The AFM consults on draft Policy Rule on Investment Recommendations

The AFM consults the market on its new Policy Rule on Investment Recommendations. This policy rule will replace the current policy rule with respect to the position of the investigation, investigative reports, publications and advice. The current policy rule is outdated by subsequent legislative amendments. The AFM also considers reviewing its policy in this context in a number of respects. The AFM is of the opinion, based on meetings with several market parties, that this new policy is in line with Dutch practice.

Investigations intended for the general public, investigative reports, publications and advice have been placed under the header of "investment recommendations" in Articles 5:53 and 5:64 of the Financial Supervision Act (Wft) as a result of the implementation of the Implementing Directive on the fair presentation of investment recommendations and the disclosure of conflicts of interest (2003/125/EC). The insights that serve as the basis for the current policy rule, the rules of conduct established in the policy rule and the terminology used have become outdated as a consequence.

The AFM's new Policy Rule Investment Recommendations is intended to clarify when information 'is intended for the general public' and therefore concerns an investment recommendation. The AFM is of the opinion, in line with the purport of the Market Abuse Directive (2003/6/EC), that only individual advice cannot be considered as intended for the general public. The new policy rule interprets the concept 'public' broadly, namely as 'more than one person'. Advice with a repetitive nature, whereby the same advice is issued to several persons, is also considered as intended for the general public. Information not intended for the general public is not an investment recommendation and falls outside the scope of the rules that have been established in this context.

The publication of an investment recommendation may lead to transactions in a financial instrument, such as a share or an option, and may consequently influence the price of that instrument. Familiarity with the content of an investment recommendation and/or the moment of its publication may result in inside information as regards the trade.
The line that estimates and research based on public information are not considered inside information and that transactions based thereon are not considered insider trading remains unchanged.

The AFM, moreover, remains of the opinion that publication of an investment recommendation can result in inside information as regards the trade. A new feature is that it is assumed, under the proposed policy rule, that an investor, who acts reasonably, will make use of an investment recommendation. It is therefore no longer necessary to consider the anticipated impact of an investment recommendation.

The new policy rule also clarifies how risks concerning price-sensitive information should be handled. Simultaneous distribution is the best way to manage these risks. An investment recommendation that reaches its public has been made publicly and can therefore not constitute price-sensitive information.

The AFM is inviting you to respond. We would like to ask you to respond in any case to the following questions:

  1. At what points can you agree with the Policy Rule on Investment Recommendations?
  2. At what points are you unable to agree with the Policy Rule on Investment Recommendations and do you anticipate problems?
  3. What are your recommendations for improvement?

The AFM would like to you receive your response before 25 September 2009 at stating 'consultation'.

Draft Policy Rule
A draft of the Policy Rule on Investment Recommendations can be downloaded in PDF format, in Dutch only.

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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