Summary AFM Annual Report 2015

ANNUAL REPORT
MAIN RESULTS OF THE SUPERVISION

In 2015 the supervision activities of the Netherlands 

Authority for Financial Markets (AFM) were organised 

around nine themes. The aim of each theme was to 

control a crucial market risk by maintaining adequate 

supervision. 

The diagram below shows how the AFM mission 

statement was translated into strategic aims and themes 

in 2015.

Management summary

The AFM promotes fair and transparent

 financial markets and contributes to the 

stability of the financial system

Fair and conscientious 

provision of financial services

Fair and efficient 

capital markets

Contributes to the stability 

of the financial system

Product providers put the customer’s interests first

Improvements in quality of financial services

provements in quality of capital accumulation

Appropriate financial services for businesses

Pension providers provide detailed and generic 

information on pension levels and risks

Decrease in prejudicial conduct and financial crime

Increase in the quality of governance, reporting and audits

Fair and efficient operation of the stock 

markets and a robust infrastructure 

Summary AFM Annual Report 2015 II

Supervision of conduct contributes 

to the stability of the financial system
Below is a summary of the main results of the 

supervision in 2015. A more detailed version can be 

found in Chapter 1 (in Dutch only) of this annual report.

Putting the customer’s interests first

The AFM has observed stabilisation in the scores of 

the largest financial organisations on the dashboard 

after a continuous upward trend lasting five years. In 

2015 banks and insurers could have taken the initiative 

more often to go the extra mile for the customer and 

changes were not always passed on to departments, 

distribution channels or types of customer, other than 

those upon which the AFM had previously focused its 

supervision efforts (see Customer Interest Dashboard 

below). We must therefore review our approach to 

determine how and where to give fresh momentum 

to the market. Concrete improvements have been 

achieved in the development of supplementary health 

insurance and car-financing products. Insurers have 

now activated the vast majority of their investment 

policy holders and improvements are being 

implemented in the treatment of customers with 

mortgage arrears. 

Quality of financial services

Our supervision activities for ‘Quality of financial 

services’ focused primarily on adherence by the sector 

to recent regulations on professionalism and to the 

ban on commission. At the same time, we invested 

in research on consumer behaviour to gain a clearer 

understanding of why consumers do not or cannot 

always make appropriate choices. Since 2015 the vast 

majority of financial advisors have been in possession 

of the diplomas required for the job. They have the 

latest knowledge and skills, which should enable them 

to deliver good advice. Most of the large and mediumsized independent advisors no longer have agreements 

or cash flows with intermediary providers.

Capital accumulation

The AFM worked hard to improve investment services 

within the ‘Capital accumulation’ theme. It encouraged 

and motivated the sector by conducting studies on 

the quality of the investment services, by making 

costs more transparent and by pushing for changes 

to national and international legislation. The AFM 

would like to see a better match between services 

and customer needs. Knowledge about the motives 

of individual investors could help to achieve this. 

Our research into investment services at banks and 

independent asset managers indicates that the quality 

has, on average, improved since 2014. The ban on 

commission, introduced in 2014, is being properly 

adhered to. It was thanks to the efforts of the AFM 

that the Comparative Cost Standard (Vergelijkende 

Kosten Maatstaf) was introduced on 1 January 

2015. This tool will allow consumers to draw clear 

comparisons between the costs of services. 

Services for business

The AFM takes the view that the improvements 

implemented by the sector in recent years in the 

interests of the consumer should be extended to 

businesses (also vulnerable businesses). We are 

not yet confident that the sector is taking this 

extra step. For example, the good scores that the 

sector achieved for providing information to private 

customers are in stark contrast with the dashboard 

results for Information Provision Banks for Business 

Customers. The banks scored an average of 2.3 for 

pre-contractual information on credit facilities for 

SME, which is far short of the norm. The banks in 

question have accepted the findings and agreed 

to take the necessary steps. The banks also failed 

to put the customer’s interests first in their own 

working programmes when re-assessing interest rate 

derivative contracts with small and medium-sized 

enterprises. An administrative fine was imposed on 

one bank for failing to keep proper records of interest 

rate derivatives. In March 2016 the AFM presented a 

strategy to have banks compensate customers with 

interest rate derivative products for their losses. The 

AFM also found shortcomings in its own review of 

the re-assessments. The Supervisory Board ordered 

an independent inquiry in December to redress this 

situation.

