This Finance/Regulatory Update is our semi-annual newsletter highlighting recent developments in the field of Dutch financial law.
The Dutch legislator implements 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 around 1 July 2013.
With regard to changes in the field of Dutch corporate law we refer to our Corporate Update dated 11 July 2013.
2. NEW DUTCH FINANCIAL MARKET SUPERVISION LAWS AND REGULATIONS ENTERING INTO FORCE AS OF 1 JULY 2013
On 1 July 2013 the Corporate Governance Act (Wet corporate governance) (available in Dutch only) entered into force. This act introduces changes to the notification requirements of Chapter 5.3 of the Dutch Financial Supervision Act (Wet op het financieel toezicht, the "Wft") on two points.
New 3% notification threshold for substantial holdings in shares and voting rights
The Corporate Governance Act introduces a new minimum threshold of 3% for the notification of substantial holdings in shares and voting rights in listed companies. The existing 5% threshold and the other notification thresholds will remain unchanged. Investors holding at least 3%, but less than 5% of holdings in shares and voting rights in listed companies prior to 1 July 2013, have the obligation to notify the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten, the "AFM") thereof, ultimately on 29 July 2013. Existing interests of 5% or more do not fall within the scope of this initial notification requirement as they should have already been notified to the AFM. Interests of 3% or more acquired after 1 July 2013 must be notified immediately.
Notification requirement for gross short positions
The Corporate Governance Act also introduces an obligation to promptly disclose gross short positions in listed companies to the AFM. Gross short positions are financial instruments these value of which increases when price of the underlying share decreases.
For gross short positions the same thresholds apply as for gross long positions: those positions also need to be disclosed when they reach the 3% threshold. The gross short positions must be disclosed when the relevant threshold is, actively (e.g. following an acquisition or disposition of financial instruments) or passively (e.g. following a capital decrease or capital increase), reached or crossed in either an upward or downward direction.
The AFM has adopted a Policy Guideline (available in Dutch only) which further clarifies the definition of a 'short position' and the calculation thereof. The Policy Guideline is in line with the rules set out in the European Regulation concerning short selling and certain aspects of credit default swaps of 14 March 2012 (EU Regulation 236/2012/EU) (the "Short Selling Regulation") and the Implementing Regulation of the European Commission (EU Commission Implementing Regulation 918/2012/EU).
The short positions must be disclosed on a gross basis. This means that for the purposes of the calculation, short positions cannot be offset against long positions.
In the event that an investor holds both short and long positions, each with a value of at least 3% of the issued capital, both positions must be notified.
The obligation to notify gross short positions shall apply in addition to the existing notification requirements for net short positions under the EU Short Selling Regulation.
In order to determine the net short position, the gross short position must be calculated first.
Exceptions concerning non-EEA listed companies
The notification obligations apply to both companies listed in the EEA and to non-EEA companies listed on a regulated market in the Netherlands. However, the new threshold of 3% does not apply to both long and short positions in companies that are incorporated under the law of a non-EAA member state and the shares of which are admitted to trading on a Dutch regulated market.
Share capital interests, voting rights or short positions can be notified through the AFM's Digital Portal, an online tool provided by the AFM. If the Digital Portal should be unavailable, the notification can be done by means of a notification form which will be made available on the AFM's website.
Act on the Identification of Investors
The Act on the Identification of Investors introduces a provision in the Dutch Securities Giro Transfer Act (Wet giraal effectenverkeer, the "Wge") allowing Dutch listed companies to identify their investor base during a fixed period preceding the shareholders' meeting. The term 'investor' includes: (i) shareholders; (ii) the custodian of an investment fund; (iii) persons holding equity securities for their own account with foreign institutions that are not affiliated institutions or intermediaries within the meaning of the Wge. The procedure can only be used to identify investors holding an interest of at least 0.5% of the issued share capital. A listed company can submit an identification request to Euroclear Netherlands, to companies that have been admitted to the clearing system as 'associated institution' (aangesloten instelling), to other intermediaries, to certain foreign institutions, and to custodians of investment institutions. By means of such identification request the listed company can obtain information with respect to the identity of its investors. Such information encompasses the name, the address and the email address of the relevant investor.
