13 January 2014

New ban on inducements for investment firms

Investment firms may no longer receive or pay inducements from or to third parties. Their clients must pay directly for any individual asset management, investment advice and execution-only services.

The new ban on inducements came into effect on 1 January 2014. During the first quarter of 2014, however, investment firms may still collect inducements for 2013. The inducements ban applies only to services provided to non-professional investors. In addition, the ban does not apply to:

  • inducements paid directly by the investor
  • inducements which enable or are necessary for the provision of the relevant service, such as custody fees, settlement and stock exchange fees, statutory levies or legal costs
  • inducements in relation to existing financial instruments other than participation rights in an investment institution (e.g., structured products)
  • inducements paid by the investment firm to a tied agent
  • certain finder’s fees
  • small business gifts 

A transitional period of one year applies to trailer fees. 

Other regulatory changes introduced at the same time as the inducements ban include:

  • The Dutch Central Bank (DNB) will become authorised to designate currencies as convertible. This is important because banks and clearing organisations may only cover liquidity shortfalls in a determined currency by liquidity surpluses in another currency if that other currency is convertible. A change in the Prudential Rules Decree is currently required to include a currency in the list of convertible currencies, so the proposed change would simplify the process
  • Additional rules are introduced on the supervision of settlement companies. These companies have been subject to licence requirements since 1 January 2014
  • DNB becomes authorised to assess banks and investment institutions on their relevance to the stability of the financial system. Where banks and investment companies are considered systemically relevant, DNB will also set the amount of the additional buffer required
  • The intervention ladder used by DNB is enhanced and more risk-orientated.
  • Financial service providers will have to store data on advice given and financial products sold for a period of five years, unlike the current requirement of one year
  • The risk management of premium pension funds will be further elaborated
  • Mortgage loan lenders can in certain circumstances proceed from the assessed value of a residential property when determining its value
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