News Update Financial Regulatory

In this News Update, we discuss the legislative requests of the AFM and DNB, EIOPA's consultation on draft Guidelines integrating the customer’s sustainability preferences in the suitability assessment under the IDD; and the emergency bill amending the Trust Offices Supervision Act 2018. We further highlight some other financial regulatory publications issued since our last News Update was published.

AFM and DNB | Legislative requests

In their annual legislative letters, the Dutch Authority for the Financial Markets ("AFM") and the Dutch Central Bank (De Nederlandsche Bank, "DNB") informed the Minister of Finance about developments in the financial sector that, in their opinion, required amendments to the legislation and regulations.

The AFM's legislative letter 2022 (in Dutch) included the following legislative wishes: Firstly, the AFM would like to create a financial incentive for tip-offs when reporting market abuse. In addition, in the context of mystery shopping, the AFM would like to make test purchases, where necessary, under a fictitious identity. The AFM would also like to see that measures imposed under the Sanctions Act 1977 (Sanctiewet 1977, "Sw"), which are currently not allowed to be published, can be made public. Furthermore, the AFM asked the Minister to investigate possibilities to sustainably improve the current compensation system for collective losses. The AFM believes the study's results into the settlement process for interest rate derivatives could serve as valuable input.

In DNB's legislative letter 2022 (in Dutch), its legislative wishes include the following: DNB desires to strengthen the supervision of the Dutch branches of life and non-life insurers from third countries to increase the certainty that their assets are and remain available to Dutch policyholders. DNB believes that the current regulatory framework does not provide sufficient guidance in this respect. It sees opportunities to strengthen the supervisory framework by imposing additional conditions on the granting of licences and in the ongoing supervision.

In addition, DNB considers it important to finance the transfer of deposits with deposit guarantee schemes ("DGS") funds if a bank fails to ensure the bank's proper resolution. This can be arranged by implementing the Member State option from Article 11(6) of the DGS Directive. DNB requests that this happens in the short term.

Furthermore, DNB believes that the resolution framework for insurers should be strengthened in certain respects, similar to recent amendments made to the resolution framework for banks. DNB also addresses legislative wishes from previous years, such as introducing an obligation to publish measures imposed under the Sw, as also requested by the AFM.

The Minister of Finance responded to the regulators' legislative letters on 14 April 2022.

EIOPA | Consultation on draft Guidelines on integrating the customer’s sustainability preferences in the suitability assessment under the IDD

On 13 April 2022, the European Insurance and Occupational Pensions Authority ("EIOPA") launched a consultation on draft Guidelines integrating customer’s sustainability preferences in the suitability assessment under the Insurance Distribution Directive ("IDD"). The Guidelines stem from Commission Delegated Regulation (EU) 2021/1257, that will introduce important changes as of 2 August 2022. The changes include the way the sustainability preferences of individual customers are considered in the suitability assessment by the insurance undertakings and insurance intermediaries providing advice on insurance-based investment products. The IDD amendments introduced by this Regulation aim to ensure that retail investors can invest and save sustainably and participate in the transition to a low-carbon, more sustainable, resource-efficient and circular economy in line with the Sustainable Development Goals. Insurance intermediaries and insurance undertakings must recommend insurance-based investment products that meet the sustainability preferences of their customers or potential customers if they have such preferences.

The main objective of including sustainability factors in the advisory process is to ensure that it does “not lead to mis-selling practices or to the misrepresentation of insurance-based investment products as fulfilling sustainability preferences where they do not”. To avoid such practices or misrepresentations, insurance undertakings and insurance intermediaries providing advice on insurance-based investment products should first assess a customer’s or potential customer’s other investment objectives and individual circumstances, before asking for their potential sustainability preferences.

To prevent mis-selling and greenwashing, insurance undertakings and insurance intermediaries distributing insurance-based investment products should not recommend insurance-based investment products as meeting individual sustainability preferences where those products do not meet those preferences.

