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The Netherlands – law and regulations
UCITS IV Directive implemented in the Netherlands
Legislation implementing the amended UCITS Directive (UCITS IV) in the Netherlands took effect on 22 July 2011.
The new rules relate to cross-border trade and are intended to achieve a more efficient market in a number of ways:
- The revised directive enables a UCIT (the feeder UCIT) to invest at least 85% of its assets in another UCIT (the master UCIT). The master and feeder do not have to have been established in the same member state. The Directive thereby makes an exception to the normal rules on the spreading of risks.
- Domestic and cross-border mergers between UCITS have become simpler.
- The notification procedure has been simplified, making it easier to offer Dutch UCITS in another member state. The manager merely needs to notify the AFM of its intention to offer participation rights in the other member state and no longer has to inform the supervisor of the other member state. The procedure has been shortened from two months to ten business days.
- The directive enables managers established in one member state to manage UCITS in another member state on the basis of the European passport for managers.
- The simplified prospectus has been replaced by the key investor information. This must contain a concise and non-technical summary of the UCIT's main elements, investment objectives, anticipated returns, risk profile, and costs. The information to be included has been fully harmonised, enabling potential participants to easily compare UCITS from different member states.
Dutch Central Bank issues policy on application of European Banking Authority guidelines
The Dutch Central Bank has published a policy guideline explaining which EBA guidelines and standards it uses as a basis for interpreting certain provisions of the Financial Markets Supervision Act (FMSA) and further regulations, including the Prudential Rules Decree FMSA.
The new policy thus links a number of EBA guidelines to the various prudential supervision rules in the FMSA and further regulations.
The Netherlands – other
Bill implementing the amended Prospectus Directive
The Minister of Finance has submitted a Bill to parliament implementing requirements arising from the revised Prospectus Directive. To meet the Directive's deadline, the Bill will have to take effect by 1 July 2012. The Bill's main features are:
- The exemption from the requirement to prepare a prospectus will apply to offers with a minimum denomination of EUR 100,000 per investor or per unit. The current limit is EUR 50,000. The threshold for dispensation under the Transparency Directive will also be raised to EUR 100,000.
- The requirement to produce a prospectus will not apply if the offer is directed at fewer than 150 persons per member state, none of whom are qualified investors. The current threshold is 100 persons.
- Clarification that the exception for offers with a total value of less than EUR 100,000 concerns the total value in the EEA.
- The exception to an obligation to produce a prospectus for offers to employees will be extended to (i) securities of issuing institutions with a head office or registered office in the EEA, and (ii) securities that are admitted to trading on a market outside the EEA..
- The definition of "qualified investor" will match the definition of professional client under the MiFID.
- Removal of the obligation to annually publish an information document.
- The requirements for the summary have been specified. The European Commission may expand the requirements for the contents and lay out of the summary.
- The prospectus will be deemed to be available to the public if it has been placed on the website of the issuing institution or the website of the financial intermediaries.
Offers of securities to the public currently fall outside the scope of the Prospectus Directive if the total value of the offer is less than EUR 2.5 million. Whereas the amended Prospectus Directive provides for the option to raise this threshold to EUR 5 million, the Bill maintains the current threshold of EUR 2.5 million. In the explanation to the Bill, the Minister of Finance has stated that an increase of the threshold is undesirable as it would cause the number of unsupervised securities offers to increase.
Finally, the Bill remedies two omissions. Firstly, the Bill requires that the prospectus identifies the person responsible for the prospectus. This requirement was incorrectly omitted from earlier implementing legislation. Secondly, the FMSA does not include the exemption for offers of securities already admitted to trading on a regulated market situated or operating in the Netherlands. This omission will also be rectified.
Bill implementing the Omnibus I-directive
A Bill has been submitted to parliament implementing de Omnibus I Directive. This Directive amends a large number of European directives in connection with the powers of the new European supervisors (ESMA, EBA, EIOPA en de European Systemic Risk Board). For example, it grants powers to supervisors to develop draft standards in order to create a single EU-rule book.
The implementing Bill amends the FMSA, the Bankruptcy Act, the Pensions Act and the Compulsory Occupational Pension Schemes Act. It introduces provisions on cooperation between the Dutch financial regulators on the one hand and the European supervisors and European Systemic Risk Board on the other. The Bill also contains provisions made necessary by the introduction of these European supervisors. The Omnibus I Directive will have to be implemented in the member states by 31 December 2011.
Dutch Central Bank issues policy on application of EBA guidelines
This policy links a number of the European Banking Authority's guidelines to the various Dutch prudential rules in or under the Financial Markets Supervision Act (FMSA), including the Prudential Rules Decree FMSA.
