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AFM: Definition, history, and facts
GlossaryWhat is the AFM?
The AFM is the conduct regulator for the financial markets in the Netherlands and is based in Amsterdam. It is an independent administrative body with statutory duties and powers. The AFM checks whether financial companies work fairly and transparently.
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What does the abbreviation AFM stand for?
The abbreviation stands for ‘Autoriteit Financiële Markten’ (Dutch Authority for the Financial Markets). The name says exactly what the regulator does: the authority that enforces laws and regulations so that financial markets are transparent, fair, and reliable.
The history of the Dutch Authority for the Financial Markets
This body has existed since 2002 and is the successor to the Stichting Toezicht Effectenverkeer (STE) (Securities Board of the Netherlands). Its establishment followed the memorandum ‘Review of the supervision of the financial market sector’ by the Ministry of Finance in 2001. With this review, the Netherlands got a broader regulator that not only looked at securities trading but monitors the entire financial market sector.
What is its function?
The AFM plays an important role in supervising the financial market so that consumers, the business community, and the government have confidence in it. In addition, it oversees the transparency and fairness of the markets. Supervision focuses on companies active in savings, investing, insurance, lending, pensions, capital markets, asset management, audit firms, and financial reporting.
What is the task of the AFM?
The task is to supervise compliance with various laws and regulations, such as the ‘Financial Supervision Act’. This act states, for example, that the AFM ensures that:
- Processes in the financial market run transparently and in an orderly manner;
- Market parties have pure relationships with each other;
- Clients are treated with care.
Additionally, the AFM advises the relevant ministries on the development of new legislation and regulations.
The powers of the AFM
Besides the duties above, the AFM also has the power to take measures if a party does not follow the laws and regulations. For instance, the regulator can:
- Issue a warning;
- Give an instruction;
- Impose a fine;
- Impose a penalty payment;
- Report to the Public Prosecution Service;
- Submit disciplinary complaints against accountants to the Accountants Chamber.
Which companies are under supervision?
The AFM supervises a broad group of companies within the financial markets. This includes investment firms, audit firms, pension custodians, and providers of investment objects. BUX is also under the supervision of the Dutch Authority for the Financial Markets.
The collaboration between the AFM and De Nederlandsche Bank
The AFM works closely with De Nederlandsche Bank (DNB), but they operate independently of each other. The AFM supervises the conduct of financial companies, while DNB checks whether these companies can meet their financial obligations. Furthermore, DNB oversees the integrity of banks and insurers, while the AFM focuses on the integrity of advisors and intermediaries.
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All views, opinions, and analyses in this article should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication.
