According to the 2004 International Monetary Fund (IMF) Financial System Stability Assessment, the Dutch financial regulatory system is mostly in compliance with International Organization of Securities Commissions (IOSCO) Principles and Objectives of Securities Regulation. The IMF attributed the effective regulation to a strong regulatory body with the necessary powers to carry out its responsibilities and increasingly risk-based regulatory approach. At the time of the assessment, the new law on financial supervision was expected to largely complete the ongoing regulatory transformation and address the few departures from IOSCO's Principles and Objectives. Indeed the Financial Supervision Act of 2006 entered into effect in January 2007 and applies a functional, as opposed to sectoral approach to financial markets supervision. There is no assessment as to whether the new law has effectively addressed all outstanding issues however. Nonetheless, the 2007 IMF Article IV Consultation with the Netherlands reports that, since the full implementation of the new financial supervisory framework, there has been improvement to financial firms' supervision and risk management practices. The supervisory framework and quality of supervision mostly represents international best practices.

General Overview

According to the 2004 International Monetary Fund (IMF) Financial System Stability Assessment (FSSA), the Netherlands financial regulatory "demonstrates a high degree of compliance" (p. 42) with the International Organization of Securities Commissions' (IOSCO's) Principles and Objectives of Securities Regulation. Effective regulation can be attributed to a strong regulatory body with the necessary powers to carry out its responsibilities and increasingly risk-based regulatory approach. The FSSA noted that a new law on financial supervision being drafted at the time of the assessment would largely complete the ongoing regulatory transformation and address the few departures from IOSCO's Principles and Objectives of the supervisory regime at the time of the assessment.

The Financial Markets Authority (AFM) website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007, and applies a functional, as opposed to sectoral approach to financial markets supervision. It improves the financial sector supervision framework and defines the requirements that apply to financial services providers. The Act both clarifies the division of responsibilities between the Dutch central bank (De Nederlandsche Bank, or DNB), and the Financial Markets Authority (AFM). The DNB is in charge of prudential supervision, while the AFM supervises market and business conduct. Also, the requirements that financial services providers must meet have been simplified to reduce the administrative burden. The Act defines a financial undertaking as a management company, a collective investment scheme (CIS), an investment firm, a depositary, a clearing institution, a financial service provider, a financial institution, a credit institution, or an insurer. Part 1 of the Act identifies the responsibilities of the supervisors, their tools for carrying out their responsibilities and guidelines for cooperation between the supervisors. Start-up requirements for financial undertakings are in Part 2. Part 3 covers prudential requirements for financial undertakings. Conduct of business requirements for financial undertakings are in Part 4, and market conduct rules for all market participants are in Part 5. The DNB website reports that the Act replaces seven supervision acts. These are the Act on the Supervision of the Credit System 1992, the Act on the Supervision of the Insurance Industry 1993, the Act on the Supervision of the Securities Trade 1995, the Act on the Supervision of Collective Investment Schemes, the Prepaid Funeral Services Insurance Supervision Act, the Act on the Disclosure of Major Holdings, and the Financial Services Act. European Union (EU) Directives also impact the securities markets which have entered into effect, according to the AFM website. The Market Abuse Directive was implemented in 2005 to better protect market integrity. It includes provisions covering disclosure duties and insider trading. Also, the Markets in Financial Instruments Directive (MiFID) came into effect in November 2007 as a part of the EU's Financial Services Action Plan to integrate Europe's financial markets, and replaces the Investment Services Directive on investment firms and financial markets. The MiFID includes greater requirements for firms, especially with regard to their business conduct and internal organization.

The 2007 IMF Article IV Consultation with the Netherlands reports that since the full implementation of the new financial supervisory framework, there has already been improvement to financial firms' supervision and risk management practices. The supervisory framework and quality of supervision mostly represents international best practices. Macro-prudential financial stability analysis with risk management has been advantageous to both supervisors and financial institutions. The DNB has started using a systemic risk-based supervision framework that tailors its supervision to individual institutions. The DNB and AFM coordinate their supervision under a covenant agreement which has solved initial coordination issues.

