On 14 April 2022, the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM) published its legislative letter (wetgevingsbrief) for 2022. The AFM annually submits this letter to the Dutch Minister of Finance (the Minister). The letter describes European and national developments relevant to the supervision on the financial sector and set outs the legislative changes desired by the AFM to address bottlenecks in Dutch legislation. The Minister published the response to this letter, which describes the intentions and actions undertaken by the Minister to address the issues raised by the AFM.
In its legislative letter, the AFM addresses three main themes: effective supervision, cooperation with other supervisory authorities and fair and efficient capital markets.
- Effective supervision
The AFM defines four legislative wishes, which, according to the AFM contribute to an increase in the effectiveness of its supervision:
- Introduction of a tip-off scheme for market abuse. The AFM would like to introduce a tip-off fee to create a financial incentive to report market abuse. Article 32 (4) of the Market Abuse Regulation (Regulation 596/2014, MAR) provides for the option for Member States to allow financial incentives to persons who offer relevant information about potential infringements of the MAR. The AFM requests the Minister to implement this Member State option into Dutch law. The Minister welcomes this request and will enter into for further consultation with the AFM about the tip-off scheme.
- Pseudo purchase authority. The AFM asks for the possibility to open a bank account under a fictitious identity, which allows the AFM to make use of its authority to make pseudo purchases. Under consumer protection law, the AFM has the authority to participate in trading without disclosing itself as such in order to verify whether market participants in practice comply with consumer protection rules. However, given the customer due diligence requirements that apply to banks, it is impossible to open a bank account using a fictitious identity. This bank account is required by the AFM to make effective use of its pseudo purchase authority. In its response, the Minister indicates that the practical difficulties encountered by regulators regarding their pseudo purchase authority will be examined, as well as a possible resolution.
- Sanctions Act publication regime. The Sanctions Act 1977 (Sanctiewet 1977, the Sanctions Act) currently does not provide for a publication regime for enforcement measures imposed for a breach of this Act. This is in contrast to other legislation supervised by the AFM, such as the Act on the Financial Supervision (Wet op het financieel toezicht, the AFS) and the Act on the prevention of money laundering and terrorism financing (Wet ter voorkoming van witwassen en terrorisme financiering, the Wwft). Currently, the AFM does publish decisions that impose measures for breaches of both the AFS or Wwft and the Sanctions Act, but the AFM is required to black out the sections regarding the Sanctions Act. According to the AFM, the introduction of a publication regime for the Sanctions Act would contribute to the uniformity of its supervision. In previous legislative letters, the Dutch Central Bank (De Nederlandsche Bank, DNB) also requested this publication regime. The Minister states that the possibility for a publication regime under the Sanctions Act will be further analysed.
- Financial reporting supervision authority. The AFM evaluated its authority with regard to its supervision on financial reporting, in light of the Guidelines for Enforcement of Financial Information (GLEFI), as published by the European Securities and Markets Authority (ESMA) and applicable as of 1 January 2022. The Financial Reporting Supervision Act (Wet toezicht financiële verslaggeving) does not provide the AFM with the five competences that the GLEFI prescribe for national competent authorities. The AFM requests the Minister to align the competences under this Act with the competences set out in the GLEFI. The Minister indicates that this will be considered and that stakeholders will be consulted in the short term.
- Cooperation with other supervisory authorities
In the coming years, the AFM wants to strengthen its cooperation with other European and national supervisory authorities. Especially with regard to the Financial Reporting Supervision Act, the AFM notes that it is currently allowed to share confidential data is has obtained under this Act with DNB and on an anonymous basis with ESMA. However, it is currently not possible to share this data with the European Central Bank (ECB). The AFM states that this restricts its ability to supervise banks that are subject to the Single Supervisory Mechanism (SSM), as these are supervised by both DNB and the ECB.
In addition, the AFM notes that the possibility to provide data to ESMA on a non-anonymous basis would contribute to the efficient and effective supervision of the Financial Reporting Supervision Act, the uniform application of this Act and the development of a joint enforcement framework.
The AFM requests the Minister to revisit the Financial Supervision Act to allow the AFM to share data with the ECB and ESMA. The Minister supports this proposal and indicates that she would like to receive a further analysis in order to discuss this with the AFM.
- Fair and efficient capital markets
The AFM points out four major legislative proposals that have been presented by the European Commission in the context of the Capital Markets Union: (1) the proposal for a European Single Access Point (ESAP), (2) the review of the Markets in Financial Instruments Regulation (MiFIR), (3) the review of the Alternative Investment Fund Managers Directive (AIFMD) and (4) the introduction of the European Long Term Investment Fund (ELTIF). The AFM indicates that it wants to continue to contribute to the design and development of these proposals, together with the Ministry of Finance.
The AFM identifies two other legislative concerns relating to capital markets:
- Amendment to the scope of disclosure rules. The disclosure rules regarding votes, capital, control and capital interest in issuers as included in Chapter 5.3 of the AFS currently do not apply to exempted issuers. The AFM noticed that the number of exempt issuers admitted to trading on regulated markets is increasing. These exempt issuers are mainly Special Purpose Acquisition Companies (SPACs), usually in the form of a private limited liability company (besloten vennootschap) that have a complex structure, also with regard to capital and voting rights. The AFM is of the opinion that the scope of the disclosure rules of Chapter 5.3 AFS should be reconsidered, as this enhances the legal certainty and information equality of issuers. The Minister recognizes the importance of a level playing field for issuers when it comes to disclosure rules. The Minister states that this will be considered together with the Minister of Justice and Security in the broader context of the modernisation of Dutch corporate law.
- Regulated markets. Currently, there is no level playing field between market operators of regulated markets and market operators of a Multilateral Trading Facility (MTF) or Organised Trading Facility (OTF) in the Netherlands. Pursuant to Article 4 of the Decree Regulated Markets AFS (Besluit gereglementeerde markten Wft), market operators of regulated markets are only allowed to implement proposed changes to the rules of its regulated market if the AFM has approved these changes. This requirement does not apply to operators of an MTF or OTF. In addition, this requirement goes beyond what is determined in the revised Market in Financial Instruments Directive (MiFID II). MiFID II only prescribes an approval requirement in case operational functions are outsourced by a regulated market. The AFM states that Dutch legislation must be aligned with MiFID II and that an amendment to the Decree Regulated Markets AFS is necessary for this purpose. The Minister already complied with this request. The amendment of the Decree forms part of the Financial Markets Amendment Decree 2022, a legislative proposal that the Minister will submit to the Dutch Parliament (Tweede Kamer).
The AFM mentions two other issues it would like the Minister to consider:
- Compensation mechanism for collective damages. The AFM calls on the Minister to improve the Dutch compensation system with regard to collective damages. In the past years, the expertise of the AFM about financial products and the financial markets has proven benefit the ability of consumers to receive adequate compensation for damages they have suffered as a result of deficiencies in the provision of financial services. The AFM wants to continue its contribution to this process and requests the minister to analyse whether this process can be institutionalised. This allows the AFM to share its expertise as an independent party, which ensures that market-wide damages suffered by different parties are treated consistently. The Minister would like to consult the AFM to discuss opportunities to improve these compensation mechanisms.
- Legislative letter 2021 – data driven supervision. In its legislative letter for 2021, the AFM identified several bottlenecks related to data driven supervision. The AFM requested the Minister to increase its powers with regard to the retrieval of data from market parties. In the 2022 letter, the AFM again brings these points to the attention of the Minister.