Stakeholders are invited to provide feedback via the online survey by 13 May 2022.

Ministry of Finance | Bill amending the Trust Offices Supervision Act 2018

On 13 April 2022, the bill (only in Dutch) amending the Trust Offices Supervision Act 2018 (Wet toezicht trustkantoren 2018) concerning an emergency measure to prohibit trust services to clients in the Russian Federation or the Republic of Belarus was submitted to the House of Representatives. The bill introduced a ban for trust offices to provide trust services if clients, target companies, beneficial owners of clients and beneficial owners of target companies are resident, established or have their seat in the Russian Federation or the Republic of Belarus. There are two exceptions to this prohibition:

• for situations in which the client, the offeree company, the client's beneficial owner or the offeree company's beneficial owner are subject to the Sw and the sanctions regulations. In this case, the client relationship must be maintained until the sanctions regulations no longer apply, followed by a three-month period in which the relevant client must be exited; and
• for EU citizens.

Violating the prohibition will be punishable under the Economic Offences Act (Wet op de economische delicten).

Licensed trust offices must comply with the bill within four weeks after its entry into force.

Other financial regulatory publications

We have highlighted a selection of other publications by legislatures and regulators for the financial markets and financial supervision since our April 2022 News Update.

Ministry of Finance

• Consultation bill on the Financial Markets Amendment Act 2024 (Wijzigingswet financiele markten 2024, only in Dutch)
• The bill on Implementation of the Omnibus Directive and Regulation ESFS Review (Wetsvoorstel Implementatiewet omnibusrichtlijn en -verordening ESFS-review, only in Dutch) was presented to the House of Representatives

AFM

• Report 'The retail market for sustainable fund investment' ('De retailmarkt voor duurzaam fondsbeleggen', only in Dutch)
• 'Examination of advertisements of investment firms' ('Onderzoek naar reclame-uitingen van beleggingsondernemingen', only in Dutch)

DNB

• Enforcement policy monitoring reports ('Handhavingsbeleid toezichtrapportages', only in Dutch)

European Supervisory Authorities

• Joint ESAs consultation paper on sustainability disclosures for STS securitisations
• ESA advice on the review of the PRIIPs Regulation
• Joint Committee Annual Report 2021
• Joint Committee Spring 2022 Report on Risks and Vulnerabilities

European Banking Authority

• Amended final draft technical standards on the mapping of ECAIs for securitisation positions
• Discussion paper on the role of environmental risk in the prudential framework
• EBA advice on the review of the macroprudential framework
• EBA quantitative MREL report
• Final draft RTS specifying the requirements for originators, sponsors, original lenders and servicers relating to risk retention
• Opinion on amendments to the RTS for own funds and eligible liabilities
• Final report on the amendment of the RTS on strong customer authentication and secure communication under PSD2

EIOPA

• Technical advice on retail investor protection
• Final reports on the revision of Guidelines on contract boundaries and of Guidelines on the valuation of technical provisions
• Opinion on individual disclosures in the context of EU-wide stress test exercises
• Supervisory statement on supervision of run-off undertakings

European Securities and Markets Authority

• Final report on certain aspects relating to retail investor protection
• Response to the consultation on the review of the EU central clearing framework
• Final report on the review of the Short Selling Regulation
• Updated Questions and Answers on the Benchmarks Regulation, Guidelines on alternative performance measures, MiFIR data reporting and SFTR data reporting.

Single Resolution Board

• Booklet on 2022 Resolution Planning Cycle
• SRB Bi-annual reporting note to Eurogroup

European Commission

• Consultation document: A digital euro
• Consultation document: Functioning of the ESG ratings market in the European Union and consideration of ESG factors in credit ratings

If you have any financial regulatory questions, please do not hesitate to contact Berry van Wijk and Roel Theissen. For questions related to Investment Management, you can also contact our colleagues Oscar van Angeren and Marthe Bollen.