Euronext Amsterdam (AEX), which was previously known as the Amsterdam Exchange, is a subsidiary of Euronext Group and is the primary securities market in the Netherlands. The 2004 IMF Financial Sector Assessment Program (FSAP) states that the Euroclear group conducts clearing and settlement. The AEX has two tiers of rules, one which applies to all Euronext Group members, and one which applies only to AEX members. AEX is a self-regulatory organization (SRO) responsible for supervising the market. The AFM website indicates that listing applications are still handled by AEX, but in 2005, the responsibility to assess and approve prospectuses for listed securities was transferred to the AFM as a result of the Prospectus Directive. There are also the Amsterdam Midkap Index (AMX) and the Amsterdam Internet Exchange (AMS). The 2004 IMF FSAP reported that Euronext had 237 domestic and 117 foreign members. There were 1000 listed shares and a similar number of listed bonds. Market capitalization was €340 billion, about 90 percent of GDP.

The IOSCO multilateral memorandum of understanding (MMoU) is based on the thirty IOSCO Objectives and Principles of Securities Regulation (IOSCO Principles) adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The Ontario Securities Commission website explains that IOSCO members who complete the screening process but are found to lack the legal authority to fully comply with the terms of the IOSCO MMOU will be invited to become signatories to Annex B of the IOSCO MMOU, provided that they express their commitment to obtaining the necessary legal authority to become full signatories. The IOSCO website lists the AFM as a signatory to Annex B.

The Principles

1. The responsibilities of the regulator should be clear and objectively stated.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 79). The assessment team accepts the Netherlands's two pillar approach to financial regulation, meaning the separation of responsibilities between the DNB and the AFM. While the regulators' responsibilities and powers are clearly defined and transparent, there is some concern over the overlap of activities. The FSAP notes that steps must be taken to increase the confidence of market participants in the division of responsibilities. Also, the upcoming transfer of the responsibility to monitor prospectuses from AEX to the AMF should be finalized and a plan developed so that the transition goes smoothly. The FSAP recommends that the authorities consider publicly stipulation when the MoF can use its power to grant exemptions from regulatory requirements. In addition, the FSAP is concerned that in waiving regulatory requirements, the AFM and DNB will lead to regulations being applied inconsistently and inhibit transparency. It suggests that the level of detail in legislation be reviewed to consider whether it is necessary. Finally, the assessment team recommends that explicit requirements be included in the new financial supervision law that requires the MoF to consult with the regulatory bodies before exercising financial service regulatory powers.

The Financial Supervision Act of 2006 entered into effect in January 2007 and applies a functional, as opposed to sectoral approach to financial markets supervision. It improves the financial sector supervision framework and defines the requirements that apply to financial services providers. The Act clarifies the division of responsibilities between the DNB and the AFM. The DNB is in charge of prudential supervision, while the AFM supervises market and business conduct. Part 1 of the Act identifies the responsibilities of the supervisors, their tools for carrying out their responsibilities and guidelines for cooperation between the supervisors. The 2007 IMF Article IV Consultation with the Netherlands reports that macro-prudential financial stability analysis with risk management has been advantageous to both supervisors and financial institutions. The DNB has started using a systemic risk-based supervision framework that tailors its supervision to individual institutions. The DNB and AFM coordinate their supervision under a covenant agreement which, resolving initial coordination issues. The AFM website indicates that listing applications are still handled by AEX, but in 2005 the responsibility to assess and approve prospectuses for listed securities was transferred to the AFM by the Prospectus Directive.

2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.

CP

According to the 2004 IMF FSAP, this principle is "broadly implemented" (p. 83).The regulators act independently in carrying out their day to day responsibilities and there is nothing that implies their regulatory decisions are externally influenced, but legislation does not provide sufficient protection to maintain that independence. The FSAP recommends several adjustments to reinforce the regulators' independence. The balance between topics included in Acts, Decrees, and Regulations should be reviewed. The budget should be approved for longer periods of time. The regulators should build up reserves for budgetary protection. The consultation process between the regulators and MoF should be more transparent. There should be legal immunity for actions taken by the regulators in good faith. Directions from the MoF to the regulators should be made public. Investors' representative should be offered the opportunity to comment on the regulatory authority budget. However, when the authorities were given the opportunity to respond, they commented that the current arrangements would make it highly unlikely that anything would impede upon the independence of the regulators, noting that several of assessment team's recommendations have already been accounted for.

