Overview of recent regulatory developments in financial markets
14 April 2017
FINANCIAL PRODUCTS
Proposed ban on marketing of harmful financial products
Recently the AFM has published a consultation document with respect to marketing of harmful financial products. This follows a proposed change to the relevant rules that will grant the AFM the authority to bring harmful financial products under a marketing ban as far as marketing to retail clients is concerned (see our news update of October 2016). Harmful financial products are - in short - high risk or complex products, further to be designated by the AFM. On the basis hereof the AFM now proposes to ban marketing of binary options, cash warrants, coco's, certain CFD's, certain turbo's and certain futures. In addition, the AFM aims at a ban of marketing of so-called 'flash credit': short term consumer credit with high interest rates. Even though the rules are yet in draft form and the input received during consultation may lead to changes, it may be expected that this ban on marketing will enter into force on 1 July 2017.
FINANCIAL INSTITUTIONS
AFM agenda and focus for 2017
Recently the AFM published a list of top 10 risks and its supervisory approach in this respect. The list includes low interest rates, excessive credit, the search for yield, issues with old in-surance policies, careful treatment of client data, cybercrime and new market entrants. In addition, the AFM indicates that for 2017 it has three priorities: decrease of undesirable risks, renewal of supervision by investment in new technology and increase of effectiveness and efficiency. Various items of focus are mentioned and we recognize certain statements made by the AFM from our involvement in various matters. Many aspects are noteworthy such as the focus the AFM puts on excessive credit, not only by addressing traditional ways of financing but also by looking at new ways of financing (even though these may beyond the authority of the AFM). A general theme throughout the list of risks and priorities is that the AFM is very much focused on (vulnerable) consumers, an aspect which is leading for many years.
DERIVATIVES
No enforcement of variation margin
DNB has announced that parties that failed to meet the 1 March 2017 deadline for collateralization of their exposure in respect of OTC derivatives by posting or exchanging variation margin, will not directly be subject to regulatory enforcement. The reason being that many parties globally have indicated that they won't be able to meet the deadline due to the lack of legal documentation. Further to statements by EBA, ESMA and EIOPA national regulators such as DNB have discretion to postpone regulatory enforcement. This is now followed by DNB. DNB has indicated that by doing so it will follow a risk based approach which means that parties must be able to substantiate that they have made best efforts to comply with the variation margin requirement. DNB further indicated that new OTC derivatives transactions shall only be allowed if all legal documentation is in place. Transactions with existing counterparties for hedging purposes are still allowed on the basis of existing legal documentation. Further, certain reporting requirements apply such as in respect of compliance and non-cooperating counterparties.
The regulatory team of Houthoff can be reached at regulatory@houthoff.com or at +31 (0)20 605 6311.
