Overview of recent regulatory developments

This overview provides a selection of relevant legal developments regarding financial markets regulation including an amendment to the €2.5 million prospectus exemption, new actions by the Dutch Central Bank in respect of guarantee products and expected amendment of remuneration rules for banks, investment firms and insurance undertakings.

SECURITIES

Increase of the threshold for the prospectus exemption

As of 1 October 2017, the exemption to the requirement to publish a prospectus for an issue of securities with a value of less than €2.5 million over the preceding 12 month period has been amended. The threshold has been increased to (less than) €5 million. While this increases the scope of the exemption, two requirements have been introduced that result in a higher burden for the party aiming to make use of the exemption. First of all, the offeror has to provide potential investors with an information document on the offering in accordance with a format set by law. This document must include information on a number of topics including details on the offeror, the risks for the investor, the target group, the kind of investment and the costs involved. This format is set by law and comprises nine pages. It provides for various inserts to be completed by the offeror. In addition to the information document, the offeror has to notify the Netherlands Authority for the Financial Markets (the AFM) on the exempted offering prior to the offering. It must also provide the AFM with certain information on the issuer, its shareholders, the issuer's website, the size of the offering and the offering period, as well as copies of the information document and marketing materials used. Consequently, where a simple warning set by law had to be included in all marketing materials until 1 October 2017, from this date on pre-notification and distribution of an information document is required.

INSURANCE

DNB remains focused on guarantee products

It has been reported that the Dutch Central Bank (DNB) has recently ruled that the BOVAG guarantee product qualifies as an insurance product. As a result, the parties providing the guarantee will normally be required to be licensed as insurance undertakings. The BOVAG guarantee is a long-standing and well known service product in the automotive industry that is offered with the sale of a used car and provides for repair of certain defects that may occur during a six month period following the sale. Without going into the details of this particular case, this once again shows that DNB remains focused on guarantee products that DNB believes constitute insurance products. For years, DNB has been of the opinion that a guarantee product is deemed to constitute an insurance product if the product is agreed upon with the client, results in the obligation for the client to pay a 'premium', includes an obligation to pay or otherwise reimburse the client and includes uncertainty in respect of the payment of the premium or the obligation to pay or reimburse. If a product is deemed to be an insurance product, the party offering the product must be licensed as an insurance undertaking unless and exemption applies. DNB can impose various penalties on a party that fails to obtain such a licence. In the opinion of DNB, any guarantee that is sold to clients, whether implicitly or explicitly, over and above the statutory guarantee period relating to the product, constitutes an insurance product. The reported ruling on the BOVAG guarantee indicates that this remains a high priority of DNB and that enforcement is still taking place.

FINANCIAL UNDERTAKINGS

Amendment of the remuneration rules for banks, insurance undertakings and investment firms

It has been announced that the DNB Regulation on Sound Remuneration 2014 (the Regulation) will be amended. The exact date is as yet unknown but is expected to take place before the end of 2017. The Regulation includes rules on the awarding, form of and deferral of variable remuneration. It applies in addition to the Dutch legal regime on sound remuneration including the bonus cap of 20%. It is explained that because of the Dutch legal regime on sound remuneration as well as European rules on sound remuneration such as those included in CRD IV and Solvency II as implemented into Dutch law or applying directly, the Regulation partly overlaps with applicable law. In addition, the Regulation was primarily based on CRD IV which does not take into account existing differences between the different European regimes. As a result of the expected change, banks and investment firms will remain subject to the rules included in the new DNB regulation which are copied from CRD IV. Certain changes will however take place as a limited number of rules will no longer apply. Insurance undertakings will no longer have to comply with the rules of the DNB regulation as they are already subject to the rules included in the Solvency II Regulation which apply as a matter of law.