3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 85). The regulators licensing, supervision and enforcement powers are sufficient. The AFM regularly utilizes its enforcement powers. However, decreasing the detailed regulations of the AFM and DNB, as recommended in Principle 1, could inhibit the regulators supervisory powers by preventing them from quickly adapting to the changing markets. The assessment explains that under the new financial markets supervision law, each institution will have a lead regulator that has principal licensing power. This may lead to the second regulators losing authority over the institutions. Thus, it is recommended that the AFM be able to seek restitution via court or directly order restitution, subject to the proper hearings and appeals procedures. In addition, the budget should be approved for longer periods of time and the regulators should build up reserves for budgetary protection.

The AFM website indicates that the Financial Supervision Act of 2006 took effect in January 2007, applying a functional approach to financial markets supervision. It improves the financial sector supervision framework, as well as defines the requirements that apply to financial services providers. Part 1 of the Act identifies the responsibilities of the supervisors, their tools for carrying out their responsibilities and guidelines for cooperation between the supervisors.

4. The regulator should adopt clear and consistent regulatory processes.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 86). The FSAP reports that the AFM has a clear and consistent regulatory process, which applies to the regulators own activities and are fully known by the target of enforcement. There is a consultation process when developing policies, all policies are published, and public statements are made about the effects of the policies. However, the consultation process between the regulators and MoF should be more transparent and the high level of detail in regulations raises some concerns. The policy of waiving rules for special exceptions could lead to an inconsistent regulatory process. The FSAP recommends that smaller market participants be consulted about their problems with complying with the regulations and it be discussed how to address the concerns.

5. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 87). The staff must adhere to strict professional standards and follow conflicts of interests and confidentiality requirements. However, the FSAP warns that the AFM is growing quickly, and the training and assimilating of staff at such a rapid rate requires a continued commitment to training and development.

6. The regulatory regime should make appropriate use of Self-Regulatory Organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p.88). The FSAP indicates that AEX is the only SRO in the Netherlands. The MoF has the power to recognize SROs but has delegated the oversight powers to the AFM. In practice, the AFM plays an advisory role for the MoF in any new recognition decisions. However, the assessment team recommends that the criteria for recognition decisions be published. Also, suggests that the same regulator who has oversight power should have the power to recognize SROs. According to the AFM website, listing applications are still handled by AEX, but in 2005, the responsibility to assess and approve prospectuses for listed securities was transferred to the AFM as a result of the Prospectus Directive.

7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 90). The FSAP indicates that AEX is the only SRO in the Netherlands. The MoF has the power to recognize SROs but has delegated the oversight powers to the AFM. In practice, the AFM plays an advisory role for the MoF in any new recognition decisions. However, the assessment team recommends that the criteria for recognition decisions be published and suggests that the same regulator who has oversight power should have the power to recognize SROs. In addition, while there is no discrepancy between the AEX and AFM's perspective of the AFM's power to approve AEX rules, the approval and commenting process should be explicitly stated. In addition, while there are no explicit requirements for fair and equal treatment of all market participants, both the AFM and DNB recognize that the proper operation of the securities markets depends on it. According to the AFM website, AEX is responsible for supervising the market. The AFM website indicates that listing applications are still handled by AEX, but in 2005, the responsibility to assess and approve prospectuses for listed securities was transferred to the AFM as a result of the Prospectus Directive.

8. The regulator should have comprehensive inspection, investigation and surveillance powers.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 92). While the enforcement powers of the DNB and AFM are generally adequate and are not typically inhibited in practice, the enforcement powers of the regulators should be expanded and clarified by the law. Current law limits the institutions from which the regulators can obtain information and should be changed so that the regulators can obtain information from anyone reasonable believed to have the necessary information. Also, there is no stipulation that ensures the accuracy of information turned over to the regulators. The law should be amended to prohibit false information being supplied to the AFM and DNB. The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007, which applies a functional, as opposed to sectoral approach to financial markets supervision. It improves the financial sector supervision framework, as well as defines the requirements that apply to financial services providers. Part 1 of the Act identifies the responsibilities of the supervisors, their tools for carrying out their responsibilities, and guidelines for cooperation between the supervisors.

