News Update Investment Management

5 March 2021

On 3 February 2021, the Dutch Authority for the Financial Markets ("AFM") wrote a letter to investment firms under its supervision clarifying which services it views as falling outside the definition of individual asset management.

The AFM holds the view that investment firms providing investment services to professional investors often apply an overly broad definition of the investment service 'managing individual assets'. This can bring a risk that other investment services are also provided by these investment firms without the appropriate licences or without meeting all the applicable legal requirements.

According to the AFM, the reason for the letter is its observation concerning 'fiduciary management' by investment firms in an earlier survey of compliance with MiFID II requirements. The AFM states that the term 'fiduciary management' is ambiguously defined and has no origin in the Financial Supervision Act (Wet op het Financieel toezicht). The AFM has indicated that when investment firms provide fiduciary management involving providing investment services or a combination of investment services, the AFM believes that firms must hold a licence to provide these services. During this investigation, the AFM has found that this is not always the case and that, in particular, the scope of managing individual assets (asset management) was interpreted too broadly.

The AFM believes that, in the case of asset management, the investment decision should always be taken by the investment firm, even if this decision is taken in the context of an instruction given by the client. According to the AFM, as soon as an investment decision regarding an individual transaction is made by the client, even if this occurs on an incidental basis, this transaction falls outside the scope of asset management.

The AFM states that it expects that investment firms will use the letter to check whether they have the correct licences and will take steps where necessary to comply with all the legislation and regulations that apply to their services.

If you have any questions, please contact Oscar van Angeren, Daan Horsthuis or Harm-Paul Plas.