The new policy ensures that the EBA guidelines are incorporated in the prudential framework of the FMSA, and the supervisory practice of the Dutch Central Bank.
Ministry of Finance consultations
Imlementation of CRD II (2009/111/EC)
To implement CRD II, the provisions in the Prudential Rules Decree FMSA on securitisations, large positions and own funds items are to be tightened. The consultation on this closed recently.
Proposals for ex ante financing of the Deposit Guarantee System
The government has recently proposed changing how the Deposit Guarantee System ("DGS") in the Netherlands is financed. Under the proposed system, banks would contribute to the DGS each quarter in advance. The contributions would be added to the deposit guarantee fund from which compensation claims can be paid. If there is insufficient money in the fund, the shortfall will be shared between banks. Banks will no longer be able to take part in the system for free. By having a risk-differentiated contribution, banks bearing the least risk will pay the lowest premiums. In addition, the costs will be spread out over time so that banks will no longer be faced with one high fee. The Minister of Finance has taken developments in Europe into account in designing the new deposit guarantee system.
The consultation on the proposals has concluded. The government would like the changes to come into force on 1 July 2012.
Amendments to the Act on the Prevention of Money Laundering and Terrorism Financing
The Financial Action Task Force's most recent evaluation report has led the government to propose several amendments of the Act on a number of points.
As the majority of shortcomings found by the FATF related to client due diligence, most of the proposed amendments relate to that aspect of the Act:
- In all instances, organisations will have to identify the beneficial owner or establish that an owner does not exist.
- When an individual presents himself as a client, organisations must verify if the individual acts on his own behalf, or on someone else's.
- If the client is a legal entity, the organisation must know which individuals may legally represent the legal entity.
- Rules are proposed for the interaction with trusts. The exemption from carrying out client audits that currently applies to trust offices will be limited to designated trust services and will not cover other services offered by trust offices.
- Organisations must consider whether a notification of an unusual transaction is necessary when the client and the beneficial owner cannot be identified, their identity cannot be verified, and the purpose and intended nature of the business relationship cannot be established.
The Act will also be clarified or amended on a number of other aspects, including:
- The definition of "transaction" will be changed to make it clear that when an organisation establishes that a transaction of a client, or of a third party for the benefit of the client, is unusual, it must always report the transaction. In principle, it will not be relevant when the unusual transaction has taken place.
- Under the existing rules, a person who has ceased to be active as a politically eminent person for at least one year will no longer qualify as a PEP. This period will be extended to five years. The PEP measures apply to all foreign PEP, even if they do not reside in the Netherlands. Finally, the PEP measures will also apply where the beneficial owner rather than the client is the PEP.
- The scope of the Act is extended to all registered property.
- Advice or assistance for the purchase or take-over of a part of a business will also fall under the notification requirement.
- Advice or assistance for the creation of a right of mortgage without any additional transfer will be included as a notifiable service for legal professionals.
The consultation ended on 11 September.
Financial Markets Amendment Bill 2013
The Ministry of Finance is holding a consultation on the Financial Markets Amendment Bill 2013. This Bill is to enter into force on 1 January 2013. In addition to technical amendments, the Bill contains a few substantive changes, including:
- The rules on commissions are to be amended to promote the notion that the customer takes a central position. Regulations will have to contain rules on the expertise and experience test to be taken by financial service providers in certain instances.
- The public offer rules are to be amended on a number of points, including how to better protect the position of minority shareholders in the case of a public offer.
The Financial Markets Amendment Act 2010 came into force on 1 July. The Financial Markets Amendment Act 2012 is pending in the Second Chamber and has a projected date for entry into force of 1 January 2012 (see also Financial Markets Newsletter June 2011 issue).
Implementation of Solvency II Directive
The Ministry of Finance is holding a consultation on the implementation of the Solvency II Directive (2009/138/EC). The purpose of the Directive is to improve the operation of the internal insurance market and offer better protection to insured parties and beneficiaries. To that effect, the Directive introduces the supervision of groups, provides for maximum harmonisation of solvency requirements and outlines the disclosure obligations for insurance companies.
The consultation will end on 7 October. The deadline for implementation of the Directive is 31 October 2012.
Implementation of AIFM Directive
The Ministry of Finance is also holding a consultation on the implementation of the Alternative Investment Fund Managers Directive. This directive introduces rules on the licensing, operations and transparency of alternative investment fund managers. The Directive aims to fully harmonise the rules for investment fund managers who exclusively offer participation rights to professional investors. However, member states may impose additional rules on managers that offer participation rights to non-professional investors. The Netherlands has opted for such additional rules. Managers who also offer participation rights to non-professional investors must be licensed under the Financial Markets Supervision Act. In addition, such managers are subject to compulsory dispute resolution that applies to managers of UCITS under the UCITS Directive.