9. The regulator should have comprehensive enforcement powers.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 94). While the enforcement powers of the DNB and AFM are generally adequate and are not typically inhibited in practice, the FSAP recommends that the enforcement powers of the regulators be expanded and clarified in the law. The law limits the institutions from which the regulators can obtain information. The law should be changed so that the regulators can obtain information from anyone who is reasonably believed to have the necessary information. While the regulator may require a person to make a statement, it is suggested that legislation explicitly state the regulators' right to do so as part of their information gathering powers. Also, public statements by the regulators can be a useful sanction and tool to raise public awareness. The FSAP suggests that the sanctioning power of the regulators be expanded to include public statement. While the powers of the regulator meet international best practices, some market participants are unhappy with their range of regulatory powers. The assessment team recommends spreading public awareness about international standards and how the regulators meet them. Also, because of the changing responsibilities of the regulators, the FSAP recognizes that enforcement gaps will inevitably emerge. The powers of the two regulators should be reviewed to identify and deal with any gaps.

The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007, which applies a functional, as opposed to sectoral approach to financial markets supervision. It improves the financial sector supervision framework, as well as defines the requirements that apply to financial services providers. Part 1 of the Act identifies the responsibilities of the supervisors, their tools for carrying out their responsibilities and guidelines for cooperation between the supervisors.

10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 96). While the powers of the regulator meet international best practices, some market participants are unhappy with their range of regulatory powers, To resolve this, the FSAP recommends spreading public awareness about international standards, and how the regulators meet them. It also suggests that the significance of any weaknesses in compliance be assessed by the regulated entity.

11. The regulator should have authority to share both public and non-public information with domestic and foreign counterparts.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 98). The 2004 IMF FSAP judged that the AFM and DNB's cooperation powers meet the Principle's criteria. The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007, which applies a functional, as opposed to sectoral approach to financial markets supervision. Part 1 of the Act identifies the responsibilities of the supervisors, their tools for carrying out their responsibilities and guidelines for cooperation between the supervisors.

The IOSCO MMoU is based on the thirty IOSCO Objectives and Principles of Securities Regulation adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The Ontario Securities Commission website explains that IOSCO members who complete the screening process but are found to lack the legal authority to fully comply with the terms of the IOSCO MMoU will be invited to become signatories to Annex B of the IOSCO MMoU, provided that they express their commitment to obtaining the necessary legal authority to become full signatories The IOSCO website lists the AFM as a signatory to Annex B.

12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 99). It reports that the AFM and DNB have the power to enter into information sharing agreements with each other and foreign regulators, and have done so.

13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.

CP

According to the 2004 IMF FSAP, this principle is "partly implemented" (p. 90). The IOSCO MMoU is based on the thirty IOSCO Objectives and Principles of Securities Regulation adopted in 1998 and the experience gathered by securities regulators in using bilateral MoUs. The IOSCO MMoU provides a standardized framework for sharing enforcement-related information and a gradually expanding network of participating regulatory agencies. IOSCO members who wish to sign the IOSCO MMoU participate in a comprehensive screening process to establish that they have the legal capacity to fully comply with the terms of the IOSCO MMoU. The Ontario Securities Commission website explains that IOSCO members who complete the screening process but are found to lack the legal authority to fully comply with the terms of the IOSCO MMoU will be invited to become signatories to Annex B of the IOSCO MMoU, provided that they express their commitment to obtaining the necessary legal authority to become full signatories The IOSCO website lists the AFM as a signatory to Annex B.

14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 103). The FSAP reports that the IOSCO Principle, "full, accurate, and timely disclosure of financial results and other information that is material to investors' decisions," is "fully implemented" (p. 103). All public offers require a prospectus. Companies must disclose their audited annual report, semi-annual report, and all other information that could affect the price of securities. Shareholders' voting rights should be included in the articles of association. All information necessary to properly judge an offer must be released. Also, the AEX listing requirements include ongoing disclosure requirements. However, the assessment team points out that the current law allows for the interpretation that an offer may be made to a large number of people without a prospectus, and that the law should be reviewed with the intention of writing limitations into the law.

The Corporate Governance Code Monitoring Committee suggested, in its 2006 report, that to improve the transparency of directors' remuneration, the companies' remuneration policy should be included in a uniform and transparent manner in the annual accounts, and that the supervisory board should report on the effectiveness of the policy. There has been a significant improvement in the reporting on the functioning of the internal risk management and control system. The AMF website reports that, as of January 2007, the Act on the Disclosure of Major Holdings and Capital Interests in Securities-Issuing Institutions was implemented. This was integrated into the Financial Markets Supervision Act. The AMF is responsible for ensuring the implementation of disclosure requirements, including the responsibility to supervise annual reporting, which is particularly important in enforcing the Code's "comply or explain" requirement. In addition, the EU Market Abuse Directive was implemented in 2005 to better protect market integrity. It includes provisions covering disclosure duties and insider trading.

