This Finance/Regulatory Update is our semi-annual newsletter regarding recent developments in the field of Dutch financial law.
The Dutch legislator intends to implement changes in legislation twice a year on fixed dates (1 January and 1 July). This newsletter provides a brief overview of the key changes in Dutch financial law that entered into force on or about 1 July 2012. With regard to changes in the field of Dutch corporate law we refer to our Corporate Update dated 16 July 2012.
The major changes that will affect the financial markets are contained in three separate sets of legislation. The first set is already in force. Nearly all of the Acts included in the second set have entered into force on 1 July 2012. The Act on the Financing of Financial Supervision is expected to enter into force on 1 January 2013. A legislative proposal with respect to the accountancy profession is still subject to further debate in the Dutch Upper House (Eerste Kamer) (see our Corporate Update dated 16 July 2012).
In the meantime the Minister of Finance submitted the third set of legislative proposals relating to the financial sector to the Dutch Lower House (Tweede Kamer). This set is expected to enter into force on 1 January 2013. We will provide you with more information on these proposals in due course.
2. New Dutch financial market supervision laws and regulations entering into force as of 1 July 2012
Act implementing the Revised Prospectus Directive
On 1 July 2012 the revised Prospectus Directive was implemented in the Netherlands. The main changes to the Dutch Financial Supervision Act (Wet op het financieel toezicht) are the following.
- Exemptions from the prospectus requirement. The prospectus requirement does not apply if the offer is made to less than 150 persons that are non-qualified investors; until 1 July 2012 this threshold was set at less than 100 non-qualified investors.
The definition of 'qualified investor' has been aligned with the definition of 'professional client' used in the Markets in Financial Instruments Directive (Directive 2004/39/EC,"MiFID"). 'Professional investors' and 'eligible counterparties' can be considered 'qualified investors'.
An offer of securities to the public currently falls outside the scope of the Prospectus Directive if the total value of the offer was less than EUR 2.5 million (calculated over a period of twelve months). The revised Prospectus Directive allows Member States to raise this threshold to EUR 5 million, but the Netherlands have decided not to raise the threshold. This means that as a result thereof, an offer of securities to the public for an aggregate value of EUR 2.5 million or more still requires a prospectus.
In accordance with the revised Prospectus Directive offers of securities aimed at non-qualified investors with a nominal or package value of at least EUR 100,000 will be exempt from the obligation to make an approved prospectus available. This used to be EUR 50,000. This amendment to the Financial Markets Amendment Act 2010 (Wijzigingswet financiële markten 2010) became effective on 1 January 2012. For more information, we refer to our Corporate Alert of 23 December 2011.
The scope of the exception to the obligation to publish a prospectus when offering securities to employees is broadened. Issuers having their head office or registered office in the European Economic Area ("EEA") that have issued securities admitted to trading on a market outside the EEA can now offer securities to their employees without a prospectus. The exemption also applies to issuing institutions with a head office or registered office outside the EEA if its securities are admitted to an EEA regulated market. The exemption also applies to non-EEA issuers listed outside the EEA, but in that case further requirements apply.
- Prospectus summary. As of 1 July 2012 the summary of the prospectus must satisfy certain specific requirements. The summary must be prepared in a common format to facilitate comparisons between summaries for similar securities and to help potential investors in their investment decisions.
- Electronic publication of the prospectus. As of 1 July 2012 the prospectus must be published in an electronic form on the website of the issuer or financial intermediary. 'Hard copy' publication only is no longer sufficient.
- Annual information disclosure document. As of 1 July 2012 it is no longer necessary to publish an annual information disclosure document.
- Prospectus Regulation (Regulation 809/2004/EC). The European Commission has published the Commission Delegated Regulation 486/2012/EU to amend the Prospectus Regulation. This Delegated Regulation governs the format and content of the prospectus, the base prospectus and the final terms, and the summary, and result in a decrease of the information requirements for specific issuing institutions. The Delegated Regulation became effective on 1 July 2012.
Act on the Introduction of the Suitability Test and the Increased Cooperation between Regulators
The Act on the Introduction of a Suitability Test and the Increased Cooperation between Regulators (Wet introductie geschiktheidseis en versterkte samenwerking tussen toezichthouders) aims first of all to improve the internal governance of the Dutch Central Bank ("DNB") and the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten, the "AFM"). The statutory duties of the supervisory board of DNB and the supervisory council of the AFM will be expanded. Furthermore, the Dutch Minister of Finance will be granted powers to adopt policy rules regulating the exercise of statutory duties by the regulators in specific circumstances.
The Act will also amend the Financial Supervision Act (Wet op het financieel toezicht), the Financial Markets (Dutch Caribbean Islands Bonaire, St. Eustatius and Saba) Act (Wet financiële markten BES) and the Supervision of Trust Offices Act (Wet toezicht trustkantoren) by introducing a suitability test for management board and supervisory board members of entities subject to Dutch regulatory financial supervision. As of 1 July 2012, management board members (and equivalent day-to-day policymakers, if applicable) and supervisory board members must qualify as 'suitable'. This requirement replaces the requirement to have sufficient 'expertise' (deskundigheid). The Act determines that both DNB and the AFM will have to consider the person suitable, in order for such person to pass the test. The person cannot be appointed in the event that either of the regulators expressed doubts. This will also apply to the 'integrity' (betrouwbaarheid) test.
