A leading Dutch MP has claimed that pension funds struggle to hold their fiduciary managers liable for mistakes and gross negligence because of the way providers have shaped their contracts.
Pieter Omtzigt, a member of the Christian Democrats party (CDA), argued that the situation was “detrimental, as a number of asset managers and investment institutions operating in the Netherlands have been involved in almost all possible kinds of market abuse”.
In questions to Wouter Koolmees, the minister for social affairs, Omtzigt cited examples including the manipulation of Libor and Euribor rates, currency exchanges rates, and swap rates. In some cases, providers have paid fines or compensation and individuals have been convicted.
Omtzigt’s questions followed enquiries about the same subject in December. At the time, Koolmees did not address whether he knew about fraud committed by members of the Dutch Fund and Asset Management Association (Dufas).
Omtzigt now wants to know whether the industry organisation has ever taken any disciplinary measures against a member because of fraud or or other malpractice.
Although Omtzigt did not name specific firms, UBS, JP Morgan and Citibank – all of which have asset management subsidiaries that are Dufas members, according to the organisation’s website – were among the major banks fined or reprimanded by regulators in the US, the UK and Switzerland over malpractice in relation to interest rates and foreign exchange rates.
A spokesman for Dufas told IPE that it had never expelled or reprimanded a member for fraud or forgery.
Drawing from a model contract on the organisation’s website, the MP argued that the weak position of the pension funds was caused by clauses that excluded almost all liabilities.
However, Dufas said the example was out of date, and it has removed the model from its website.
Accountability and transparency demands
Koolmees had contended that “in practice different contracts were used” – but Omtzigt subsequently demanded to know the basis for this statement.
Omtzigt also asked whether a pension fund’s accountability body (VO) was allowed to see the fiduciary contract, claiming that managers went to great lengths to keep their agreements secret.
In Omtzigt’s opinion, pension funds had placed too much faith in their fiduciary managers.
He also asked the social affairs minister who was responsible for checking whether managers illegally sold their own derivatives to pension funds without trading them on the open market. Although illegal, Omtzigt contended that this was difficult to check.
Last December, after the senate adopted an amendment on fiduciary management rules tabled by Omtzigt, Koolmees said that the ultimate responsibility about investment decisions remained with pension fund boards.
Commenting on the issue, Anton van Nunen – considered by many in the sector as the originator of the fiduciary concept – said he didn’t agree with Omtzigt’s suggestions.
“Many fiduciary managers have extended their liabilities recently to include the notion of ‘culpable shortcomings’,” he argued. “This goes much further than being liable for fraud and forgery.”