15. Holders of securities in a company should be treated in a fair and equitable manner.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 105). Shareholders rights are covered in Dutch Company Law. Depending on the structure of a company, the shareholders' have the right to elect directors varies, but in all cases there is a balance in the shareholders rights and the need for independent directors. Major changes in corporate structure require shareholder approval, but the articles of incorporation may assign some of that power to the supervisory board. By law, shareholders in the Netherlands have significant power, but companies may limit their powers through the articles of incorporation. In 30 percent of listed companies, not all shares of the same class have the same voting power. The shares are put into a trust office and while the economic benefits are equally distributed, the voting power is granted to the trust office. The trustees of the trust office, who are often closely associated with management, exercise the voting power; and the only check that the shareholders have is requesting a court inquiry into potential mismanagement. However, the FSAP indicates that the there was proposed legislation to provide proxies to holders of depository receipts. The Company Law also covers the registration and transfer of shares and dividends and permits bearer shares. There are also protections for shareholders in the case of a takeover or change of control; and there are sanctions for a lack of compliance with notification requirements. In addition, there are disclosure requirements protecting shareholders included in the AEX regulations. The Dutch Civil Code was amended in 2004 to provide proxies to holders of depository receipts for voting, according to the Hopt et al. report.

Also in 2004, according to Hopt et al., the Dutch Civil Code was amended in part to improve corporate governance by increasing the role of the AGM and providing greater rights for shareholders. AGMs have been allotted the additional responsibilities of authorizing major transactions, establishing remuneration policy and approving shares based on that policy. The new powers of shareholders include greater rights to submit proposals to AGMs and the provision of proxies to holders of depository receipts for voting. The AMF website reports that, as of January 2007, the AMF is responsible for ensuring the implementation of disclosure requirements, including the responsibility to supervise annual reporting, which is particularly important in enforcing the Code's "comply or explain" requirement. In addition, the EU Market Abuse Directive was implemented in 2005 and better protects market integrity. It includes provisions covering disclosure duties and insider trading. There has been progress in the equal treatment of shareholders since the introduction of the Dutch Corporate Governance Code, according to the 2005 ABI study, and companies have reduced the voting power of multiple voting shares. All the companies studied were in the process of eliminating restrictions on depositary receipts. Also, the companies that issued golden shares agreed to limit their issuance, but not to eliminate them.

16. Accounting and auditing standards should be of a high and internationally acceptable quality.

CP

According to the 2004 IMF FSAP, this principle is "broadly implemented" (p. 105).Acccounting and Auditing assessment

17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 109). The FSAP reports that there are entry requirements, supervision, and ongoing monitoring for collective investment schemes (CISs). To further improve CIS regulation, the FSAP recommends that the regulatory requirements be expanded to all those who carry out functions associated with CISs. Also, the assessment recognizes that so far, the general regulatory principles have been sufficient to prevent conflicts of interest, but suggests that specific rules on conflicts of interest and record-keeping be included in legislation.

The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007. The requirements that financial services providers must meet have been simplified to reduce the administrative burden. The Act defines a financial undertaking as a management company, a CIS, an investment firm, a depositary, a clearing institution, a financial service provider, a financial institution, a credit institution, or an insurer. Part 2 of the Act identifies start-up requirements for financial undertakings. Part 3 covers prudential requirements for financial undertakings. Conduct of business requirements for financial undertakings are in Part 4 and market conduct rules for all market participants are in Part 5. The DNB website reports that the Act replaces seven supervision acts including the Act on the Supervision of Collective Investment Schemes.

18. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 111). While the lack of a requirement that a CIS entrusts its assets to a third party as an additional safeguard to ensure the actions of a CIS are in line with the terms and conditions of the CIS. The 2004 IMF FSAP recognizes that implementing the requirement would be difficult because of the high concentration of the Dutch markets, but still suggests it be considered. Otherwise, it recommends other safeguards that ensure the proper disposal of assets.

