What are incidents and wrongdoings?

Any person establishing wrongdoing in the financial services sector can notify the AFM. The notification may concern financial companies but also employees of financial companies or consumers dealing with these companies.

Examples of notifiable wrongdoings

• if something is not right in a provider’s business, such as serious flaws in their record keeping or recruitment policy;
• developments in the financial services sector, such as new products and service concepts that are not in the client’s interest;
• notably poor/unusual advice to consumers about financial products;
• you know someone in the financial services sector who has committed criminal offences;
• the possible existence of an unequal playing field;
• cases of fraud, forgery or swindle;
• unauthorised commissions;
• cold calling;
• the provision of financial services without a (correct) licence
• while working in the financial services sector, knowing that the company for which you work (potentially) does not comply with the rules;
• staff members providing advice and/or brokering financial products without holding the requisite diplomas;
• policymakers with a criminal record who have not been registered with the AFM being in charge behind the scenes at a financial company (known as a ‘straw man construction’).

As a provider, adviser, intermediary or investment firm, you are obliged to notify the AFM of particular developments at your company and of wrongdoings in the market that you encounter in your day-to-day activities. You may come across issues at your company or in the sector that may adversely affect the compliance with legislation supervised by the AFM.

Mandatory notifications cannot be made anonymously. The notification requirement is enshrined in Sections 4:11, 4:92 and 4:97 of the Financial Supervision Act (Wet op het financieel toezicht (Wft)). You yourself are responsible for reporting an incident to the AFM. You must always report incidents to the AFM yourself, even if another party has already notified the AFM of the same incident.

Examples of situations in which notification is mandatory

• wrongdoings and incidents at your company that may affect the trustworthiness of policymakers, ethical and controlled business operations and the continuity of the business;
• wrongdoings in the day-to-day operations of companies with which you cooperate. This obligation falls under the supply chain responsibility relating to cooperation with other intermediaries or sub-intermediaries.

Immediate notification

If your organisation observes this kind of wrongdoing, you must notify the AFM immediately. If you are conducting your own investigation, this investigation need not be completed before you notify the AFM. The AFM would like to subsequently receive your eventual investigation findings as a supplementary notification.

Advisers and intermediaries in the financial services sector are obliged to inform the AFM of violations of the Wft and other wrongdoings in the market that they encounter in their day-to-day activities.

Examples of these are (serious forms of) conflicts of interest, violations of the Wft or criminal offences that have happened and involve your company and/or your employees.

Wrongdoing also occurs if the conduct of your clients, your company and/or your employees may harm confidence in your company or in the financial markets in general, or if incidents at your company may affect the trustworthiness of policymakers, ethical and controlled business operations and the continuity of your business.

You must also notify us of potential wrongdoings in the day-to-day operations of companies with which you cooperate. This obligation falls under the supply chain responsibility relating to cooperation with other intermediaries or sub-intermediaries.

Examples of incidents and wrongdoing

The following list is not exhaustive but is intended to give you an impression of the type of notifications falling under the notification requirement:

- A policymaker is regarded as a suspect of fiscal and/or criminal antecedents.
- The company is involved in an investigation by the Public Prosecution Service, for instance into insider trading, money laundering, fraud, embezzlement or swindling.
- The Tax and Customs Administration issues a personal claim against a policymaker.
- An employee of the company has committed forgery. For instance, an adviser has signed a form and presents this signature as the client’s, or has pre-dated an application.
- A bank has lodged a high-impact claim against the company.
- An intermediary’s appointment at a bank or insurance company is revoked because of high cancellation rates.

The AFM exerts risk-driven supervision. In order to obtain a clear picture of the principal risks, we (partly) depend on your notifications of wrongdoings. In your role as provider, you have insight into the parties with which you cooperate and may be able to spot wrongdoings and violations.

As a provider, you are obliged to notify the AFM of potential wrongdoings in the market that you encounter in your day-to-day activities.

Examples

Below are a number of examples of possible situations at intermediaries and authorised agents that you have to report:

• parties with which cooperation was terminated on your initiative, and the reason for this;
• refused cooperation, and the reason for this;
• the intermediary signing the quotation on the client’s behalf;
• by-passing of blockades in quotation software;
• the same boxes repeatedly being ticked in standardised client profiles;
• systematic provision of incorrect and misleading information;
• temporary redemption of a loan by an intermediary so that a higher mortgage can be arranged;
• deliberately incorrect statement regarding the client’s health;
• the website showing that the intermediary performs activities falling outside the scope of the licence;
• an intermediary completing a health statement on the client’s behalf;
• the sole diploma holder or policymaker being absent for a long period;
• an intermediary’s director having been convicted of fraud;
• poor complaint handling;
• mortgage fraud;
• evasion constructions;
• systematic switching of insurance products;
• poor mortgage advice and/or insufficient quality of service provision;
• (high) pre-lending costs.

Investment firms and intermediaries in the financial services sector are obliged to inform the AFM of violations of the Wft and other wrongdoings in the market that they encounter in their day-to-day activities. Notifications should be sent to meldingenformulier@afm.nl.

Examples of wrongdoings/violations:

• unusual transactions (known previously as ‘MOT notifications’);
• companies providing an investment service without a licence;
• tied agents not acting in accordance with the Wft;
• constructions that try to circumvent or are in breach of the ban on commissions.