In April, the Ministry of Finance published the Consultation on Implementation of the Amended AIFM and UCITS Directive Act. DUFAS responded to this consultation. In our response, we have drawn attention to a number of clarifications and recommendations to align the implementation as closely as possible with the text of the European directives, the existing Dutch legislative framework and market practice.
We appreciate that the implementation bill is broadly in line with the European directive texts. Preventing "gold plating" contributes to a level playing field within the European Union and strengthens the European capital market. In addition, we have made a number of substantive recommendations to ensure that the implementation of the revised AIFM and UCITS directives is properly aligned with Dutch legislation.
Clarify definition 'initiate loans'
The proposed definition of loan origination in Section 1:1 Wft raises ambiguities. We advocate using the term 'issuer' instead of 'provider' to better align with the text of the AIFMD. In addition, we advocate explicitly stating that the initiation of loans refers only to situations where this is done for or on behalf of the investment institution or its manager.
Better delineate scope of MiFID rules
Article 6(6) AIFMD stipulates that certain MiFID rules only apply when it comes to activities involving financial instruments. This limitation is missing in the proposed Article 1:19(2) Wft. We therefore request the inclusion of this restriction to avoid over-implementation.
Execution of orders as a new service
There is ambiguity as to whether "order execution" qualifies as a new service under the revised guidelines. We call for an explicit explanation in the explanatory memorandum to the law to avoid ambiguity.
Terminology 'fund rules' does not align with practice
In practice, 'fund rules' is rarely mentioned anymore, but more often 'fund documentation' as a collective term for all legal and commercial documents of a fund. We therefore recommend adjusting the legislation accordingly, or clarifying in the explanatory statement what should be understood by 'fund rules'.
Restriction on regulator's power to suspend fund transactions
The proposed article 1:77a Wft gives the AFM the authority to temporarily suspend subscriptions, redemptions or repurchases in funds. This authority is broader than the European directives allow. We therefore argue for a clearer review framework, with three conditions:
- the existence of exceptional circumstances;
- prior consultation with the administrator, and;
- the presence of risks to investor protection or financial stability.
In addition, we propose to limit the territorial scope of this power to institutions under Dutch supervision.
