Many providers of exempted investment products evade the obligation to warn consumers

Providers of investment products that do not come under the supervision of the Netherlands Authority for the Financial Markets (AFM) as a result of an exemption are required to warn investors, among other things, in advertisements and on their websites. A special, mandatory illustration exists for this purpose, which is referred to as the notification of exemption. A random sample of the AFM shows that many providers still fail to comply with this statutory requirement. In such cases, investors have insufficient insight into the parties with which they do business.

The AFM has looked at 31 providers of securities and/or rights of participation that do not come under its supervision, because they make use of an exemption. Only six of those 31 providers make it sufficiently clear that they do not come under AFM supervision. The AFM therefore once again explains the rules on its website and offers starting points for using the notification of exemption.

Ten providers use the notification of exemption in an incorrect format or do not place it in all advertisements. The AFM has spoken to them about this and requested them to use the notification of exemption correctly. Fifteen providers do not warn investors at all that AFM supervision does not apply. The AFM may take enforcement action if they do not apply the notification.

The AFM has drawn up a brochure on investing for investors that helps them make an investment decision. They can use this brochure to ask targeted questions about, for example, AFM supervision, the costs and the risks. In addition, they can check the AFM register to establish whether a provider has a licence or an approved prospectus.

It is important that providers clearly indicate that they do not come under AFM supervision, because in such cases investors have to be extra vigilant. There are other risks than those involved in offers that are under supervision. For example, the AFM has not assessed the provider for properness and honest business operations. Nor is the provider under continuous supervision.

Consumers can recognise the warning by one of the illustrations below, which have to be clearly visible as a result of minimum height and width requirements.

The exemption threshold was raised from 50,000 euros to 100,000 euros per investment product on 1 January 2012. Providers of investments, securities and/or rights of participation who make use of this exemption are not required to hold a licence and/or publish an approved prospectus. Consumers who make investments above this threshold are expected to be able to properly assess the products offered and the provider offering the products.

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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