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17-04-2020

Trust offices: new DNB policy on social propriety 

Introduction
On 15 January 2020 the Dutch Central Bank (DNB) published a policy for trust offices on social propriety (Beleidsregel maatschappelijke betamelijkheid trustkantoren) which entered into force on 16 January 2020 (Policy). The Policy further elaborates on the provisions of article 14 of the Dutch Act on the supervision of trust offices 2018 (Wet toezicht trustkantoren 2018, Wtt 2018) and describes how DNB will supervise trust offices with regard to their legal obligation to act in a socially proper manner. The Policy applies to trust offices with their registered office in the Netherlands, trust offices with their registered office in another Member State or appointed state which provide their services on a cross-border basis or via a branch in the Netherlands and to branch offices of trust offices located in the Netherlands with their registered office in another Member State or appointed state.
 
Background
DNB saw the need to set up the Policy as a result of recent incidents caused by shortcomings in the social propriety of trust offices. This is an important matter, as the principle of social propriety for trust office is an important precondition for the general trust in trust offices and for the financial stability of the Dutch financial markets.
 
Legal framework
Pursuant to Article 14, paragraph 1, of the Wtt, trust offices must act in a socially proper manner. To achieve this, the article requires that trust offices have adequate policies and operations in place to minimize the risk of acting socially improper.
 
Purpose of the Policy
The purpose of the Policy is to clarify how DNB will supervise the legal requirement of trust offices to act in accordance with social propriety and DNB wants to provide guidance on how trust offices can organize their internal policy in such a way to comply with this legal requirement. This means that DNB focuses on supervising the contents of the internal policy on acting in accordance with social propriety of trust offices and the setting up of the processes, procedures and measures needed to further implement and execute this internal policy. DNB has explicitly chosen for a “principle based” approach and not for a “rule based” approach. It is not DNB’s intention to prescribe which activities must be regarded as socially improper. Trust offices have to use their internal policy set in place and will have to decide for themselves whether specific actions are in violation of social propriety.
 
How to comply with the legal requirement
Below we will discuss what trust offices can do, according to the Policy of DNB, to comply with the legal requirement of acting in accordance with social propriety. 

  1. set up a specific internal policy regarding social propriety;
  2. have an adequate description of how, when and with which actions a balance of interests is made;
  3. set up of internal procedures, processes and measures that reflect the internal policy;
  4. gather knowledge of what is considered as socially proper conduct according to society; and
  5. stimulate active discussions on the topic within the trust office.

With the entering into force of the Policy, DNB contemplates to more strictly supervise the compliance of trust offices with the requirement to act in accordance with social propriety. With this supervision, DNB takes a procedural approach and the Policy is principle based rather than rule based.
The Policy provides examples for trust offices to comply with the legal requirement, however trust offices are free to comply in any other way.
The Policy is to be found here.

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