This document by the Netherlands Authority for the Financial Markets [Autoriteit Financiële Markten] (AFM) contains guidelines on appropriate inducements for financial service providers. A significant number of these inducements are, in fact, included in open standards which are explained in these guidelines. Third party commissions have to enhance the quality of the service (brokerage or consultancy). These commissions must not detract from the obligation of the financial service provider to work in the client's interests. The AFM uses, among other things, examples to show how these new rules for appropriate commission should be applied.
The AFM wants these guidelines to help financial service providers to assess commissions against the new rules and make them transparent for consumers. The provisions are intended to provide better protection for consumers when purchasing a complex product or a mortgage loan. These guidelines were drawn up after comprehensive consultation with market players.
Financial service providers will have to carry out a critical examination of their commission structures because the expectation is that not all commissions will fulfil the statutory norm. The guidelines can be used for precisely this purpose. The most important issues covered by the guidelines are:
- The provider and the intermediary are both responsible for complying with the rules.
- Commissions first have to be assessed against the rules. If a commission complies with the rules, it has to be made transparent to the client. Making commissions transparent is, in itself, not enough.
- Using five indicators, financial service providers can determine whether the commission is appropriate.
- The commission has to be in balance with the costs incurred and the effort made.
- The new rules apply to existing and new commission arrangements.
- Turnover-related commissions have been banned since 1 January 2009.
The AFM advises financial service providers to draw up policy for the application of the appropriate commission rules. If it can then be demonstrated that a certain commission structure (or calculation basis) is permissible, this can generate efficiency benefits. On the whole, clients will usually apply appropriate commission. If that is the case, the financial service provider will only have to monitor non-standard instances.
On 18 May 2009, the AFM submitted draft guidelines concerning the application of appropriate commission rules by financial service providers to market parties for consultation purposes. The period of consultation continued until 19 June 2009.
Based on the responses, the AFM compiled what is referred to as a feedback statement (Dutch only) which can be consulted on the AFM website. In this document the AFM summarises the feedback received from respondents and its ensuing responses. As a result of the responses, the AFM has adapted and clarified a number of points contained in the guidelines.
The AFM published the Guidelines for appropriate commission for investment firms on its website on 16 July 2009.
The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.
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.