Proposal for the 2015 Financial Markets Amendment Act published for consultation
01 October 2013
The draft Bill contains several proposals for amendments, the most notable ones being:
- the applicability of the suitability requirements and integrity testing will be expanded to persons: (i) who work at a bank or insurance company; and (ii) who are (ultimately) responsible for transactions that can substantially alter the risk profile of a financial undertaking;
- the applicability of the banker’s oath will be expanded to persons: (i) whose activities can alter the risk profile of a financial undertaking; or (ii) who are directly involved in providing financial services;
- the conditions under which group finance companies may be exempted from the banking licence requirement will be tightened; and
- the District Court of Amsterdam will be given exclusive jurisdiction over civil cases regarding investment service provision, performing investment activities, and the public offering of securities.
The consultation closed on 16 September 2013.
Allen & Overy, in conjunction with four large Dutch law firms, responded to this consultation. This joint response criticised the proposed tightening of the conditions for the exemption for group finance companies. Currently, a group finance company issuing bonds to the public may be exempted from the banking licence requirement if, in short:
(i) the group finance company has arranged for an unconditional guarantee by the parent company, a keep well agreement, or a guarantee by a bank for the liabilities incurred; and (ii) at least 95% of the proceeds of its bond issues are employed within the group to which the finance company belongs. The draft Bill proposes to tighten these conditions, in an effort to prevent abuse of the exemption as currently worded. The amendments include changing the said 95% requirement in such manner that the banking licence exemption would no longer be available if more than 5% of external funding is employed outside of the group.
Our consultation response strongly criticised the draft Bill. We suggested that the tightening of the conditions is inconsistent with the rationale behind the exemption, and, moreover, that the proposed changes are likely to lead to the end of the use of group finance companies in the Netherlands. We have meanwhile spoken to the Ministry of Finance officials who are in charge of this draft Bill; they have acknowledged that they will need to address our concerns. It remains to be seen how they will accomplish this. The draft Bill will probably not be submitted to parliament before early 2014.
The Bill is part of a cycle of amendments of national regulations in the field of financial markets. The idea behind this is that each year all the amendments in the area of financial markets are included in one Bill.
2014 Financial Markets Amendment Act
In the meantime, the Bill for the 2014 Financial Markets Amendment Act was passed by the Lower House and was sent to the Upper House last September. Amendments contained in that Bill include placing clearing and settlement institutions under supervision, the introduction of a general duty of care for the financial services industry, amendments relating to financial reporting, and adaption of the rules on the separation of assets for investment institutions and undertakings for collective investments in transferable securities (UCITS). Entry into force for this Bill is planned on 1 January 2014.
Footnotes1 The Bill is part of a cycle of amendments of national regulations in the filed of financial markets. The idea behind this is that each year all the amendments in the area of financial markets are included in one Bill.