AFM fines BinckBank for infringement of product governance rules

Product governance to prevent misselling

The European Union has introduced product governance requirements. The purpose of these rules is to ensure that investment firms only offer investment products that are in the clients’ interests, so as to prevent product scandals and the misselling of products. It is the responsibility of investment firms like BinckBank to determine the appropriate target markets for the products their clients are able to trade in. To this end, these firms must have a distribution strategy that safeguards that products are only distributed to clients for whom these products are suitable and not (on a structural basis) to customers outside the target market.

BinckBank did not have adequate policy in place

Previously, BinckBank’s product governance policy was not sufficiently detailed. The policy for determining the target market was inadequate. For example, the policy only described in general terms on what basis clients’ knowledge and experience was considered ‘basic’, ‘informed’ or ‘advanced’, even though this was a key parameter for determining which target market clients belonged to. In addition, the policy did not state in sufficiently concrete terms on what basis particular financial products were considered suitable for particular target markets. Furthermore, the distribution strategy was insufficiently detailed on a number of points, such as regarding how products were presented on the website and in the app and the ease with which customers were able to find and buy products. BinckBank’s policy’s did not make clear how the bank considered the key characteristics of each target market (‘type of client’, ‘knowledge and experience’, ‘financial situation’, ‘risk tolerance’ and ‘objectives and needs’) in deciding how it distributed products.

Lastly, BinckBank made its product review process primarily dependent on complaints it received. In short, BinckBank had not put in place the necessary tools to determine whether or not it sold products to clients outside the appropriate target market. As a result, BinckBank could not guarantee that it only offered its clients products that were in their interests.

Infringement has ended – BinckBank currently complies with the requirements

On 3 June 2022, the AFM imposed an order for incremental penalty payments on BinckBank to put an end to this infringement. BinckBank has since complied with the terms set in this order; the AFM has established that its product governance policy currently complies with the statutory requirements.

Fine with simplified settlement

The AFM has fined BinckBank for its past infringement. Since 2019, the AFM had repeatedly called BinckBank to account for its inadequate product governance and also issued guidance on this. Nonetheless, several years passed before BinckBank implemented the required improvements in its policy, which it wrongfully delayed until the migration to Saxo Bank had been completed.
As BinckBank has lent its full cooperation to the AFM’s investigation and has consented to the simplified settlement of this fineable matter in accordance with the AFM’s procedure for the simplified settlement of fineable matters, the original fine of €625,000 has been reduced by 15% to €530,000.

More information

Administrative fine (in Dutch) (pdf, 620 kB)