A listed company can submit an investor identification request at its own initiative, but it is under no statutory obligation to do so, unless so requested by investors who, either individually or jointly with other investors, hold at least 10% of the issued share capital. Investors can submit such request to the company between 60 days and 42 days prior to the shareholders' meeting.
A listed company can submit an identification request during the 60 days-period preceding the shareholders' meeting, including the day of the meeting itself. However, the first request for identification must be made ultimately on the 28th day prior to the general meeting. This day coincides with the registration date for the shareholders' meeting. The company should announce on its website, at the latest on the date of the shareholders' meeting, that a request for identification of investors has been made. The request must include a record date to which the identification procedure relates. In practice, the record date will be equal to the registration date.
Dutch implementation of the AIFMD as of 22 July 2013
The Act implementing the Alternative Investment Fund Managers Directive (the "AIFMD") will enter into force as of 22 July 2013. The implementation of the AIFMD will result in a number of substantial changes.
As of 22 July 2013, the Wft will make a distinction between two separate categories of collective investment schemes:
Institutions to which the EU Directive on Undertakings for Collective Investment in Transferable Securities applies, ("UCITS").
Alternative collective investment schemes within the meaning of the AIFMD (collective investment schemes that do not qualify as a UCITS).
The AIFMD introduces harmonised rules with respect to the authorisation of permits and the regulatory supervision of managers of collective investment schemes. The AIFMD rules provide for a maximum harmonisation for managers of investment institutions that only market to professional investors; the Dutch implementation therefore provides no additional rules with respect to such investment institutions.
For managers that market participation rights to non-professional investors, the AIFMD does provide a basis for additional rules in the national implementation of the AIFMD. In accordance with this possibility, the Dutch legislator has catered for a lighter regime. For managers to which the lighter regime applies, no licence requirement applies. Such managers must however notify the authorities of their Member State of origin. Moreover, an obligation applies to provide such authorities with certain information.
Managers of investment institutions to which only the lighter registration regime applies, have the possibility to make use of the "EuVeCa" label when the European Venture Capital Regulation (EU Regulation 345/2013/EU, the "EuVeCa") enters into force. This allows investment institutions to profile as venture capital funds when they meet certain criteria.
New regulation services document (dienstverleningsdocument) into force
On 1 July 2013 the requirement to provide a standardized service document (dienstverleningsdocument, "SSD") to customers, when selling products which fall within the scope of a regulatory fee prohibition, came into force. Products covered by this fee prohibition are: (i) payment protectors, (ii) complex products, (iii) mortgage loans, (iv) individual disability insurances, (v) life insurances, (vi) funeral insurances, and (vii) certain other financial products designated by ministerial decree.The SSD shall be provided by the financial service provider to its consumers, before it provides financial services in relation to these specified financial products.
CRD IV: developments
On 16 April 2013 the European Commission agreed to the proposal to strengthen the European banking sector through stricter capital requirements – the so-called Capital Requirements Directive IV ("CRD IV"). On 20 June 2013, the Council of Ministers agreed to CRD IV and on 27 June CRD IV was published in the Official Journal of the European Union. CRD IV will enter into force as of 1 January 2014.
Pursuant to CRD IV further bonus caps will apply to employees of banks and investment firms. The two most important changes are aimed at imposing a cap on variable remuneration.
A maximum on variable remuneration of 100% of an annual salary with the possibility of increasing the cap to 200% of an annual salary with shareholder approval (66% of the shareholders with a quorum of 50% of voting rights should vote in favour. If that quorum is not reached or present, 75% should vote in favour).
If the variable remuneration exceeds 100% of an annual salary, 25% of the variable remuneration must be deferred for a period of not less than 5 years.
A draft legislative proposal for the implementation of the CRD IV Directive (available in Dutch only) has been published in the Netherlands for consultation on 24 April 2013. It is expected that a legislative proposal will be submitted to the Dutch Parliament (Tweede Kamer) before October 2013. We will of course keep you informed of any further developments.