Financial Services Regulation in the Netherlands

If you’re planning on starting a business in the EU, why not do it in the Netherlands? Registering a financial company in Holland is a multi-stage process which requires the applicant to comply with a number of regulatory requirements. So, let’s see what they are. 

Regulatory Framework

Registering certain types of financial institutions, and especially investment companies, is governed by specific provisions of EU legislation, as well as rules & regulations of its individual member states. They contain some clear-cut requirements for the creation of an independent & effectively functioning entity which meets the conditions of doing business in a specific EU jurisdiction.

In particular, they include:

• monitoring the effectiveness of a company’s operation;
• reporting to relevant regulators; and
• accepting & considering complaints.

What this means is that a company registered in the Netherlands must develop a risk-based monitoring program.

Dutch authorities consider compliance to be an integral part of sound operation of any financial institution. In their guidelines for applicants, the AFM & DNB require financial institutions, such as insurers, payment institutions & banks, to put in place an independent & effective compliance program.

They also consider conducting internal audit an important element of continuous operations of any financial institution. In addition, EU regulations, as well as national legislation, expressly require that the majority of registered financial institutions in Holland conduct internal audit & exercise internal control.

Internal control includes:

• development & implementation of an annual audit plan;
• developing audit recommendations;
• directly reporting to an institution’s senior management.

Registering a Company in Holland: Requirements

The majority of those planning on registering a financial company in Holland prefer it to be either a public LLC or private LLC. Under Dutch legislation, companies must have a one-level BoD; however, public & private LLCs can have a two-level management structure consisting of a BoD & supervisory board.

Managing directors may be personally responsible for their company’s activities for a variety of reasons, including inappropriate management. Special obligations may apply in case of bankruptcy of a company. In the event of serious misconduct, all managing directors are held jointly & individually liable for all internal losses.

Other Requirements

Financial service providers in Holland must customize their products & services to their clients’ sophistication level. This is accomplished by conducting due diligence, establishing customer-level qualifications & assessing appropriateness & suitability. Overall, determining a client’s sophistication involves taking into account 3 levels, namely retail-orientedness, professionalism & counterparty’s eligibility,.

Conclusion

Undertaking financial activities in Holland requires taking into account a number of regulatory requirements. Consultations with Dutch regulators also play an important role in a successful outcome of the registration process.