The ban on investment applies to companies that produce, sell or distribute cluster munitions, or essential parts thereof. A financial enterprise established in the Netherlands must take adequate measures to ensure that it does not execute transactions or have transactions executed on its behalf in, provide loans to, or acquire not freely marketable participating interests in these companies. Existing holdings must be sold or otherwise disposed of within a reasonable time.
Ban on investment in cluster munitions
The ban is an extension of the Convention on Cluster Munitions, to which the Netherlands is a signatory. The Convention implements the far-reaching ban on the use, possession, production and transfer of cluster munitions. The parties to the Convention have undertaken to adopt appropriate national executive measures to implement the Convention. The ban is included in Section 21a of the Market Abuse (Financial Supervision Act) Decree (Besluit Marktmisbruik Wft). The AFM is responsible for supervision of compliance with the ban.
What does the ban mean?
Who is subject to the ban?
The ban applies to financial enterprises located in the Netherlands. These are banks, asset managers, collective investment institutions, investment firms, financial institutions, pension funds and insurers. Branch offices and affiliated agents of these companies located abroad are also subject to the ban if they are managed from the Netherlands. Clearing institutions, natural persons, foreign subsidiary companies and legal entities other than financial enterprises fall outside the ban.
What are the exceptions?
There are 3 exceptions to the ban.
- It is permitted to execute transactions based on an index, but only if individual companies falling under the investment ban account for less than five per cent of the index concerned.
- The ban moreover does not apply to transactions in collective investment schemes managed by third parties if individual companies falling under the investment ban account for less than five per cent of the investments of the scheme.
- Investment may also be made in specifically described projects of a company falling under the ban, as long as the funds will not be used for the production, sale or distribution of cluster munitions.
Supervision by the AFM
The AFM uses the sector’s indicative list as a ‘risk radar’ in its supervision. The AFM will take enforcement measures if no explanation can be given for why an investment has been made in a company falling under the ban. The AFM wishes to note that the indicative list is not static and that the financial enterprise is and will remain responsible for ensuring that the ban on investment in cluster munitions is complied with.
In the event of breaches of the ban, the AFM may impose a fine between €500,000 and €1 million, or it may refer the case to the Public Prosecution Service.