The Netherlands Authority for the Financial Markets (AFM) has taken note of the combined response of the Ministers of Finance and of Security and Justice (hereinafter Letter to Parliament) to the evaluation investigation of the Wtfv, the vision of accountancy and the response to the policy document of Mr Plasterk. The AFM is pleased that the response meets several of the AFM's wishes with respect to the supervision of financial reporting, which will serve the interest of the users of financial reporting.
At the same time, the AFM maintains its view that there is still room for improvement of legislation concerning the supervision of financial reporting. The AFM endorses the vision of supervision of accountancy organisations as has been formulated in outline.
Supervision of financial reporting
Current legislation and regulations in the field of the supervision of financial reporting contains a number of bottlenecks that in themselves and combined with the other bottlenecks obstruct supervision. Partly in light of these restrictions, the AFM has been closely following the evaluation of the Financial Reporting (Supervision) Act (Wtfv), the vision of accountancy and the response to the policy document of Mr Plasterk.
The AFM is pleased that the Letter to Parliament proposes to resolve several of these bottlenecks:
- Currently, the AFM is bound in some cases to a limited investigation period of 6 months. The Letter to Parliament proposes to extend the investigation period from 6 to 9 months.
- Currently, the request to review the financial statements is the only enforcement instrument the AFM can apply to enforce compliance with a recommendation. This instrument is often too drastic and does not offer a satisfactory outcome in practice. The Letter to Parliament also proposes to enable the AFM to enforce a recommendation before the Enterprise Division.
- The act currently still prohibits the exchange of information between supervision of financial reporting and other supervisory departments within the AFM. The Letter to Parliament contains the proposal to create the possibility to exchange information within the AFM if this is of material importance to another supervisory department. We are positive about the creation of this option. It will have to be assessed during elaboration and implementation whether the proposal in terms of the exchange of information offers sufficient options to maintain effective supervision.
The Letter to Parliament lacks proposals to deal with bottlenecks concerning the information procedure and the options of asking questions and demanding information during the investigation phase.
The Letter to Parliament consequently offers a good starting point for improving AFM supervision. The AFM currently consults with the Ministry of Finance on how the proposed legislative amendments and policy intentions can be implemented in an efficient and effective manner. In addition, we will continue to speak with the Ministry concerning the resolution of the remaining bottlenecks, in particular in the field of strengthening the limited options of asking questions and demanding information, in order to continually increase the effectiveness and efficiency of supervision. This is of the greatest importance, precisely in the current economic circumstances.
Supervision Accountancy Organisations
The AFM agrees to the response of the Minister of Finance concerning the supervision of accountancy organisations, as it has been formulated in outline. The AFM will publish the findings of the investigation into financial incentives before quality, which deals in more detail with the subject of independence, at the start of October. A consultation process will also be initiated in consultation with the Ministry of Finance and the NBA, the Netherlands Institute of Chartered Accountants.
* Lower House, session year 2010-2011, 32 013, no. 16.
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.