Short Reads

License wrongly rejected by the AFM

License wrongly rejected by the AFM

License wrongly rejected by the AFM

24.10.2016 NL law

In a recent decision, the Dutch appellate court in financial supervision matters ruled that the Netherlands Authority for the Financial Markets wrongfully rejected a license applied for by a Dutch investment firm. 

The firm offers binary options in the Netherlands. The Dutch regulator cannot reject a license because it considers the products the firm offers undesirable for a retail audience. The judgment confirms that also in case of firms offering high risk products, the powers of the regulators to refuse a licence are limited to the grounds laid down in the applicable laws and regulations. 

The judgment of the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven, the "CBb") of 4 October 2016 can be found here (in Dutch only) 

Background

Optieclub.nl B.V., a party that offers binary options, applied for a license to provide investment services in the Netherlands on 4 December 2012. Binary options are options with either a fixed payout amount or a payout amount of zero. The payout will occur when the underlying value (e.g. index, commodity, shares) moved towards the direction that is agreed upon in the option. The AFM and the Dutch Minister of Finance consider binary options as high risk products and aim for a ban on advertising for such products. The AFM even qualifies binary options as "toxic".

On 1 May 2014, the AFM rejected the license application. The AFM found that Optieclub did not comply with the requirement to maintain a sound operational management (integere bedrijfsvoering). On 16 January 2015, the District Court of Rotterdam ruled in favour of Optieclub. The AFM appealed.

The CBb judgment

The AFM found that Optieclub did not sufficiently take (i) measures to prevent itself or its employees to breach the Betting and Gambling Act (Wet op de kansspelen, the "WoK"), and/or (ii) measures to prevent Optieclub or its employees from performing acts that are contrary to generally accepted standards (maatschappelijke betamelijkheid) that can damage public confidence in Optieclub or the financial markets, since binary options – as a product – do not satisfy the requirement of safeguarding the interests of the firm´s customers.

The CBb ruled that the AFM is responsible for supervising the operation of the financial markets. The AFM has powers within this mandate to set requirements and use enforcement measures. The AFM, however, does not have powers to set requirements or use enforcement powers outside this mandate. In particular, the CBb ruled that the AFM does not have the mandate to use its powers with respect to breaches of the WoK. According to the CBb, establishing whether the WoK is breached is the task of the Netherlands Gaming Authority (Kansspelautoriteit). In this case, the Netherlands Gaming Authority did not establish that Optieclub breached the WoK. The CBb therefore ruled that as long as the breach of the WoK is not established, the AFM cannot claim that the activities of Optieclub damages the confidence in Optieclub or the financial markets.

In addition, the CBb ruled that the assessment whether Optieclub acts in breach of generally accepted standards relates to the actual market conduct of Optieclub or its employees and cannot be determined by reference to the product alone. The mere fact that Optieclub offers binary options does not justify the conclusion that Optieclub acts contrary to generally accepted standards that can damage the trust in Optieclub or the financial markets. 

Related news

13.11.2019 NL law
A new Act on the Supervision of Trust Offices

Articles - Roderik Vrolijk and Soeradj Ramsanjhal published an article in the Dutch Financial Law Review as a follow-up on their article two years ago in the same journal. The authors specifically shed light on the customer due diligence and open norms of the new Act on the Supervision of Trust Offices 2018, that entered into force on 1 January 2019. 

Read more

05.11.2019 LU law
Stibbe renforce son cabinet au Luxembourg avec l’arrivée de Johan Léonard en qualité d’associé au sein du département de droit fiscal

Inside Stibbe - Luxembourg, 5 novembre 2019 – Stibbe renforce son cabinet luxembourgeois avec le recrutement latéral de Johan Léonard, associé au sein de la pratique de droit fiscal. Son arrivée permettra au cabinet d’augmenter son offre fiscale au Luxembourg afin de mieux répondre à l’évolution des besoins du marché. Johan a rejoint Stibbe le 4 novembre 2019.

Read more

08.11.2019 BE law
Interview with Wouter Ghijsels on Next Gen lawyers

Articles - Stibbe’s managing partner Wouter Ghijsels shares his insights on the next generation of lawyers and the future of the legal profession at the occasion of the Leaders Meeting Paris where Belgian business leaders, politicians and inspiring people from the cultural and academic world will discuss this year's central theme "The Next Gen".

Read more

07.11.2019 NL law
Banking & Finance 2019 Second Edition – The Netherlands and Luxembourg chapter

Articles - Maarten de Bruin, Rein van Helden, Rogier Raas and Robert Steeg have all contributed to the Chambers and Partners Banking & Finance 2019 Second Edition, providing the Netherlands chapter. The Luxembourg chapter was written by Gérald Origer, Jean-Marc Delcour, Steven Paridaens and Nicolas Pradel.

Read more

31.10.2019 NL law
EBA Publishes Follow-Up Report on 2018 FinTech Roadmap

Short Reads - Building on its 2018 FinTech Roadmap, the EBA has issued a report focused on potential impediments to the cross-border provision of banking and payment services. In the 29 October 2019 report, the EBA identifies three regulatory areas in which the further integration of European banking and payment services markets can be improved.  The three areas the EBA addresses are authorisation and licensing, conduct of business and consumer protection requirements, and anti-money laundering ("AML") and countering the financing of terrorism ("CFT").

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring