before 1 January 2014.

The government has announced that it will look at introducing an oath or promise for other types of employees.

Cross-border cooperation between financial supervisors

Rules on cross-border cooperation between the AFM and DNB on the one hand and the European supervisors EBA, ESMA and EIOPA, the European Systemic Risk Board, and the European Commission on the other took effect on 1 January 2013.