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

17.01.2020 LU law
Stibbe Luxembourg étend son offre de services par la venue de nouveaux associés et counsels au sein des pratiques spécialisées en gestion d’actifs/fonds d’investissement, en droit des sociétés ainsi qu’en droit financier

Inside Stibbe - Luxembourg, le 17 janvier 2020 – Stibbe renforce ses pratiques spécialisées en droit des sociétés, en droit financier ainsi qu’en gestion d’actifs/fonds d’investissement par la venue de Bernard Beerens (associé, droit des sociétés), Audrey Jarreton (counsel, droit bancaire et financier), Edouard d’Anterroches (associé, fonds d’investissement), Victorien Hémery (associé, fonds d’investissement) et Dayana Bert (counsel, fonds d’investissement).

Read more

24.01.2020 NL law
Can the government refrain from imposing enforcement measures if it is not within the offender’s power to comply with a standard?

Short Reads - What should be done if a stakeholder makes a request to the government for enforcement to rectify violations in a scenario where the offender does not have full power to comply because of a reliance on third parties? The Administrative Division of the Dutch Council of State ruled on 23 January 2019 that an administrative body cannot simply reject an enforcement request in such a situation, but must consider whether, for example, the imposition of an order subject to a penalty payment may provide an incentive for the actual termination of the violation.

Read more

17.01.2020 LU law
Stibbe boosts service offering in Luxembourg with new partners and counsel for asset management/funds and corporate & finance

Inside Stibbe - Luxembourg, 17 January 2020 – Stibbe reinforces its corporate & finance and asset management/funds practices in Luxembourg with the hire of Bernard Beerens (corporate partner), Audrey Jarreton (banking and finance counsel), Edouard d’Anterroches (investment funds partner), Victorien Hémery (investment funds partner), and Dayana Bert (investment funds counsel). Their arrival comes after the recent hire of tax partner Johan Léonard. All of these new additions demonstrate the firm’s commitment to expanding Stibbe’s service offering in Luxembourg.

Read more

15.01.2020 NL law
The Dutch scheme - a summary of the upcoming new restructuring tool

Short Reads - As mentioned in our earlier blog, the Dutch legislator has prepared a bill – the Act on confirmation of private restructuring plans (Wet homologatie onderhands akkoord) – introducing a framework that allows debtors to restructure their debts outside formal insolvency proceedings (the “Dutch Scheme“). We expect this highly-anticipated bill to enter into force by this summer. The Dutch Scheme combines features from the UK Scheme of Arrangement and the US Chapter 11 proceedings. Below, we summarize certain key aspects of the Dutch Scheme.

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