On 26 June 2014, the consultation version of the Financial Markets Amendment Act 2016 (the "Amendment Act") was published. Market parties have the opportunity to provide their response until 13 August 2014. In this newsletter we will discuss a number of the most important proposals that have been included in the Amendment Act.
The Amendment Act 2016 contains, amongst others, new rules regarding:
- The regulatory authorities will have the power to suspend board members (and possibly supervisory board members) if their suitability is in doubt;
- Protection of investors in derivatives against bankruptcy of the bank;
- Application of intervention measures to parent companies of insurance companies;
- The possibility to expropriate claims on the distressed institution in case of intervention;
- Prevention against money laundering and the financing of terrorism in cross-border transport of valuables.
Below we set out a number of the most important proposals in the Amendment Act.
Suspension of policy makers in case their suitability is in doubt
The Amendment Act provides that the AFM and DNB will have the power to give an instruction in case the suitability of a board member is in doubt, but has not yet been definitively determined. According to the explanatory notes to the Amendment Act, this includes the power to suspend a board member. Also according to the explanatory notes, the AFM and DNB currently already have the power to suspend a board member in case its integrity is in doubt.
It appears to follow from the proposals in the Amendment Act that the same would apply applies to supervisory board members, but this is not clear.
Protection of investors in derivatives
The Amendment Act introduces a new regime for the protection of investors in derivatives against the bankruptcy of the intermediary that is involved with the derivative.
The regime will be incorporated in the Dutch Securities Book-Entry Administration and Transfer Act (Wet giraal effectenverkeer). The Amendment Act provides that all derivative positions that the intermediary has entered into with a third party - a CCP or another third party - in connection with client positions and all rights and obligations regarding the exchange of collateral, will be separated from the other assets and liabilities of the intermediary. Clients of the intermediary holding client positions will have recourse on this separate estate in case of bankruptcy of the intermediary.
Amendment intervention measures
Following from the evaluation of the Dutch Intervention Act, the Amendment Act provides for new powers for the Minister of Finance and DNB. The power to exercise intervention measures and to file for the bankruptcy of an insurance company is expanded to the parent company of the insurer. The European Bank Recovery and Resolution Directive, that will in due course be implemented in Dutch regulation through a separate act, will provide for such power with respect to banks and certain investment firms. The Amendment Act provides that the Minister of Finance and DNB will also have this power with respect to parent companies of insurance companies.
Another amendment (that not only applies to insurance companies) is that also claims of third parties against the distressed institution can be expropriated.
Prevention of money laundering and the financing of terrorism in cross-border transport of valuables
The Amendment Act provides new rules for taking effective action against money laundering and terrorism financing regarding the transport of currency, gold, precious metals and gemstones.
The Amendment Act also contains a number of smaller amendments, including the following:
- The AFM and DNB will have the power to withdraw the licence of an institution under its supervision if the institution does not pay its annual supervisory fees;
- A clarification that the Dutch managers of alternative investment funds cannot offer participations in funds that have their seat in a non-cooperative country as defined by the FATF;
- An exception will apply to managers of investment institutions that offer participations of least EUR 100,000 with respect to the rules on controlled business operations;
- The definition of "clearing and settlement institution" (afwikkelonderneming) is amended in order to clarify that the sole transmission of payment instructions is not an activity for which a licence is required as clearing and settlement institution.
The intended date on which the Amendment Act will enter into effect is 1 January 2016. Market parties will have the opportunity to respond until 13 August 2014.