Bearing in mind these changes, DNB and the AFM have amended the 2011 Policy Rules on Expertise (Beleidsregel deskundigheid 2011). The new 2012 Policy Rules on Suitability (Beleidsregel geschiktheid 2012 (Strct. 2012, 13546)) entered into force on 1 July 2012. These policy rules clarify the suitability test and set out which criteria should be met when conducting the suitability test of a day-to-day policymaker. Moreover, the new Policy Rules clarify when day-to-day policymakers may or should be tested and which information and records the Dutch regulators may use when conducting the test.
DNB and the AFM have recently issued an information bulletin concerning the testing of day-to-day policymakers and supervisory board members.
Act on the Limitation of Liability of the Dutch Central Bank and the Netherlands Authority for the Financial Markets and Introducing a Ban on Bonuses for Entities Receiving State-Aid
This Act amends the Dutch Financial Supervision Act (Wet op het financieel toezicht) and Financial Markets (Dutch Caribbean Islands Bonaire, St. Eustatius and Saba) Act (Wet financiële makten BES), introduces an express statutory limitation of the liability of the DNB and the AFM and a prohibition for entities who have received state-aid to pay out bonuses. This Act also entered into force on July 1, 2012.
The existing legislation did not include specific provisions relating to the liability of financial markets regulators (DNB and the AFM). Whether or not they could be held liable was determined by general tort law. This Act introduces an express statutory limitation on the liability of the DNB and the AFM for damages caused by an act or omission on their part when exercising a regulatory task or authority, except in cases of wilful misconduct or gross negligence.
The Act also prohibits entities receiving state-aid to pay out bonuses. As a result of this prohibition, day-to-day policymakers of banks and insurers receiving state-aid may not receive any bonuses as long as these banks and insurers are receiving state-aid. The prohibition will apply equally to entities currently receiving state-aid as well as future recipients of state-aid. Transitional arrangements have been made for entities currently receiving state-aid. These transitional arrangements take into account the extent to which the bonus prohibition was foreseeable and predictable for entities and their day-to-day policymakers.
Financial Institutions Special Measures Act (Intervention Act)
On 13 June 2012 the Intervention Act (Wet bijzondere maatregelen financiële ondernemingen) entered into force, allowing DNB and the Dutch Minister of Finance to intervene in financial undertakings that are in severe financial difficulties.
The Intervention Act primarily amends the Dutch Financial Supervison Act (Wet op het financieel toezicht) and the Dutch Bankruptcy Act (Faillissementswet). The existing intervention possibilities proved to be insufficient to bring about a timely and orderly resolution of a problem institution without resorting to bankruptcy. The Intervention Act intends to change this by adding several new categories of statutory powers which can be invoked by DNB and the Dutch Minister of Finance to ensure that the financial system can carry on functioning in times of financial crisis.
Pursuant to the Intervention Act, DNB is authorised to prepare a transfer plan in respect of a failing bank or insurance company with its corporate seat in the Netherlands, if there are signs of a dangerous development regarding its own funds, solvency, liquidity or technical provisions, and if it is reasonably foreseeable that this development cannot be reversed in a timely manner.
The moment at which the DNB can take measures towards a failing financial undertaking is brought forward considerably. In addition, the applicable criteria are less strict than was previously the case when taking such measures. Depending on the transfer to which the transfer plan relates, the DNB has three options as soon as the transfer plan is ready: it can request the District Court to: (i) approve the applicability of the transfer plan; (ii) declare the emergency procedure (noodregeling) applicable; or (iii) declare the bankruptcy of the financial undertaking at stake.
If the stability of the financial system is in serious and immediate danger as a result of the situation of a financial firm (such as a bank, insurance company or investment firm) having its seat in the Netherlands, the Minister of Finance can: (i) take immediate measures (onmiddellijke voorzieningen) regarding the relevant financial firm (for instance by suspending its managing directors), or (ii) proceed to expropriating the assets of, or shares in, the relevant financial firm.
Moreover, the Intervention Act provides that contractual clauses containing 'trigger events' linked to intervention measures under the Act are unenforceable. Examples include rights of counterparties to require additional collateral or to terminate an agreement with immediate effect in the event of intervention measures. Such rights can only be exercised with prior approval of DNB. Also in the event of a downgrade of the financial institution as a result of intervention measures, counterparties cannot invoke this against the financial institution. The rationale of the limitation of 'trigger events' is that the financial troubles of the financial institution should not be worsened as a result of the government intervention.
Omnibus-I Directive Implementation Act
The Omnibus-I Directive (Directive 2010/78/EU) amends the existing legislation and implements the competences of the three new European regulators and the European Systemic Risk Board (ESRB). The three new European regulators are the European Banking Authority (EBA); (ii) the European Insurance and Occupational Pensions Authority (EIOPA); and the European Securities and Markets Authority (ESMA).
The Financial Markets Amendment Act 2012
The Financial Markets Amendment Act 2012 (Wijzigingswet financiële markten 2012) entered into force on 1 January 2012 (with the exception of certain provisions which only entered into force on 1 July 2012). The provisions of the Act which entered into force on 1 July 2012 relate to the inclusion in the Dutch Financial Supervision Act (Wet op het financieel toezicht) of provisions relating to money transaction offices and the repealing of the Money Transactions Offices Act (Wet op geldtransactiekantoren), provisions amending the Bidding Rules (see our Corporate Update dated 16 July 2012), provisions relating to the auctioning of emission rights, provisions concerning the implementation of regulations and an amendment to the Supervision of Trust Offices Act (Wet toezicht trustkantoren).