Summary AFM Annual Report 2015 III
Pensions

The AFM started work on the ‘Pensions’ theme 

with supervision of the Pensions Communications 

Act (Wet pensioencommunicatie), which came into 

force on 1 July 2015. Under this new legislation, 

all information that pension providers supply to 

participants must be clear, correct, consistent, and 

in keeping with the participant’s requirements and 

wishes. New information tools such as Pension 

1-2-3 will be officially introduced in the course of 

time and give participants a clearer idea of pension 

risks and uncertainties. More than 80 per cent 

of pension providers are familiar with the new 

Pensions Communications Act and can interpret 

and implement it correctly. Investigations by the 

AFM have revealed that pension funds do not keep 

their participants adequately and consistently 

informed about indexation in the past and present 

and – most importantly – the anticipated indexation 

in the coming years. An inspection of five pension 

providers at the end of 2015 indicated that most 

have improved their information services.

Audits

An improvement programme was launched in 

2015 for ‘Governance, reporting and auditing’. In 

2013 and 2014 the AFM found that the quality of 

the audits performed by the larger accountancy 

firms was below standard. In a report entitled ‘In 

the public interest’ (Dutch: In het publiek belang) 

the Royal Netherlands Institute of Chartered 

Accountants (NBA) concluded that fundamental 

changes were needed in the governance, structure, 

processes, conduct and culture in accountancy 

firms in order to realise substantive improvements 

in quality. The AFM will use the newly introduced 

dashboard, amongst other things, to monitor 

developments and urge the parties to report the 

progress to the sector and other stakeholders. The 

AFM will also act in an enforcement capacity if 

necessitated by the seriousness of specific offences. 

The aim of the AFM is to motivate accountancy firms 

to work assiduously to realise fundamental change 

and improve the preconditions. Hopefully, this 

will lead to an improvement in the quality of their 

statutory audits, which will then be more in tune 

with the public interest. In the wake of the findings 

of the Big 4 inspections in 2014, the AFM handed 

over four files to the ‘fine officer’. 

The quality of financial reporting had been 

improving steadily for several years, but the trend 

did not continue in 2015. Inspections carried out 

by the AFM in 2015 on listed companies with an 

increased risk of errors in the financial reporting 

for 2014 delivered a relatively large number of 

findings (provisional). Scope for improvement was 

also revealed by three AFM studies on information 

on interests in businesses, pensions and bank 

covenants.

Capital markets

The number of reports on insider trading and 

market manipulation rose by 20 per cent in the 

past year. Compared with the number of reports 

received by other European regulators, the AFM 

concludes that this increase is not the result of 

more market abuse, but more efficient checks by 

market players, who are also better served by a 

market that operates fairly. The AFM investigated 

many of these reports; four have resulted in files 

being handed over to the ‘fine officer’. One led to a 

referral to the Public Prosecution Service. The AFM 

had more than 250 contact moments with listed 

companies, traders and investors on how to handle 

price-sensitive information, financial reporting, 

reports and emissions/public offerings. In around 

25 cases this contact had an immediate effect 

resulting, for example, in a press release or the 

correction of a report in the media. The AFM had to 

interrupt trading three times to prevent trading with 

asymmetric information until a press release was 

issued.

Financial stability

One important aspect of ‘Financial stability’ in 

2015 was the impact of the low interest rates on 

Summary AFM Annual Report 2015 IV
the operations of financial markets. Other, related 

issues were the influence of the low interest rates 

on market liquidity and the potential system risks in 

asset management. An investigation was performed 

jointly with the DNB to determine the effects of the 

new regulations on the operation of the derivatives 

markets. This led to a joint AFM/DNB publication under 

the umbrella of the Financial Stability Committee (FSC). 

An FSC-led study was also carried out on the Dutch 

mortgage market, which led to recommendations from 

both authorities to lower the maximum loan-to-value 

to 90 per cent over the course of time. 

Prejudicial conduct and financial crime 

Under the theme ‘Prejudicial conduct and financial 

crime’ the AFM took action against mala fide players: 

recidivists, multiple offenders and parties that operate 

without authorisation. The AFM also excluded 

unethical executives from the market and took action 

against harmful earnings models and products. In 2015 

it issued 11 warnings against boiler rooms. Forty-one 

parties which were active without a licence were told 

to cease their activities and around one third took 

immediate steps. In 2015 the AFM sent out 25 transferof-standards letters to address breaches of integrity by 

licence-holders. To prevent money laundering and the 

funding of terrorism 116 transfer-of-standards letters 

were sent to investment companies, followed later by 

further details in a newsletter.

FORMAL AND INFORMAL ENFORCEMENT

In 2015 the AFM imposed a total of 17 fines, 

significantly fewer than the 31 imposed in 2014. The 

AFM has made no changes to its enforcement policy. 

The fines for 2014 included a relatively high number of 

smaller businesses and could be settled with a simple, 

more or less standardised procedure. Most of the fines 

in 2015 concerned more serious and complex cases 

at larger companies. The fines in 2015 amounted to a 

total of €9,616,250 compared with €7,327,287 in 2014. 