ESMA has held consultations on measures implementing the AIFM Directive.The deadline for implementation of the Directive is 22 June 2013, but a transition period will apply in certain cases. ESMA has also held consultations about measures implementing the AIFM Directive.
AFM to use mystery shoppers for more effective supervision
The AFM has announced its intention to use mystery shoppers during supervisory investigations. A pilot has shown that this method can be effective.
In the past, the AFM has exercised a great deal of restraint when using this method of investigation. Recently, however, it has performed further legal analysis at the recommendation of the Scheltema Commission, and has also consulted with other supervisors and the Ministry of Finance. This has led to the conclusion that, subject to certain conditions, the AFM can employ test clients to verify whether financial undertakings are complying with the FMSA.
Europe
European Directives - developments
- The European Parliament has approved the Commission's proposal for a Directive regarding the supplementary supervision of financial entities in a financial conglomerate.
- The European Parliament has approved a proposal for a regulation on short selling and certain aspects of credit default swaps.
Commission publishes new proposals on capital requirements
The European Commission wants to strengthen capital requirements and governance at banks and investment firms and has put forward proposals for a regulation and a directive to replace the existing Capital Requirements Directives. The new directive governs the access to deposit-taking activities, while the regulation establishes rules for the activities of credit institutions and investment firms. The proposals have three concrete goals:
- Banks should hold more and better forms of capital to be able to withstand future shocks. In making these proposals, the Commission is applying international standards on bank capital (Basel III) agreed upon at G20 level to the European situation.
- The Commission also wants to set up a new governance framework giving supervisors new powers to closely monitor banks and, possibly, to take action when they spot risks. They would, for example, be allowed to reduce credit if it looks like it is growing into a bubble.
- In the Commission's proposal all legislation on this subject is consolidated. This creates a single rule book for banking regulations, which will improve both transparency and enforcement.
The Commission is aiming for implementation of the new rules by the end of 2012. The rules will be phased in gradually, but from 2019 they mustbe fully in effect.
Court of Justice of the European Union provides further interpretation of market manipulation ban
Causing an abnormal or artificial price level is sufficient for the ban on market manipulation to apply. It is not relevant whether the price immediately returns to its natural level or after a certain period. This follows from a recent preliminary ruling of the Court of Justice of the European Union on the interpretation of market manipulation in the Market Abuse Directive. The ruling followed a referral by the Administrative Court for Trade and Industry in the Netherlands.
According to the Court of Justice, for the price of one or more financial instruments to be considered fixed at abnormal or artificial levels, the definition does not require that the price maintains an abnormal or artificial level for more than a certain duration.
The ruling implies that the Dutch AFM or Public Prosecution Service merely needed to prove that an artificial price level had been caused: they did not have to address the time frame. This applies to situations both where a manipulator takes the price to an artificial level and where a manipulator stabilises the price at an artificial level without having moved the price first.
Action on short-selling
The European supervisors have issued a joint statement on action against short selling taken by Italy, France, Spain and Belgium. The AFM has announced that it sees no reason to introduce a ban on short selling in the Netherlands at the present time. Furthermore, ESMA has published an updated list of measures adopted by competent authorities on short selling
ESMA publishes list of credit rating agencies
ESMA has published a list of credit agencies registered or certified in accordance with the Credit Rating Agencies Regulation (EC) No. 1060/2009.
Other ESMA publications
EBA publications
International publications – August-September 2011
Capital Markets Law Journal
- The European sovereign debt crisis and its evolving resolution / Deborah Zandstra – Capital Markets Law Journal, Vol. 6, No. 3, p. 285 e.v.
- Drafting a model collective action clause eurozone sovereign bonds / Lee C. Buchheit and Mitu Gulati – Capital Markets Law Journal, Vol. 6, No. 3, p. 317 e.v.
- Alternative regulation: the directive on alternative investment fund managers / Angus Duncan, Edmond Curtin and Marco Crosignani – Capital Markets Law Journal, Vol. 6, No. 3, p. 285 e.v.
Journal of International Banking Law and Regulation
- Responses to the Financial Crisis / Rosa M. Lastra and Geoffrey Wood – Journal of International Banking Law and Regulation 2011, Vol. 26, Issue 7, p. 307 e.v.
- Section 2(a)(iii) of the ISDA Master Agreement and Emerging Swaps: jurisprudence in the Shadow of Lehman Brothers – Journal of International Banking Law and Regulation 2011, Vol. 26, Issue 7, p. 313 e.v.