The AFM imposes a penalty on an insurer for behaviour of affiliated intermediaries

The Netherlands Authority for the Financial Markets (AFM) announces that on 8 October 2008 it imposed an administrative penalty, on the basis of Article 83(1) of the Financial Services Act (Wfd), on Hamburg-Mannheimer N.V. of Brussels.

The insurer has insufficiently ensured that its affiliated intermediaries comply with the law. Clients of these affiliated intermediaries were provided with incorrect advice. Hamburg-Mannheimer N.V. has expressed its regret and has since paid the penalty.

In the opinion of the AFM, the insurer has violated Article 43 of the Wfd. The Wfd has been incorporated in the Financial Supervision Act (Wft) as of 1 January 2007. The provider of insurance is responsible for its affiliated intermediaries. These are intermediaries that provide intermediary services for the account and in the name of the provider without an independent licence and without collecting any premiums or amounts intended for the consumer. The law provides that the provider is responsible for ensuring that affiliated intermediaries who provide intermediary services on behalf of this provider comply with the statutory requirements.

AFM research shows that some affiliated intermediaries did not gather information on their clients’ financial position, knowledge, experience, objectives and willingness to accept risks at the time they provided advice to these clients. In a number of cases they did not take the gathered information into account.
Hamburg-Mannheimer N.V. has provided the intermediaries affiliated with it with a standard form (‘client profile’). The insurer subsequently obliged its affiliated intermediaries to use this form, to fill it out and to have it signed by the client. The client profile uses multiple choice questions and awards points per answer. The points are added up and the total results in the recommendation of an investment fund within the life insurance. Only limited differentiation is applied to the score, which means that important questions with respect to the willingness to take risks or the financial position do not have decisive significance for the advice. This meant that in a number of cases an investment fund was recommended whereby the information gathered was not taken into account. Clients that had indicated that they did not want negative yields were nevertheless advised, on the basis of the total score of the points, to choose an equities fund within life insurance. This constitutes violation of Article 32(1)(b) of the Wfd (currently Article 4:23(1)(b) of the Wft).

The AFM has established, on the basis of the above, that Hamburg-Mannheimer N.V. has violated Article 43 of the Wfd (currently Article 4:93 of the Wft), by not making sure that its affiliated intermediaries comply with the statutory provisions.

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.

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