DNB and the AFM supervise compliance with the Wft and its subsidiary regulations. For the effective performance of supervision, DNB has several instruments at its disposal. Examples of such instruments are the power to collect information, the power to issue a direction and the power to appoint a caretaker.
Purpose of a direction
A direction is an order to pursue a specific line of conduct aiming to terminate or redress an offence. By issuing a direction to a party, DNB intends to make that party comply with specific rules. A direction may, for instance, impose a requirement on a party to dismiss a director or to desist from certain activities. In many cases, DNB will give a warning before issuing a direction.
Who may be issued a direction?
An direction may be issued to:
- a financial undertaking
- a representative of an insurer
- a holder of a verklaring van geen bezwaar [declaration of no-objection]
- anyone that invites redeemable funds, in or from the Netherlands, from others than professional market parties, or that acts as an intermediary therein.
Notably, a direction may not be issued to authorised parties only, but to anyone that pursues activities included in the definition of a financial undertaking.
In addition, a direction may be issued, in certain other cases, to a financial undertaking within the scope of part 3.6.4 of the Wft (on the Prudential supervision of financial conglomerates). See Sections 3:295(1) and (3), and 3:299(4) of the Wft.
When may a direction be issued?
DNB may issue a direction in the event of an offence against the Wft or its subsidiary regulations. DNB may also issue a direction to a financial undertaking (not to others) if DNB is of the opinion that the undertaking’s own funds, solvency or liquidity are likely to become insufficient. In such a case, there has been no formal offence against the Wft or its subsidiary regulations.
When DNB wants to issue a direction whose purport is that a (co-)policymaker or a person holding a position in an organ performing a supervisory function, DNB must ask the AFM for its opinion (see Section 1:47(2) Wft). Further agreements on mutual consultations between DNB and the AFM are laid down in the DNB/AFM Covenant.
Finally, DNB is required to issue a direction if a financial undertaking with registered office in the Netherlands, either through a branch office in another Member State or in providing services to another Member State, offends against the law of that Member State and the local supervisor has asked DNB to intervene (see Section 1:59 Wft).
Implications for third parties
A direction does not purport to intervene in agreements between the addressee of the direction and third parties. A direction can never include an order to alter an agreement with a third party.
What if a direction is not followed up?
The instruments provided by the Wft in case a direction is not followed up both in full and before the stated deadline, include the following:
- appointment of a caretaker (curator, see section 1:76 Wft)
- imposition of an order prohibiting the conclusion of new agreements in the Netherlands (‘transaction ban’) on certain types of financial undertaking with registered office in another Member State that operate a branch office in the Netherlands or provide services to the Netherlands (Section 1:58 Wft), on life or non-life insurers with registered office in a state other than a Member State that provide services to the Netherlands (section 1:66 Wft) and on clearing institutions or funeral expenses and benefits in kind insurers with registered office in another state, that provide services to the Netherlands (section 1:67).
- In this case, the AFM must be asked to state its viewpoint
- The transaction ban is published in the Staatscourant Government gazette.
- Another instrument is the imposition of a cease and desist order under penalty or an administrative fine.
- imposition of an order prohibiting the conclusion of new agreements in another Member State on certain types of financial undertaking with registered office in the Netherlands having a branch office in the said Member State or providing services to that Member State (Section 1:59 Wft).
- imposition of an order prohibiting the pursuit of business through a branch office or the provision of services to another Member State on a financial undertaking holding a Single Licence (Section 1:77(1) Wft), or on an insurer that has been issued a direction concerning the trustworthiness and/or competence of its representative or of a person determining its day-to-day policy, if the insurer has failed to follow up that direction (adequately) (Section 1:77(2) Wft).