1. Applying for the wrong license category
An incomplete or incorrect license application may lead to a delay or even a rejection of the application. And that would be a shame, because a license application always incurs costs – even if the application is rejected. That’s why it is important to find out in advance how to categorize the services you want to offer. Do they require a license? And if so, is the license granted by the AFM or DNB? The AFM grants licenses to financial service providers, fund managers and investment firms, among others. DNB is the licensing authority for payment institutions, trust offices, banks and insurers. You may also have to deal with both regulators, for example in the case of an investment firm. The license must be applied for with the AFM, while shareholders with an interest of 10% or more must apply for a declaration of no-objection (DNO) from DNB.
2. Insufficient insight into the legal framework
In order to qualify for an AFM or DNB license, your organization must meet certain legal requirements. But financial legislation is quite complex, which makes it difficult to get a complete overview of the applicable legal framework. The application forms do not cover all of the requirements. Without consulting a specialist in the field of financial supervision laws, you run the risk of overlooking requirements.
3. Organizational structure does not match license category
As a licensed financial institution, you have to meet all kinds of requirements. During the license application you must therefore provide the regulator with insight into your business processes and the way in which your organization is structured. For this you must provide an organization chart, in which all departments and structures are included. In this chart you must indicate in detail which persons are in charge of the departments and pay attention to the internal audit functions in particular. Also indicate which functions are outsourced and which persons may hold more than one position.
A lot can go wrong in this phase of the process. If the organization chart is incomplete, this can raise questions with the regulator. Therefore, you should ensure that the structure of the organization matches the license category. Also pay attention to strict requirements and mandatory functions.
4. Concealing antecedents during the assessment of the board
The policy makers and supervisory directors of a financial company must be suitable for the position that they want to hold. For that reason, an assessment needs to be performed by the regulator. Candidates will be assessed for their knowledge, skills and professional conduct. Among other things, the regulator will take into account the competencies, education and work experience.
The properness of all policy makers must be beyond doubt. The regulator will assess whether there are intentions, actions or antecedents that will stand in the way of fulfilling the intended function. Properness testing focuses primarily on antecedents. The applicant will be charged heavily for concealing antecedents or the omission to report antecedents. Therefore, you should always report any events, even if you doubt their relevance.
5. Issues regarding the DNO application
For certain license categories, shareholders who have an equity or controlling interest of at least 10% must be assessed by DNB. This is because the regulator wants to prevent parties that are not financially sound or not integer, from holding interests in financial companies. DNB requires a lot of information for this assessment. If DNB agrees, it will issue a declaration of no-objection (DNO).Applying for a DNO is complex and time-consuming. There are requirements regarding the capital position, the reliability and sometimes the suitability of the policymakers. To this end, financial figures of legal and natural persons, a business case and reliability test must be submitted to DNB. The figures may not be older than one year.
Need help?
For more help, you can download our 13-step guide to requesting a Wft license.
We hope that our tips will help you avoid common mistakes, so that your license application runs smoothly. License applications that are complete and of good quality have the best chance of success. Based on interviews and other information we can help you to legally qualify your business structure, activities, services and products. Then we can determine together whether a license is needed and if so, for which services a license is required. We are also able to help you set up your organization according to legal requirements and determine the impact of financial legislation and regulation on your services. Our experts are happy to help you.
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