No more return commissions at custodian banks

The ban on inducements has ensured that custodian banks no longer pay return commissions to investment advisers and asset managers. This is evident from a request for information from the Netherlands Authority for the Financial Markets (AFM) sent to the five largest custodian banks in the Netherlands.

Custodian banks are banks that carry out orders and keep securities for clients of investment advisers and asset managers. Prior to the ban on inducements custodian banks would pay fees to investment advisers and asset managers when they were instructed to carry out orders on behalf of investors. These so-called return commissions have been banned since 01 January 2014.


Custodian banks offer their services to investment advisers and asset managers in accordance with revenue models that are in line with the ban on inducements. The AFM welcomes the efforts made by the sector that made the transition to direct payment for the provision of services. "We realise that the impact of the abolishment of return commissions is considerable for many investment advisers and asset managers. We are pleased that the sector has made the transition to revenue models that include direct payment by clients", according to Tim Mortelmans, head of the AFM's Financial Enterprises Supervision.

Before the ban on inducements, the return commission could be an incentive for investment advisers or asset managers to have more or other orders carried out than would be in the interest of the client. There could also be incentives to have orders carried out by parties that charge higher transaction costs than is necessary.

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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