The AFM imposes an administrative fine on B.A.G. BV for providing unsuitable advice on capital sum insurance


On 8 June 2012, the Netherlands Authority for the Financial Markets (AFM) imposed an administrative fine on B.A.G. B.V. (BAG), for providing unsuitable advice on taking out capital sum insurance. At the time of the violation, BAG held a licence for providing brokerage and advisory services concerning, inter alia, capital sum insurance (life insurance). BAG's very limited financial capacity has caused the AFM to mitigate the fine to €500.

The AFM found violations in 10 of the 12 investigated BAG client files from the period of 1 June 2010 to 20 December 2010. When issuing advice on capital sum insurance, BAG failed to obtain sufficient information on the consumer's objective(s) and willingness to accept risk. The AFM has determined that, on the basis of the information in the files, it cannot be established that taking out capital sum insurance was in the interest of the consumer.

For example, it became clear on the basis of 10 out of 12 client files that BAG did not obtain information concerning the question to what extent the client is willing to tie up his money for a longer period and whether he is willing to accept any costs related to premature termination of capital sum insurance. This while capital sum insurance was taken out each time for a period varying from 30 to 44 years. And it is evident from the files that relatively high costs are due if the insurance is terminated prematurely. As a result of the fact that BAG failed to obtain sufficient information on the willingness to accept risk, it was unable to base its recommendation on this information.

It is also evident from two files that the client (also) had a short-term objective, while BAG recommended capital sum insurance with terms of 30 and 39 years, whereby termination of the insurance entails relatively high costs. It is furthermore evident from one client file that the client indicated as his objective his intention to stop working early and his wish for a supplement that commences before he reaches the age of 67. BAG recommended, however, to take out capital sum insurance that will pay out when the client reaches the age of 67. It did not become clear from these files that BAG based its advice in part on the objective indicated by the client.

This means, in the opinion of the AFM, that BAG acted in violation of Article 4:23, first paragraph, parts a and b, of the Financial Supervision Act (Wft). The Wft obliges financial enterprises to provide consumers with appropriate advice. They are consequently obliged to obtain information and base its advice (partly) on this information.

The Penalty Scheme in Financial Legislation (Amendment) Act (the new fines act) and the Administrative Fines in Financial Legislation Decree (Decree on Administrative Fines) entered into effect on 1 August 2009. The fines act and the Decree on Administrative Fines apply, because the violation took place after 1 August 2009.

The basic amount for violation of Article 4:23(1) Wft is €500,000. When determining the amount of the fine, the AFM took into consideration the seriousness and duration of the violation, culpability and financial capacity of BAG. The AFM previously imposed a fine on BAG in 2009 for a similar violation. As it concerns a case of recidivism, the legislator has determined that the fine amount will be doubled. BAG's very limited financial capacity has the caused the AFM, however, to mitigate the fine to €500.

Interested parties can submit the AFM's judgment contained in the decision to the competent court for review. If you have any questions or comments you can contact the Financial Markets Information Line on: 0800-5400 540 (free of charge).

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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