A number of administrative fines imposed by the AFM were recently published. In addition to administrative fines for market manipulation, a fine was imposed on a financial services provider which had failed to notify the regulator that one of its policymakers had been interviewed as a suspect by the police. Another fine was imposed on ABN AMRO because, according to the AFM, ABN AMRO had safeguarded insufficient data on services provided to a client, Vestia, which prevented the AFM from exercising adequate supervision.
These developments demonstrate how important it is for financial services providers to immediately self-report to regulators when one of its policymakers is interviewed as a suspect. In addition, these providers should adopt a clear compliance policy within their organisations which creates a system that detects problems immediately. This policy would help to prevent any uncertainty about the nature of the work being performed.
Fine for failure to notify suspicion
The Trade and Industry Appeals Tribunal ruled in February 2014 that an administrative fine imposed by the AFM on a financial services provider which had failed to notify the existence of a suspicion, is lawful. The fine is now final. The Tribunal’s ruling underscores the importance of timely notification to regulators.
According to the AFM, the fine was imposed because the financial services provider failed to report to the AFM that one of its policymakers had been interviewed by the police as a suspect. A financial services provider must immediately self-report to the AFM if a change occurs in the data that was provided for the reliability assessment of its policymakers.
One of the policymakers of the service provider was interviewed by the police as a suspect in February and May 2008 in a case going back to 2004-2005. The financial services provider failed to immediately notify the AFM of this suspicion.
Fines for market manipulation
On 7 July 2014, the AFM imposed four administrative fines on three individuals for manipulating the market price of participating interests in an investment fund.
Two fines were issued to an individual who possessed a large number of participating interests in the investment fund Sabon FunDing, which was at the time listed on Euronext. He invested both as an individual and through a company of which he was sole shareholder. This individual traded in these participating interests with known parties, and the interests remained under his actual control. The third parties received the participating interests without paying for them. The participating interests were then sold back on the stock exchange to the individual and the profits arising from the transactions were for the most part reimbursed to the individual. These transactions, according to the AFM, created the impression that there was trading activity in respect of the funds while, in an economic sense, nothing changed. In addition, according to the AFM these transactions led to an artificially high market price, which constitutes market manipulation.
In April 2012, the name of the investment fund Sabon FunDing was changed to Brand FunDing and the individual was once again found guilty of market manipulation. He had used press releases to spread information that he was going to sell his participation interests to finance a takeover of a shopping chain, Brand FundDing. However, in the days following the press releases, he acted as a major buyer – rather than a seller – of Brand FundDing participations. The AFM reduced the amount of each fine to EUR 5,000 because the individual concerned is now bankrupt and heavily in debt.
One of the other offenders was found guilty of market manipulation on two occasions. According to the AFM, he had placed purchase orders with limits that were inexplicably high, which led to an artificially high price level. Based on the seriousness of the offence the fine was set at EUR 500,000.
Fine for violation of duty to safeguard important data
The AFM issued an administrative fine of EUR 3 million to ABN AMRO Bank on 28 August 2014
In mid-2010, Fortis Bank merged with ABN AMRO. Fortis had entered into a number of derivatives transactions with Vestia over the years. The AFM requested information from ABN AMRO after the merger in relation to Vestia and to what extent the bank complied with applicable legislation. ABN AMRO apparently had a restricted amount of data available on the matter, partly because the telephone conversations between the account managers of Fortis and Vestia were not available. In its decision to fine ABM AMRO, the AFM also took into consideration that ABN AMRO, as legal successor of Fortis, should have saved the e-mailbox of the main Vestia contact within Fortis.