Regulatory framework aims at sound operational management

Section 10 (1) of the Dutch Act on the Supervision of Trust Offices (the ‘ASTO’) states that rules may be issued for trust offices, pursuant to an order in council, i.e. a governmental decree, with the intention of ensuring sound operational management. Such rules were issued in the Order on Sound Operational Management Relating to The ASTO (‘Regeling integere bedrijfsvoering Wet toezicht trustkantoren’; the ‘Order’). The Order is in effect from 1st March 2004.

According to Article 2 (c) of the Order, sound operational management means:

the management of the organization of the trust office and the structure of the processes, of and relating to the trust office, such that integrity risks are controlled.

Article 2 (d) of the Order contains a definition of aforementioned integrity risks:

integrity risk: the risk of damaging the reputation of the trust office or the financial markets in general as a result of inadequate compliance with obligations under private law, administrative law, tax law or criminal law.

The definition of this term relates to compliance with statutory obligations, creating a specific and auditable standard. The damage to the reputation of a trust office or the financial markets in general as a result of inadequate compliance with these obligations is not restricted to actions or omissions by the trust office itself. The definition also covers the conduct of employees of the trust office, object companies and third parties which could damage this reputation.

Further, the Order defines an ‘incident’ as:

an event that poses a serious danger to the sound operational management of the trust office, including an action or omission by: the managers or supervisory directors of the trust office; other persons who determine or co-determine the policy of the trust office; persons who have a qualifying holding in the trust office; an employee of the trust office; a third party; or an object company” (Article 2 (f) of the Order).

A trust office shall immediately notify the DCB of an incident, if the incident, for instance, has been or will be reported to the judicial authorities and/or if in view of the seriousness, scope and other circumstances of the incident, it can reasonably be assumed that the DCB should be informed because of its supervisory role (Article 11 (3) under a. and e. of the Order).

Karel Frielink
Attorney (Lawyer) / Partner


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