The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007. The requirements that financial services providers must meet have been simplified to reduce the administrative burden. The Act defines a financial undertaking as a management company, a CIS, an investment firm, a depositary, a clearing institution, a financial service provider, a financial institution, a credit institution, or an insurer. Start-up requirements for financial undertakings are included in Part 2 of the Act. Part 3 covers prudential requirements for financial undertakings. Conduct of business requirements for financial undertakings are in Part 4 and market conduct rules for all market participants are in Part 5. The DNB website reports that the Act replaces seven supervision acts including the Act on the Supervision of Collective Investment Schemes.

19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 113). The FSAP reports that there are disclosure requirements for prospectuses, annual and semi-annual accounts, monthly statements, and key features documents, and advertising documents. The AFM must be satisfied with the information disclosed. If the Decree and annexes do no meet information requirements, the AFM may withhold authorization of a prospectus. Information in a prospectus must be updated with any changes. There are additional disclosure requirements in the Civil Code and Decree Accounting standards.

The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007. The requirements that financial services providers must meet have been simplified to reduce the administrative burden. The Act defines a financial undertaking as a management company, a CIS, an investment firm, a depositary, a clearing institution, a financial service provider, a financial institution, a credit institution, or an insurer. Start-up requirements for financial undertakings are included in Part 2 of the Act. Part 3 covers prudential requirements for financial undertakings. Conduct of business requirements for financial undertakings are in Part 4 and market conduct rules for all market participants are in Part 5. The DNB website reports that the Act replaces seven supervision acts, including the Act on the Supervision of Collective Investment Schemes.

20. Regulation should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 114). While the general principles in Dutch law have been sufficient for compliance with this Principle, the rules lack specificity and do not guarantee ongoing compliance. CIS assets valuation is covered in the Dutch Civil Code and external reporting rules are set by the council on external reporting, but are not specific to CISs. The frequency of valuations must be included in the prospectus. There are no requirements for fair and reliable valuations. Consequently, the 2004 IMF FSAP recommends reviewing the specificity of the laws.

The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007. The requirements that financial services providers must meet have been simplified to reduce the administrative burden. The Act defines a financial undertaking as a management company, a CIS, an investment firm, a depositary, a clearing institution, a financial service provider, a financial institution, a credit institution, or an insurer. Start-up requirements for financial undertakings are included in Part 2 of the Act. Part 3 covers prudential requirements for financial undertakings. Conduct of business requirements for financial undertakings are in Part 4 and market conduct rules for all market participants are in Part 5. The DNB website reports that the Act replaces seven supervision acts, including the Act on the Supervision of Collective Investment Schemes.

21. Regulation should provide for minimum entry standards for market intermediaries.

CP

According to the 2004 IMF FSAP, this principle is "broadly implemented" (p. 116). The names of the senior management of a regulated entity need not be made public, and the FSAP recommends that requirements be put in place to make the names available to the public. Because the Netherlands only offers one license for financial services, which allows an institution to provide any financial service, the FSAP recommends instead that licenses be required for each type of financial activity and be approved by the regulator responsible for supervising that area. The same regulator should have the authority to withdraw licenses if deemed necessary. Other suggestions include improving notification requirements by adding a broad notification requirement to notify the relevant regulator of any information that could be relevant in licensing decisions and removing the exemption for credit institutions from notifying about breaches in conduct of business regulations. The regulations governing those who are subject to checks should be broadened to include any person who could influence a license applicant.

The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007. The requirements that financial services providers must meet have been simplified to reduce the administrative burden. The Act defines a financial undertaking as a management company, a CIS, an investment firm, a depositary, a clearing institution, a financial service provider, a financial institution, a credit institution, or an insurer. Start-up requirements for financial undertakings are included in Part 2 The DNB website reports that the Act replaces seven supervision acts.

22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 118). According to the FSAP, capital standards for securities comply with the EU Directive. The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007. The requirements that financial services providers must meet have been simplified to reduce the administrative burden. The Act defines a financial undertaking as a management company, a CIS, an investment firm, a depositary, a clearing institution, a financial service provider, a financial institution, a credit institution, or an insurer. Part 3 of the Act covers prudential requirements for financial undertakings. Conduct of business requirements for financial undertakings are in Part 4 and market conduct rules for all market participants are in Part 5. The DNB website reports that the Act replaces seven supervision acts.

