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Articles

Guidance on reassessment of suitability and integrity of policymakers by the dutch financial regulators

Guidance on reassessment of suitability and integrity of policymakers by the dutch financial regulators

Guidance on reassessment of suitability and integrity of policymakers by the dutch financial regulators

08.10.2015 NL law

Board members of Dutch financial undertakings are subject to integrity and/or suitability testing by the Dutch financial supervisory authorities. Suitability and integrity testing aim to promote confidence in the financial sector. 

 

Once a person has been tested and the outcome thereof is positive, the suitability and/or integrity of such person are conclusively established, until a change in relevant facts or circumstances gives reasonable cause for a reassessment. Only limited guidance is available on what may constitute 'changed circumstances', but recent case law provides some guidance.

Background. A board member's suitability is assessed by reviewing a combination of the appointee's CV, job profile, an overview of the knowledge and experience within a management or supervisory role, a description of the selection process and an explanation why the appointee is considered suitable for the position.

The integrity of a board member is assessed on the basis of personal information included in a integrity screening form, and subsequent consultations with other authorities (e.g. the Tax Authorities and the Public Prosecutor).

A reassessment may occur when (i) a change of position occurs, or (ii) a 'change in relevant facts or circumstances give reasonable cause' for a reassessment.

Developments. Recent case law illustrates how the Dutch financial supervisory authorities interpret the concept of 'changed circumstances'. A board member used confidential and price-sensitive information with respect to the introduction of fixed interest rates for long-term liability calculations to enter into profitable transactions for his undertaking. The Dutch Central Bank decided to reassess his suitability and integrity on the basis of these circumstances. The District Court of Rotterdam deemed these circumstances to be a reasonable cause to reassess the board member's suitability and integrity, since the board member was actively involved in (i) sharing the confidential information within his undertaking, and (ii) the decision-making process with respect to the concluded transactions of the financial undertaking.

In another recent case – relating to the same facts and circumstances, but concerning a different board member – the District Court of Rotterdam decided that there is an inseparable connection between suitability and integrity. In that case, the Dutch Central Bank had only considered the board member's suitability, but had failed to reassess his integrity. Furthermore, when making the reassessment, the Dutch Central Bank must take into account the competences of other colleagues in the same organisation and verify whether certain shortcomings of the reassessed person may be offset by the competences of his co-board members.

 

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