NETHERLANDS – The Autoriteit Financiële Markten financial market watchdog says dozens of Dutch pension funds still don’t fully comply with its market conduct rules.

“We have noted that quite a few pension funds are lax on introducing the rules, even after our initial letter clarifying the margin for interpretation,” said Ton van Tulder, manager of account supervision at AFM.

“The pension funds will receive a letter as a last signal. If they still don’t comply, they’ll risk sanctions,” van Tulder added.

The securities-related market conduct supervision, or ETGT, prescribes an effective code of conduct, an adequate administrative organisation and internal checks. It applies to pension funds with a yearly transaction volume of over €20m, which is approximately 10% of the 800 Dutch schemes, according to the AFM.

“At the moment we think that between 15 and 20 of the 80 schemes haven’t implemented major parts of the ETGT rules yet,” van Tulder said.

“Moreover, we currently have a discussion with 10 to 15 other schemes on the question if ETGT applies to them or not.”

The present situation doesn’t surprise consultant Watson Wyatt. “ETGT has been snowed under, because pension funds have been inundated with new legislation in recent years. Moreover, the AFM is very strict in the interpretation of the rules for exemption,” it explained.

“We just uphold the law,” van Tulder responds. He however shows understanding for some of the objections of pension schemes.

“The present exemption clause is pretty black-and-white, and the AFM as well would like a more shaded one,” he said.

“That’s why the Finance Ministry has already drawn up an implementing order. It will be discussed in parliament as part of the new financial supervision legislation, or ‘Wet Financieel Toezicht’, which is scheduled to come into force as of January 1 2007.”

According to van Tulder, most interpretation problems with pension funds relate to the insight and the influence of pension funds on investments, and the conception of contracted-out management.