Shortly before its dissolution (due to the elections), two legislative proposals have been adopted which quietly yet significantly amend the procedure by which the Financial Services and Markets Authority ("FSMA") can impose administrative sanctions. In future, the FSMA will publish its decisions with full disclosure of the parties' identities, even if an appeal is lodged. Furthermore, the Executive Committee of the FSMA regains from the auditor its discretion to initiate an investigation. Finally, the FSMA undergoes various (minor) procedural and institutional reforms.
Below is an overview of the most important changes, which, for example, will impact on procedures relating to insider trading and other market abuse.
Procedural amendments
The Act of 25 April 2014 amends, amongst other legislative instruments, the Act of 2 August 2002 on the supervision of the financial sector and financial services (the "Financial Supervision Act"). Remarkably, various novelties of the so-called "twin peaks reform" – which have only been in force since 15 July 2011 – have once again been repealed.
The auditor of the FSMA loses the discretionary power to decide whether to open an administrative investigation. This power has now once again been granted to the FSMA's Executive Committee. On the initiative of that committee, the auditor ("auditeur") or, in his absence, his deputy, will conduct an investigation "with due regard for the rights of defence". For example, at the conclusion of the investigation, the parties involved may comment on the investigation. The legislator has now added that both the parties involved and the Executive Committee can file a request for additional investigative action. The auditor can deny such a request, but only by stating the reasons for such denial. Once the investigation is finally concluded, the Executive Committee decides to either drop the case, propose a settlement (upon the proposal of the auditor) or refer the case to its Sanctions Committee.
These amendments were published in the Official Gazette on 7 May 2014, but retroactively entered into force on 1 May 2014.
Announcement of decisions
Although the way it does so is anything but praiseworthy from a technical-legislative point of view, it should be noted that the Act of 25 April 2014 on the legal status and supervision of independent financial planners also specifies how the FSMA will announce the decisions of its Sanctions Committee.
Most importantly, in principle all decisions will be published with full disclosure of the identity of the parties involved, even if a party has already lodged an appeal against the decision. The act adds that, in future, the FSMA must notify the parties involved of its decisions by fax or e-mail before publishing the decision on its website.
The suspensive effect of the appeal will therefore be limited to the collection of the penalty or fine. Because of its stigmatising effect, the announcement of the decision is often (at least perceived as) the harshest element of the imposed sanction. Yet this part of the sanction now, in fact, becomes immediately enforceable. This raises doubt as to the conformity of these new rules with the right to a fair trial, as guaranteed by Article 6 of the European Convention on Human Rights. Indeed, the sanction is now made public, whereas it is imposed by a body (the Sanctions Committee) that does not itself offer the safeguards which Article 6 ECHR requires. Moreover, it is highly doubtful whether even subsequent reform on appeal by the Brussels Court of Appeal could repair the reputational harm caused to the parties involved by the announcement of the FSMA's decision, even if the Court's judgment is also made public in a similar manner.
If the FSMA's Sanctions Committee is of the opinion that an announcement would disproportionately harm the party involved or could seriously disrupt financial markets, it retains the option to decide to only announce the decision on an anonymous basis.
These amendments entered into force on 6 June 2014 (10 days after publication in the Official Gazette on 27 May 2014).
Institutional Changes
Finally, the legislator has also introduced some institutional changes to the functioning of the FSMA. The function of "secretary-general" is abolished, and the auditor's position has now become full-time. The auditor is also assisted by a deputy. Furthermore, the powers of the Supervisory Board have been expanded, and the internal decision-making rules of the Executive Committee and the Supervisory Board have been slightly amended (e.g. the president no longer has the casting vote). These changes entered into force on 1 May 2014.
Conclusion
The amendments to the Financial Supervision Act, which were adopted almost unnoticed, mark a continuing quest for more efficient organisation and to some extent bring welcome clarification. Yet what is most remarkable is the immediate announcement of the decisions of the FSMA's Sanctions Committee. It is a matter of concern that the sanction's signalling function triumphs over the right to a fair trial, regardless of the degree of seriousness of the behaviour which gave rise to the sanction. This is even more the case since any alleged urgency is rather exceptional, given that the FSMA's investigations are often only concluded years after the facts. Hence, it should be no surprise if these changes are heavily debated…