This newsflash discusses the following two important developments regarding the expertise requirement for members of the management board and supervisory board of financial enterprises:
- a bill is now before the Dutch parliament pursuant to which the expertise of supervisory board members of a financial enterprise must, as from 1 January 2011, be tested by the Dutch Central Bank ("DCB") and the Authority for the Financial Markets ("AFM");
- the DCB and AFM have published a draft policy rule setting out the criteria they will use to test whether management and supervisory board members have met the statutory expertise test.
Expertise test for supervisory board members
On 22 September 2010, a bill was submitted to the lower house of the Dutch parliament under which supervisory board members (which, for the purpose of this newsflash, includes any other supervisory body) of the financial enterprises listed below will have to be tested by the DCB or the AFM before they can be appointed. The financial enterprises in question are:
- (the managers and custodians of) investment institutions;
- investment firms;
- payment institutions;
- financial service providers;
- credit institutions; and
- insurance companies.
Supervisory board members are currently subject to a trustworthiness requirement but not to an expertise requirement. The expertise requirement applies only to management board members and other persons who determine the financial enterprise's day-to-day management.
The target date for the entry into force of the new legislation is 1 January 2011. Transitional rules will apply to persons who are already supervisory board members on that date. Under those rules, such persons will be presumed to meet the expertise requirement until the end of their term of appointment or 1 January 2015, if earlier. This presumption will cease to apply if there is a change in the relevant facts or circumstances which gives reasonable cause for an evaluation of the relevant person's expertise. In the event of reappointment after 1 January 2011, an expertise test must be conducted.
DCB and AFM policy rule on expertise
On 1 September 2010 the DCB and AFM published a consultation document for a joint policy rule clarifying and specifying the expertise requirement. The policy rule is intended to take effect on 1 January 2011. Interested parties have until 31 October 2010 to submit their comments.
The policy rule will apply not only to management and supervisory board members of the financial enterprises listed above (under "Expertise test for supervisory board members"), but also to those who determine or co-determine the policy of pension funds and to management board members, supervisory board members and those who determine or co-determine the policy of trust offices.
The policy rule sets out the criteria and information to be used by the DCB and AFM when testing whether the statutory expertise requirement has been met. The rule divides financial enterprises into three different groups and sets out different conditions for each group. For example, the expertise requirement for management and supervisory board members of a bank differs from the requirement applicable to management and supervisory board members of an investment institution.
According to the policy rule, expertise consists of:
- skills; and
- professional conduct.
Expertise can be shown by means of:
- work experience; and
- evidence of relevant personal characteristics/abilities (such as decisiveness, communicative skills, leadership ability and vision).
For financial enterprises in each group, the policy rule indicates, among other things, the number of years over which the relevant skills and other expertise must have been acquired.
The requisite expertise must relate to the field of business in which the relevant enterprise operates. For example, for the group including banks and insurers, the policy rule states that expertise is required on the following topics:
- management, organisation and communication;
- the enterprise's products and services and the markets in which the enterprise is active;
- controls and integrity in the conduct of business; and
- balanced and consistent decision-making.
Different areas of expertise apply in the case of pension funds. The policy rule specifies the following topics:
- organisational management;
- the relevant laws and regulations;
- pension schemes and types of pensions;
- financial and actuarial issues, including financing, investments, actuarial principles and reinsurance;
- administrative organisation and internal controls; and