The total number of formal enforcement measures was 

also lower in 2015: 52 compared with 106 in 2014. The 

decrease is largely attributable to lower penalties and 

public warnings. The number of informal enforcement 

measures rose to 575 in 2015 compared with 471 in 

2014. 

Further details on enforcement measures can be found 

in Toezichtaanpak AFM (AFM Supervision Strategy) 

(qualitative) and in Chapter 3.2 AFM in cijfers (AFM in 

figures) (quantitative).

STRENGTHENING SUPERVISION BY INVESTMENTS 

IN TECHNOLOGY AND METHODOLOGY

Technological and societal developments affect 

the AFM as well as the financial sector. We can 

continuously increase our effectiveness via data 

availability, analysis and application. In 2015 we 

pursued this aim by gaining further insight into 

consumer and investor behaviour and cultural 

change (see Chapters 2.2 and 2.3). 

Technological developments are having a profound 

impact on the financial market and the market 

structure. For example, we are seeing more and more 

new earnings models and new players. Meantime, 

the long-established players are expected to change 

with the times. The changes in the market structure 

are driven by both supply (fintechs) and demand 

(consumers and investors). Technology will also 

accelerate the internationalisation of retail markets. 

Internationalisation could speed up in the coming 

years, especially in areas where there is relatively 

little national legislation and regulation and hardly 

any direct customer contact. The AFM decided to 

strengthen its knowledge in this area in 2015 and plans 

to set up the Innovation & Fintech programme for this 

purpose on 1 January 2016.

INCREASING THE EFFECTIVENESS, EFFICIENCY 

AND AGILITY OF THE INTERNAL ORGANISATION

In order to respond adequately to external changes 

the AFM must further develop its own organisation. 

In 2015 the AFM management was strengthened 

Summary AFM Annual Report 2015 V
by the appointment of a new Supervisory Board 

and two new directors. The supervision system 

which was restructured and implemented in 2014 

has been evaluated. These steps and the further 

development of the organisational setup of the AFM 

are summarised in the Multi-Year Agenda. 

Strengthening the management

After the departure of several Supervisory Board 

members at the end of 2014, the Minister of 

Finance appointed Paul Rosenmöller, Rob Becker, 

Bart Koolstra and Annemarie van Gaal on 15 July to 

fill the vacancies. Annemarie van Gaal resigned as of 

1 January 2016. 

In April 2015 Theodor Kockelkoren resigned as a 

board member and was succeeded by Femke de 

Vries on 1 October 2015. At the same time, Frans 

van den Hurk was appointed Chief Operations 

Officer (COO) with responsibility for all the AFM 

business operations. Rotation and renewal were 

implemented at managerial level to strengthen the 

management and in response to the evaluation. 

Evaluation of the reorganisation

On 1 January 2014 the AFM carried out a 

reorganisation, which was evaluated in 2015 and 

led to further changes. Starting from April 2016, 

AFM supervision will be split into six domains with 

renewed themes and objectives and a time horizon 

of three to five years. The Expertise Centre and the 

Innovation & Fintech programme, due to start in 

2016, will give further content to the supervision. 

Multi-Year Agenda

The Multi-Year Agenda was launched in 2015 to 

define the AFM in the medium term. The AFM has 

developed a four-part vision for the Multi-Year 

Agenda, with a renewed mission, revised core values 

and qualities, and an ambitious aim for 2022. 

The aim of the AFM is to be a recognised groundbreaking supervision authority by 2022; an 

organisation that sets the tone. The AFM wants to 

push the boundaries to make a lasting impact on its 

environment and tackle relevant issues. The AFM 

must therefore anticipate and respond promptly 

to the changing world, but shape and influence 

this world at the same time. This combination will 

ensure that the AFM, as a supervision authority, 

will stay a step ahead and operate effectively. 

It also means that the AFM will understand and 

apply the latest technology for its supervision 

tasks and make optimal use of the available data. 

The AFM will ensure that its interventions remain 

effective by making use of insights into behaviour 

and corporate culture. The AFM will push the 

boundaries by constantly reviewing and evaluating 

its own effectiveness and by keeping pace with 

developments in the sector and in supervision in 

both the Netherlands and abroad.

Summary AFM Annual Report 2015 VI
Core qualities

Discipline 

Analytical strength 

Dynamism

Mission

The AFM promotes fairness and transparency on

financial markets. As an independent supervision 

authority, it contributes to sustainable financial 

prosperity in the Netherlands.

Ambition

To be a ground-breaking 

supervision authority by 2022

Core values

Diligence Thoroughness

Autonomy Connectivity

&

&

Summary AFM Annual Report 2015 VII

The ambition ‘To be a recognised ground-breaking 

supervision authority by 2022’ is fleshed out in a 

strategic roadmap which sets out the AFM plans in 

the coming years to achieve this ambition. Further 

information on the Multi-Year Agenda can be found in 

Chapter 3 (in Dutch only).