Guidance on interpretation of the inducement ban for investment firms
The Netherlands AFM has issued guidance that can assist investment firms in answering practical questions about the inducement ban.
Guidance on the interpretation of the inducement ban for investment firms
The Netherlands Authority for the Financial Markets (AFM) has issued guidance that can assist investment firms in answering practical questions about the inducement ban. The guidance is available in the Dutch language only.
What is this about?
On 01 January 2014 the inducement ban for investment firms has entered into force. Its goal was to remove undesired incentives of inducements, and to increase the transparency concerning inducements relating to the provision of investments services. The ban prohibits investment firms to provide or receive any fees relating to the provision of investment services to a non-professional client. Following various questions on the bans applicability in practice, the AFM now issues guidance which provides for specific examples. The guidance can be found here.
Which firms should care?
The guidance is first of all relevant for investment firms and other providers of investment services.
What should they know?
There are two main principles set out in the guidance of the AFM. Firstly, when an inducement directly relates to the provision of investment services the ban will apply. Secondly, the goal of the inducement ban is to remove undesired incentives that result in the best interest of the client no longer being first priority.
The AFM provides six examples to illustrate the above general principles relating to; fees directly related to the provision of investment services (eg; marketing activities, discounts, referral fees), events organized by providers (eg; marketing events), service models (eg; the outsourcing of the processing of orders) and investment firms with own fund providers.
When will this apply?
The inducement ban has been in force since 2014, the AFM merely provides guidance on its application.
Any further thoughts?
This guidance could assist market parties in determining in specific situations whether the inducement ban is applicable or not.
