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Licensing obligation under FSA

It is virtually impossible to operate on the financial markets in the Netherlands without a licence. Although an exception, dispensation or exemption from a licence may be granted or a licence may not be required for your activities, you will have had to think about the obligation to apply for a licence. The purpose of the licensing obligation is to maintain trust in the financial markets, which obviously benefits your company. However, the licensing obligation also involves the necessary administrative hassle, which entrepreneurs are keen to avoid.

The (Dutch) Financial Supervision Act requires that certain activities on the financial markets may only be conducted with a licence. Failure to observe that licensing obligation may give rise to enforcement measures by the Dutch Central Bank (“DNB”) or the Netherlands Authority for Financial Markets (“AFM”). Depending on the focus of the supervision, the licensing supervisor is either the DCB (prudential supervision aimed at financial solidity of supervised institutions and stability of the financial sector) or the AFM (supervision on conduct aimed at orderly and transparent markets, integrity in relationships between market parties and careful treatment of customers).

The licensing obligation applies to, among other activities, conducting the business of a bank, insurance company (life and nonlife), prepaid funeral services’ insurers and clearing institutions. The licensing obligation extends to offers of investment properties, credit and participation rights in investment institutions, investment services, the conduct of investment activities, advice on financial products other than financial instruments and brokerage.

The Financial Supervision Act also contains various exceptions to the licensing obligation. Moreover, the Financial Supervision Act Exemption Regulation offers the possibility of an exemption from the licensing obligation. It may therefore make sense to find out whether a licensing obligation can be avoided before activities are initiated on financial markets.

The Financial Supervision Act and the related subordinate legislation describe precisely what conditions must be satisfied to obtain a licence. An important aspect of the license grant is an appraisal of the reliability and/or expertise of the managing directors, supervisory directors (in some cases) and shareholders of the applicant.

A licence granted under the Financial Supervision Act in the Netherlands often opens the gate towards Europe since many licences include what is called a European passport. The holder of such a Dutch licence is allowed to operate in other EU Member States with relatively few formalities.

A licence application requires thorough preparation and many legal aspects need to be considered. Failure to prepare a licence application correctly may lead to a complex and lengthy licence application process and, in the most extreme case, results in the application being denied. In order to ensure that the licence application is handled as efficiently and quickly as possible, we recommend that you seek specialist help. Eversheds Sutherland can offer that specialist help. Our expertise comprises:

  • advice on licence obligations and exemptions;
  • assistance for the purpose of reliability and expertise assessment;
  • preparation of the documentation necessary for the licence application;
  • handling the licence application; and
  • maintaining communications with the supervisory authorities.

Miriam Ee, van