Relevant regulation

EU anti-money laundering directives are issued periodically by the European Parliament to be implemented by member states as part of domestic legislation.  European anti-money laundering directives (AMLD) are intended to prevent money laundering and terrorist financing and establish a consistent regulatory environment across the EU. This is accomplished by addressing emerging money laundering and terrorist financing typologies, and helping to close AML compliance gaps.

The Digital Operational Resilience Act (Regulation (EU)2022/2554) solves an important problem in the EU financial regulation. Before DORA, financial institutions managed the main categories of operational risk mainly with the allocation of capital, but they did not manage all components of operational resilience. After DORA, they must also follow rules for the protection, detection, containment, recovery and repair capabilities against ICT-related incidents. DORA explicitly refers to ICT risk and sets rules on ICT risk-management, incident reporting, operational resilience testing and ICT third-party risk monitoring. This Regulation acknowledges that ICT incidents and a lack of operational resilience have the possibility to jeopardise the soundness of the entire financial system, even if there is "adequate" capital for the traditional risk categories.

The European Market Infrastructure Regulation (EMIR) is an EU regulation aimed at reducing systemic counterparty and operational risk and thereby prevent future financial system collapses. Its focus is regulation of over-the-counter (OTC) derivatives, central counterparties and trade repositories. It provides steer on reporting of derivative contracts, implementation of risk management standards and common rules for central counterparties and trade repositories.

The General Data Protection Regulation (GDPR) has been in effect for the European Union since 25 May 2018. In the Netherlands it is known as 'privacywet Algemene Verordening Gegevensbescherming' or AVG. As an entrepreneur, you have obligations when processing personal data due to the GDPR. Your customers, employees and suppliers must know what data you have about them and suppliers must know what data you have about them and can standup for themselves when it comes to processing their data. For example, your customers can request access to their stored data, or revoke a previously given permission.

Enhanced transparency, investor protection and risk reduction

‍The Markets in Financial Instruments Directive (MiFID) is a European regulation that increases the transparency across the European Union's financial markets and standardizes the regulatory disclosures required for firms operating in the European Union.

MiFID implemented new measures, such as pre- and post-trade transparency requirements, and set out the standards of conduct to be followed by financial firms. MiFID has a defined scope that primarily focuses on stocks. The directive was drafted in 2004 and has been in force across the European Union (EU) since 2007. MiFID was replaced by MiFID II in 2018.

MIFID II was initially intended to be an overhaul of MIFIDI. However, when the financial crisis erupted in 2008, it became clear that an overhaul would simply not do. With MIFID II the European Legislator intends tore shape the financial industry totally, from trading all the way down in the value chain to custody. Enhanced transparency, investor protection and risk reduction are the key objectives under MIFID II. The most important modifications under MIFID II are:

I. Improved investor protection by means of:

‍Best Execution

The financial crisis impacted everybody. A lot of investors lost money because they were uninformed and unaware of the risk and consequences risk-taking could have. Therefore a lot of emphasis now lies on investor protection. Transparency is one essential step in providing investors with the needed information. Next to that, investors should be able to rely on their service provider for providing them with the best possible service. The European legislator therefore strengthened the rules surrounding best execution. Where Mifid I demanded that all reasonable effort should be made in providing best execution, Mifid II now demands that all sufficient steps betaken. This one word difference makes a world of difference in providing investors with the guarantee that they will receive best execution.

Pre- and Post-trade Transparency and Reporting

The pre- and post-trade transparency and reporting regime, will result in a massive amount of data becoming available to the public and the regulator. Pre-trade reporting will be the responsibility of trading venues and SI’s. Post-trade reporting can also be done by execution venues but will bet he responsibility of the investment firm. A distinction must be made in reporting to the regulator by the Authorized Reporting Mechanism (ARM) and reporting to the “market” by the Authorized Publication Agreement (APA). - Transaction cost analysis- Independent Investment advice- Recording voice and electronic trading- Experience staff Capability test (Out of scope for AFS)- Product governance (Out of scope for AFS)  

II. The organized Trading facility (OTF) MIFID II introduces a new type of trading venue: the Organized Trading facility (OTF). An OTF is a multilateral system just like a Regulated Market or MTF. In an OTF, third party buying and selling interests in bonds, structured finance product, emissions allowances or derivatives are a bleto interact in the system in a way which results in a contract. The biggest difference lies in the ability of the market operator of an OTF to use discretion in the matching methodology.

III. Direct market Access (DMA) and ALGO trading (out of scope for AFS) IV. Third country policy (out of scope for AFS)

The Financial Supervision Act (Wet op het financieel toezicht - Wft) regulates supervision of almost the entire financial sector in the Netherlands. The Wft comprises a large number of rules and regulations for financial markets and the supervision. This supervision is carried out by De Nederlandsche Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). The Wft is vitally important for parties active in the financial market, such as AFS Group B.V.

The Securities Supervision act (Wet Giraal Effectenverkeer/ Wge) has as main purpose to supervise  the custody and administration of securities. This is provided by a central institution: the Euroclear Netherlands. This institute is supervised by the AFM. The Wge contains an important provision for investors. It has been stipulated that banks and companies must separate the assets and securities of investors from their shareholders' equity. This ensures that when an institution goes bankrupt, investors' securities are not lost. This way investors are protected.

The Anti-Money Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme – Wwft) provides a comprehensive set of measures to prevent the use of the financial system for money laundering or terrorist financing.