The ‘Policy Regulation Provision of Information’ shows the way in which the AFM evaluates the provision of information of financial products and services. The ‘policy regulation’ is still a consultation document, but indicates how the AFM wants to further shape the open standards concerning the provision of information.
Above all the policy regulation concentrates on the open standards concerning the provision of information as incorporated into the Financial Supervision Act (Wet op het financieel toezicht, Wft), the Consumer Protection Enforcement Act (Wet handhaving consumentenbescherming, Whc), and the Unfair Commercial Practices Act (Wet oneerlijke handelspraktijken, Wohp).
The provision of information needs to enable consumers to make an adequate evaluation of a product or service. This occurs, according to the AFM, when the relevant characteristics of a product or service are explained to consumers, in a correct, clear and non-misleading way.
The policy regulation is based on current legislation and regulation and the current interpretation thereof. New insights could also lead to different interpretations. In that case, the AFM will publish an actualised version of the policy regulation.
The policy regulation can be used as a guideline by suppliers of financial products or services and can be used to assess information given to consumers. This assessment based on the current interpretations of the AFM requires financial enterprises to keep themselves informed and up to date with new versions of the policy regulations.
| Issues from the policy regulation |
When is a statement an advertising statement?
To establish this, you need to ask yourself a few questions. In the case of one or more positive answers to the questions below, it probably is advertising:
- Is the information aimed at consumer acquisition or incitement to purchase?
- Does the information emphasise positive characteristics of the product/service?
- Is the information regarding the price of the product intended to make it more attractive?
- Is the information not an objective representation of facts?
Advertising does not depend on the medium. Every web page can also be soliciting and commending in its own right while still separately meeting the advertising requirements and information provision.
Furthermore, information is exclusively intended for recognition or factual announcements such as a change of address and not for advertising.
Correct, clear and not misleading
Information must be correct, clear and not misleading. The dividing line between these three is not always very clear, however, what is clear is that all three need to be complied with. Accurate information is factually correct, represents the product that the consumer gets and is not contradictory to information both within as between media.
Information must at least be traceable, understandable and balanced for the target group. It is also important that the information offers insight into the relevant characteristics of the product or service and does not mislead consumers.
- Information is understandable when difficult terms are avoided and when concepts are explained in a simple way.
- Information is balanced when the advantages and the disadvantages as well as risks of a product or service are equally transparent.
- With for instance a consumer survey the information can be tested regarding traceability and comprehensibility.
Without prejudice
Information, including advertising, should be without prejudice to the information required by law, such as the obligatory risk indicator or credit warning ‘borrowing money costs money’.
Relevant characteristics
Financial enterprises need to provide the consumer with the relevant characteristics of a product or service before entering an agreement with them. However, a definition of relevant characteristics is impossible to give. Relevant characteristics differ per product and service.
In the broad sense, a relevant characteristic is a characteristic of a product or service the consumer needs to have information about to be able to understand the product and its functioning. What can the consumer expect from the product? For this purpose information needs to be given about:
- the functioning of the product
- the proceeds (interest, dividend, return)
- the costs
- the risks
- (limiting) conditions
- characteristics that are not in line with the prevailing market.
Relevant characteristics are not general but linked to a specific product or service. In the ‘Policy regulation information provision’ the AFM gives examples of relevant characteristics for the following products:
- Saving: savings, subordinated deposits, fiscally facilitated saving
- Borrowing: continuous credit, interest-only mortgage
- Insurance: death risk insurance, funeral insurance, car insurance, disability insurance
- Investing: right of participation in investment institution, stocks, ship investment, structured products, contract for difference (CFD).
This list of products is not complete, but with the information and examples from the policy regulation other products can also be judged according to the AFM standards.
Timely
Information, including the product characteristics, must be given in time. This means prior to entering into an agreement. But with an offer that can be used as a confirmation of an agreement, prior to or simultaneously with the offer.
Information must actually be given to a consumer. It does not suffice only to have the information available on a website, for instance. Sending leaflets or conditions afterwards is of course not considered timely.
To guarantee that a consumer has been given information you can choose to have the consumer sign for receipt.
Unfair Commercial Practices Act (Wohp)
The Wohp has been incorporated into the Civil Code. Consequently, the range of the Woph is larger than the Wft. This means that both have to be met and that Wtf in case of exemption applies only in a limited way or not at all, but that the Wohp remains fully applicable.
The Wohp states that a consumer cannot be denied the essential information he needs for an agreement. Essential information is information needed by a consumer to be able to make a well-considered decision. This information cannot be hidden or be given in an unclear, incomprehensible and ambiguous way or too late.
Exemption
Enterprises or products that are exempt may not give the false impression that they are under the supervision of the AFM or the DNB.
| What do you need to do? |
The policy regulation further specifies the open standards in the legislation. This provides the opportunity to supplement where necessary, the internal assessment framework you use to test the information provision of your organisation. In addition, the policy regulation can be incorporated into the product approval and the review process.
To conclude, the AFM indicates that new insights can lead to adaptations of the policy rules. This means that you have to verify on a regular basis that the policy regulation you apply is still the most recently published version.
Would you like to discuss how to incorporate the policy regulation into your organisation? For more information or an appointment, please contact Charco & Dique on phone number 020-4165403 or e-mail address info@charcoendique.nl