23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 120). While the requirement for high standards of integrity exists within several requirements, the FSAP suggests that the requirement that market intermediaries must meet the legal and regulatory obligations and maintain a high level of integrity should be explicitly stated. The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007. The requirements that financial services providers must meet have been simplified to reduce the administrative burden. The Act defines a financial undertaking as a management company, a CIS, an investment firm, a depositary, a clearing institution, a financial service provider, a financial institution, a credit institution, or an insurer. Start-up requirements for financial undertakings are included in Part 2 of the Act. Part 3 covers prudential requirements for financial undertakings. Conduct of business requirements for financial undertakings are in Part 4 and market conduct rules for all market participants are in Part 5. The DNB website reports that the Act replaces seven supervision acts.

24. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.

II

According to the 2004 IMF FSAP, this principle is "not implemented" (p. 121). The FSAP indicates that there are no clear plans for dealing with a firm's failure. The AFM has established a procedure, but the DNB, which is most relevant to market intermediaries, has not. The AFM and DNB should establish a joint plan for addressing a firm's failure, including procedures for market disclosure. The 2007 IMF Article IV Consultation with the Netherlands reports that since the full implementation of the new financial supervisory framework, there has already been improvement to financial firms' supervision and risk management practices. The supervisory framework and quality of supervision mostly represents international best practices. Macro-prudential financial stability analysis with risk management has been advantageous to both supervisors and financial institutions. DNB has started using a systemic risk-based supervision framework that tailors its supervision to individual institutions. DNB and AFM coordinate their supervision under a covenant agreement which has solved initial coordination issues. The new information is not reflected in the IMF's 2004 assessment.

25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 124). The FSAP recommends that the AFM establish and publish clear recognition criteria to increase the transparency of its supervision of AEX and subsequently issue instructions based on these criteria.

26. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 125). Since it is a key regulatory tool, the contribution model should be finalized as quickly as possible and be applicable to AEX, as a pan-European exchange. Also, all harmonized matters should be covered in the MoU among the five regulators.

27. Regulation should promote transparency of trading.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 126). Pre- and post-trade reporting requirements are in line with international standards, including the EU Investment Services Directive. To further improve transparency, the FSAP recommends that the AFM and Euronext review the rule covering block trades.

28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 127). The law prohibits market manipulation and insider trading. The FSAP explains that securities institutions are prohibited from taking misleading action or misrepresenting financial transactions. Euronext reports all transactions to the AMF and the AMF independently monitors market function. AMF carries out investigations and can impose fines, or may report an offense to the public prosecutor.

29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.

FC

According to the 2004 IMF FSAP, this principle is "fully implemented" (p. 128). The DNB is responsible for the supervision of Investment Firms and Banks' financial positions. Clearnet is a clearing house and responsible for monitoring large exposures of its Clearing Members. Clearnet can require information from Clearing Member, including clients' daily open positions. Clearnet can impose sanctions for refusal to provide information on large positions. Euronext can suspend Clearing Members from Trading. Also, there is a separation of client funds from the Investment Firm to protect investors. Compliance with Clearnet rules is required in the Euronext rulebook.

30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.

FC

The 2004 IMF FSAP reports that AEX, which was previously known as the Amsterdam Exchange, is a subsidiary of Euronext Group and is the primary securities market in the Netherlands. The FSAP reports that, like the other Euronext Group members, Euroclear group conducts its clearing and settlement. AEX has two tiers of rules, one which applies to all Euronext Group members, and one which applies only to AEX members. The Securities Trade Act provides the legal bases for the oversight and supervision of securities clearing and settlement systems, "according to which the Minister of Finance shall verify the settlement system when recognizing (licensing) a securities exchange" (p. 165). This establishes indirect supervision of Clearnet and Euroclear activities.

The AFM website indicates that the Financial Supervision Act of 2006 entered into effect in January 2007. The requirements that financial services providers must meet have been simplified to reduce the administrative burden. The Act defines a financial undertaking as a management company, a CIS, an investment firm, a depositary, a clearing institution, a financial service provider, a financial institution, a credit institution, or an insurer. Start-up requirements for financial undertakings are identified in Part 2. Part 3 covers prudential requirements for financial undertakings. Conduct of business requirements for financial undertakings are in Part 4 and market conduct rules for all market participants are in Part 4. The DNB website reports that the Act replaces seven supervision acts including the Financial Services Act.