Overview of recent regulatory developments in Financial Services
This overview provides a selection of relevant legal developments regarding financial services regulation including a draft policy by the AFM on sound information, the European ban on binary options and restrictions for CFDs, enhanced focus on consumer credit checks and an update on PSD2 and new publication rights for the Dutch regulators.
Draft policy on sound information
The AFM recently published a draft policy rule on the provision of sound information. This policy rule includes existing guidance by the AFM on the provision of information and adds some new elements. Even though this draft is still open to consultation (until 20 April), it clearly sets out the views of the AFM in respect of sound information. Explicit reference is made to the use of behavioural sciences, a popular theme for Dutch regulators these days. The policy rule provides guidance on the relevant legal provisions on marketing and provision of information, distinguishing where possible between different financial products and services. While large parts of the policy rule are obvious and self-explanatory, it provides a helpful tool for the preparation of marketing materials as it makes quite clear what information has to be included. For example, it explains how to ensure that the information is sufficiently balanced.
European ban on binary options and restrictions for CFDs
On 23 March, ESMA announced that it will make use of its temporary intervention powers further to article 40 MiFIR by prohibiting the marketing, distribution and sale of binary options to retail investors and by setting restrictions on CFDs that are to be marketed, distributed and sold to retail investors. The CFD restrictions relate to leverage limits, margin close out, negative balance protection, benefits offered to retail investors and a standardised risk warning. These measures will start to apply one month (ban on binary options) and two months (restrictions to CFDs) after the official publication of these measures and will last for a period of three months with the possibility of extension in accordance with article 40 MiFIR. As a result, manufacturers and distributors of CFDs will have to take these new restrictions into account and amend the CFDs marketed accordingly. It is reasonable to expect that the AFM will closely monitor this ban and these restrictions in the Netherlands as the subject has been on the agenda of the AFM for quite some time and the AFM has apparently been one of the driving forces behind these measures.
Mandatory credit check
The AFM recently announced that it will be more strictly supervising credit providers to ensure that a mandatory credit check is performed for consumer credit in excess of €1,000. This credit check aims at preventing excessive credit and requires providers of consumer credit to verify the financial position of the prospective client in order to assess whether the proposed credit is justified. It appears that the AFM has reason to believe that too often this credit check is not performed properly (or performed at all). Consequently, providers of consumer credit will have to make sure that this credit check is duly performed (to the extent required).
Even though the Netherlands is lagging behind in implementing PSD2 as the relevant bill is still being discussed in parliament, DNB is proactively working towards compliance of existing and new payment services providers. While existing payment services providers and their shareholders have been asked to submit evidence on compliance with the PSD2 rules and to apply for a declaration of no objection to the extent required, new payment institutions are provided with information on how to apply for a PSD2 license. In this respect the PSD2 dead-lines remain relevant, even lacking implementation legislation. As a result, DNB will have to confirm that existing payment services providers are compliant with PSD2 by 13 July 2018 at the latest, whereas declarations of no objections for shareholders will have to be granted by 13 January 2019 at the latest. PSD2 compliance will even be tested by DNB on the basis of draft rules and regulations (including draft RTS and EBA Guidelines). For the formal granting of declarations of no objection, DNB will have to await the implementation of PSD2 into Dutch law. This is expected to take place later this year.
New publication rights for the Dutch regulators
Last week a bill that provides for new publication rights for the Dutch regulators, was adopted by Dutch parliament. This bill makes it possible that the Dutch regulators will be more transparent about the supervision exercised. More particularly, according to the new rules the Dutch regulators will be able to issue a public warning in order to inform the public and to avoid (further) damage for (potential) clients of a party violating Dutch financial regulatory rules. In addition, the Dutch regulators will be allowed to publish a statement about a warning or sanction imposed in response to public comments by the party involved. This right is introduced in order to enable the Dutch regulators to explain their side of the story in case the party subject to the warning or sanction opts to make this public on its own initiative. Finally, DNB will be allowed to publish certain key financial data provided on banks. These new publication rights will be accompanied by certain rights to protect the interests of the parties concerned, including the right to be object against publication. It is unknown when these new rules will come into effect. Now that the parliamentary process has been finished it is likely that this will be at short notice.
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