In context

Financial Markets in brief – new regulation and other developments

December 13, 2016
In context

There have been many developments in national and European financial markets regulation during the past month. Among other things, a consultation on the review of the Dutch Financial Markets Supervision Act and on a new prudential regime for investment firms was published. In this article we provide a brief overview of these and other developments.

Highlighted publications


Consultation on review of Dutch Financial Markets Supervision Act
The Ministry of Finance is considering a review of the Dutch Financial Markets Supervision Act (Wft) and has published an exploratory study of the options.


The Wft has been amended more than 70 times since it entered into force in 2007. A considerable number of the amendments concern the implementation of European regulation. As a result, the Wft has become voluminous and very complex. In order to make the Wft future-proof and easier to read, the Minister of Finance now has proposed the following angles of approach:

  • Leaving the Wft as it is
  • Making minor legal-technical amendments and improving the explanatory notes
  • Improving the current structure of the Wft, while maintaining the cross-sectoral approach
  • Introducing a sectoral approach, where the rules are organised by area (for example, banking, insurance, securities markets)
  • Replacing the Wft with a number of separate, sectoral acts


The ministry is also assessing the need for an English translation of the entire Wft, and for a guide or website which explains the applicable legislation for each sector.


The twin peaks model, where the Dutch Central Bank (DNB) is responsible for prudential supervision and the Netherlands Authority for the Financial Markets (AFM) for conduct of business supervision, will be maintained.


The consultation runs until 1 March 2017.


Implementation of remaining market abuse rules
The Ministry of Finance has launched a consultation on a decree implementing the remaining provisions of the Market Abuse Regulation (MAR).


As a regulation, the MAR has direct effect. Therefore, most rules – chapters 2 to 5 – will be removed from the Dutch Market Abuse Decree. In addition, the implementing decree deals with a number of implementation issues and Member State options in the MAR. For example, under the MAR, an issuer who has delayed disclosure of information to the public must inform the competent authority immediately after the information is disclosed to the public. Issuers must also keep a record of the date and time when the inside information first existed, the time when the decision to delay was taken, who was responsible for the decision, and evidence of fulfilment of each of the conditions for delay. The implementing decree now clarifies that this information is to be provided to the AFM only upon request.


Finally, once the implementing Decree enters into force, the AFM will have the authority to impose the new maximum fines required by the MAR. The maximum fine for serious infringements will then be EUR 5 million and, as a result, the maximum fine for repeat infringements will be EUR 10 million. For large enterprises the fine will be up to 10% of net annual turnover. This maximum fine can be raised to EUR 20 million or (for large enterprises) 15% of net annual turnover.


The Dutch bill implementing the MAR and the Market Abuse Directive took effect last summer. When the implementing decree takes effect, the implementation of the new market abuse regime will be complete.


The consultation runs until 16 December.


Agreement on new EU prospectus rules
The European Parliament, the Council for the European Union and the European Commission have agreed on the proposal for the Prospectus Regulation, which will replace the current Prospectus Directive. The proposal includes the following changes:

  • No EU prospectus will be required for capital raisings and crowdfunding projects below EUR 1 million. Member States will also be able to set higher thresholds for their domestic markets. Here the threshold will be raised from EUR 5 million to EUR 8 million.
  • An EU growth prospectus will be created for SMEs, mid-caps admitted to an SME Growth market or small issuances by non-listed companies.
  • An alleviated corporate bond prospectus will be available for admission to wholesale debt markets.
  • Frequent participants in the capital markets will have a frequent issuer regime that they can activate once an opportunity to raise funds arises. This will halve approval times from ten days to five.
  • There will be a lighter prospectus regime for issuers already listed on a public market that want to issue additional shares or raise debt.
  • Prospectus summaries will become shorter and the language used will be easier to understand for investors.
  • No more paper prospectuses will be required, except if a potential investor explicitly requests one.
  • ESMA will operate a free and searchable online prospectus database.


The European Commission expects that the new rules will make it easier and cheaper for smaller companies to access capital markets. Also, the rules will be simplified for all companies that wish to issue shares or debt.


The agreed text now goes to the European Parliament and the Council of the EU for a final vote.


Application date of PRIIPS Regulation postponed
Following the European Parliament’s rejection of the Regulatory Technical Standards (RTS) that set out the format and methodology for the Key Information Document (KID), the Parliament has also called for a postponement of the entry into application of the underlying Regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs).


The European Commission’s proposal to delay the date of application of PRIIPs by one year has now been adopted by the Parliament.


The RTS are currently being revised and are expected to be adopted during the first half of 2017 and apply as of 1 January 2018. This means that issuers and distributors of PRIIPs products have until 1 January 2018 to put the provisions in place.


EBA consults on new prudential regime for investment firms
The EBA has launched a consultation on the design of a new prudential regime for investment firms. The proposed framework aims to create a harmonised set of requirements that are simple, proportionate, and tailored to investment business. The framework covers all investment firms that are ‘not systemic’ and ‘bank-like’ and encompasses MiFID investment firms and potentially MiFID II firms, but will also be relevant for UCITS management companies or AIF managers authorised to conduct certain MiFID investment services or activities.


The framework under consultation focuses on the risks that investment firms may pose to customers and to market integrity and liquidity. The EBA is proposing that the ongoing capital requirements be calculated based on capital factors attributed to one of these two broad types of risks, which are then amplified by the risk to which firms themselves are exposed. This means that firms which pose more risk to customers and markets should comply with higher capital requirements than those who pose less risk, and firms that pose similar risk to customers and markets, but are themselves exposed to more risk, should hold more capital than those that are exposed to less risk. In addition to capital requirements, the prudential regime also addresses the definition of capital, liquidity requirements and other prudential requirements.


Other aspects of the proposal address the:

  • Need for consolidated supervision
  • Opportunity to monitor large exposures for investment firms
  • Consequences that the introduction of a new prudential regime would have on the reporting requirements
  • Importance of internal risk management arrangements; and
  • Need for competent authority to have the power to address firm-specific issues.


It also includes a dedicated section on remuneration which sets out that all investment firms should have remuneration policies compliant with MiFID remuneration requirements in place for all staff and tied agents.


The consultation runs until 2 February 2017.


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