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Announcement of AFM and DNB: New penalty system in force

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Following an amendment of the penalty system under financial supervision legislation with effect from 1 August 2009, the penalties under this system have been raised. The penalty amounts may run up to EUR 4 million and, in case of a repetition of the offence, to EUR 8 million. Effective 1 July 2009, also the Algemene wet bestuursrecht or Awb (General Administrative Law Act) has been amended. As a consequence, henceforth also enterprise directors who ordered the offence to be committed, may be fined. The new rules apply for offences committed after the effective dates of the above legislative amendments.

Amendment of penalty system under financial supervision legislation
On 1 August 2009, the Wet wijziging boetestelsel financiële wetgeving or Boetewet (‘Act amending the penalty system under financial legislation’) entered into force. The Boetewet  introduces a uniform system for determining administrative penalties in a range of financial supervision acts, including the Wet op het financieel toezicht or Wft (Financial Supervision Act), the Wet toezicht accountantsorganisaties (Accountants’ Organizations [Supervision] Act) and the Pensioenwet (Pensions Act). In addition, the penalty maxima under these financial supervision acts have been raised substantially. The Boetewet serves to enable the  Netherlands Authority for the Financial Markets (AFM) and De Nederlandsche Bank (DNB) to impose penalties that are commensurate with the seriousness of the offence and have a deterrent effect.

A penalty system that is both fixed and flexible
With the enactment of the Boetewet, the statutory penalty system has become more flexible than it used to be. The provisions under which offences may be fined, break down into three categories.
For Category One (reporting requirements etc.) a fixed system is in force. This implies that the penalty amount is in principle provided by law, and that it may only be moderated for reasons of financial capacity, proportionality and exceptional circumstances. 
For Categories Two (provisions governing operations etc.) and Three (prohibitory provisions  etc.) a flexible system applies. While in these cases, too, the law specifies penalty amounts, the  Boetebesluit (Decree on Penalties) contains guidelines for adjusting the penalty amount to the offence concerned. This implies that the AFM and DNB must explicitly consider whether circumstances like seriousness, duration, and the degree of blame should have an increasing or decreasing effect on the penalty amount. In these cases, too, the penalty amount may only be moderated for reasons of financial capacity, proportionality and exceptional circumstances. In addition, the law provides for Categories Two and Three that, if the proceeds of the offence exceed EUR 2 million, the administrative penalty may also be determined on the basis of twice the proceeds realised.

Higher penalty maxima
The penalty maxima have been raised substantially across the board. The maxima now applying for the three penalty categories are € 10,000, € 1,000,000 and € 4,000,000, respectively. In addition, the AFM and DNB may decide to determine the penalty on the basis of twice the proceeds of the offence if these exceed EUR 2 million. 
 

Amendment of the Awb
The Awb has been amended effective 1 July 2009. The amendments include an extension of Chapter 5, which deals with enforcement.

Actual manager
Among other powers, this regulation grants the AFM and DNB the authority also to impose an administrative sanction, e.g. a penalty, on the natural persons or persons who actually ordered the offence to be committed by a legal person, such as the director(s) of a financial institution that perpetrated the offence. For natural persons and legal persons the same penalty amounts apply.

The principles and factors set out in the Handhavingsbeleid (enforcement policy) adopted by the AFM and DNB (Saatscourant [Government Gazette] of 11 July 2008, 132/30) serve as directive for the assessment of concrete cases on the basis of which the supervisors determine what action would be appropriate. Within the scope of the deployment of instruments, this policy provides that, in cases of non-compliance with market access requirements, the supervisors in any case consider whether (also) to take action, if possible, against the natural persons ordering the offence to be committed.

No amendment of publication rules
These amendments do not alter the publication regime of the financial supervision acts.
This implies, among other things, that an administrative penalty imposed for a serious breach of the Wft (Category Three or designated by Law) will be published directly, i.e. five days after the date of announcement. For every penalty imposed under the Wft it holds that it is not published until after the decision to impose a penalty has become irreversible by operation of law. Publication will not be proceeded with only if this could conflict with the purpose of the supervision for compliance with the Wft as exercised by the AFM and DNB.
The other financial supervision acts provide the opportunity – not the obligation – to publish administrative penalties.

The AFM is committed to promoting fair and transparent financial markets.

As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.

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