Supervision of asset management in the Netherlands
If you are looking for the most suitable asset manager, it is important that a manager is qualitative and reliable. This is also the reason that asset managers in the Netherlands are accountable to a number of supervisors, in order to protect the quality and reliability of customers. These supervisors check financial providers, the quality of their offers and the specific products they offer. This article on supervision of asset management discusses which supervisors, organizations and regulations for asset management may be relevant to you.
Supervisors of asset management
- ESMA: the European Securities and Markets Authority
- AFM: Netherlands Authority for the Financial Markets
- DNB: The Dutch Central Bank
- DSI: Dutch Securities Institute
- Kifid: Complaints Institute for Financial Services
- MiFID: Markets in Financial Instruments Directive
- Separation of assets
These supervisors, organisations and procedures are all important for various types of asset management, such as funds, banks and online asset management.
Who supervises asset managers?
Asset managers and all employees associated with the asset manager are closely monitored. The services and products they provide must meet strict quality requirements. Official institutions monitor these asset managers and supervise their services and products.
Examples of such supervisors are: the AFM (Financial Markets Authority), the Foundation for Expertise, Screening and Integrity (DSI) and finally De Nederlandsche Bank (DNB).
ESMA
First of all, ESMA. This abbreviation stands for the European Securities and Markets Authority. This organization ensures that all rules in the financial world are complied with. The European institution tries to ensure that the standards are maintained in order to help the investor and create a stable market so that the investor is not disadvantaged too much. The standards are the same for all European countries and are binding.
Supervision of asset management in the Netherlands: DNB and AFM
Each country determines the laws and regulations that apply to asset management (and investing in general) and to what extent supervisors may interfere. In the Netherlands, it is regulated as follows: The Financial Supervision Act (WFT) is the most important in the Netherlands and concerns the financial institutions. The AFM and the DNB ensure that these procedures and regulations are complied with in the Netherlands. The European regulations are the most important, but national authorities can choose to enforce stricter regulations in a specific area. The German institution FlatexDeGiro is a good example of this: they are responsible for the resale of orders. In Europe, this is permitted on a small scale, but strict requirements apply. However, in the Netherlands, there is a ban on the resale of orders.
The AFM and the DNB check matters concerning asset management. The division is as follows:
- The AFM supervises the competence, soundness and conduct of business of asset managers.
- The DNB is mainly specialized in financial matters. The DNB is concerned with the honesty of affairs in the financial world. All obligations are listed.
DSI Foundation – supervision of asset management for integrity and expertise
In order to guarantee you a competent and expert party, various requirements have been drawn up that asset managers must meet. If an asset manager meets these requirements, this party can report to the Dutch Securities Institute (DSI). This is an objective body that deals with the integrity and competence of parties that are active in the financial world. A party must first take a certain exam before the registration is fully completed. All asset managers that have passed this exam in good order and thus meet the requirements set by the DSI, are considered qualified by the AFM.
Asset managers who have a DSI quality mark are included in a specific register.
KiFiD – all complaints regarding asset management
If shareholders do not agree with the way things are going regarding finances or the provision of services, they can contact KiFiD (Complaints Institute for Financial Services). If customers and, for example, asset managers cannot solve problems themselves, they can contact KiFiD. This is an objective body for which you do not have to pay additional costs if you have a complaint. This body will then try to come up with a suitable solution, after having done sufficient research.
All administrators who have a binding agreement with KiFiD must comply with the final decision of KiFiD. If there is no binding agreement, the administrator is not obliged to comply with the decision of KiFiD. In these cases, you as an investor must go to court. Unfortunately, this will entail additional costs. It is therefore wise to know in advance whether the party is affiliated with KiFiD and has a binding agreement with KiFiD.
MiFID – playing open cards
The MiFID (Markets in Financial Instruments Directive) is a European pillar that has established guidelines for reporting on certain matters, such as costs. This has been determined in agreement. The MiFiD and MiFiD II have been determined by a European organization and are aimed at increasing the openness and reliability of the market and better protecting the investor from dangers. An example is the TCO methodology (Total Cost of Ownership). TCO is a percentage that shows the total costs of a certain party on an annual basis.
Asset segregation: stay in control of your own portfolio
The specific Act on the Giro Circulation of Securities obliges parties to adhere to the phenomenon of asset separation. This means that the party must keep the financial resources of clients separate from the estate. Investments of clients are therefore kept in a separate bank. In this way, the investments of clients are not lost if the party goes bankrupt. The AFM and the DNB ensure that companies adhere to this law and that investments of clients are separated from the rest.
Our reading tips
for the novice investor