During its supervisory activities, the AFM still regularly encounters brokers who do not comply sufficiently with the requirements of the duty of care, integrity and expertise. Providers of financial products have a responsibility in this connection. This responsibility does not just follow from the law (duty to ascertain, duty to report and mutual dependence), but also from the need to guarantee the quality of the distribution.
Chain management in the interest of the client
A provider that focuses centrally on the interest of its clients provides cost-efficient, useful, safe and understandable products and distribution to clients. This means that during the product development process, providers have to consider the manner of distribution. It also means that brokers have to satisfy certain quality requirements in order to be able to provide adequate advice concerning the product.
Chain management assumes that providers take responsibility and implement measures if brokers do not satisfy the necessary quality requirements. Banks and insurers will continue to have a responsibility in this respect, even after the ban on commissions. It is expected that the ban on commissions will result in a significant and positive change in the relationship between providers and brokers, who will operate more independently from each other. This does not alter the fact that banks and insurers have to keep monitoring their distribution chain in the interest of the client. The statutory framework that regulates the mutual relationships applies in any case if brokerage services are provided or if a party acts as an authorised agent.
Follow-up investigation at providers in 2011
In 2010, the AFM identified significant shortcomings in chain management. In 2011, the AFM again investigated the manner in which providers implement this responsibility. This investigation has led to a number of important observations:
Better compliance with the duty to ascertain, and more reports of abuses
All banks and insurers involved have implemented measures in 2011 to improve chain management. The response to the revoking of licences of brokers is more alert, and the procedures pertaining to checks of the register have been tightened. Providers also report abuses in the market more often.
Insight into the quality of providers has improved, but differs for each provider
Providers have taken measures in order to be able to monitor the quality of brokers. There are, however, substantial differences between providers, with respect to the degrees to which these measures have been made concrete. The AFM recommends that providers should further elaborate the measures, so that they are able to identify harmful practices in good time and to act accordingly. For example, this could involve following the percentage of unnatural decline in an insurance portfolio, or monitoring the number of explains and the structure of the loans with respect to mortgage advice.
Winding up a portfolio has to be done within three months
Winding up a portfolio following revoking of the licence still takes too long. The AFM expects providers to take measures in order to shorten the time for winding up portfolios to the standard term of three months. After expiry of this term, if the broker still concludes agreements or manages a portfolio, a situation involving cooperation with an illegal broker may exist.
Introduction of a new partial pensions licence will create an additional moment for checking possession of a licence
The new partial pensions licence was introduced on 1 January 2012. Pension brokers have to apply for this licence with the AFM before 1 February 2012. The pension broker will then have until 1 July 2012 to demonstrate how he will satisfy the requirements of professional expertise. The AFM expects that pension insurers will perform additional checks in February and July 2012 to establish whether pension brokers have the new partial pension insurance licence at their disposal. Brokers who do not apply for a partial pensions licence before 1 February, or who are unable to demonstrate before 1 July how the requirements of professional expertise will be satisfied, will have to wind up their pensions portfolio within a period of three months.
More frequent consultation of the AFM register in 2012 will make the effect of the new partial pension insurance licence visible sooner. It is in the interest of participants in directly-insured pension schemes that pension insurers assume their responsibility in this area.
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.