Risk & Compliance Case

Licence Application for a Cooperative Investment Firm as Custodian Institution 

The challenge

  • Cooperative custodian institution seeks AFM licence as an investment firm
  • Highlight risk management and added value for the financial sector
  • Unexpected structural change impacts application and requires adjustments

Our approach

  • Projective Group guides licence application and quality assurance
  • Refining documentation, anticipating AFM questions, and ensuring completeness
  • Addressing unexpected setback and necessary structural revisions
  • Advocating the initiative’s value and unique benefits to the financial sector

Key results

  • Convinced the AFM of the initiative’s added value for the sector
  • Successfully obtained AFM licence
Date:December 2, 2022

A cooperative custodian institution established by and for asset managers approached Projective Group with this innovative idea. Consultant Sjako Weering supported them in applying for a licence as an investment firm from the Dutch Authority for the Financial Markets (Autoriteit financiële markten – AFM). “The main challenge was to make the AFM see not only the adequate risk management they observed but also the added value of the initiative for the financial sector in the Netherlands,” says Sjako. 

Quality Assurance 

The initiator of the project approached Projective Group to guide the licence application process and perform quality assurance on the documentation to be submitted. “Our initiative is a collaboration of and for asset managers,” he says. “We have a small but highly experienced and knowledgeable team. We have enough capacity to apply for the licence independently, but based on experience, engaging Projective Group streamlines and accelerates the process.” 

Sjako got to work with the client: “The board had already prepared a significant portion of the required documents. My role was to refine the documents, anticipate expected questions from the AFM, and ensure the licence application was complete and of good quality.” 

Unexpected Structural Change 

Several months after submitting the initial application, the AFM came back with a number of questions. These questions were mainly about the method of asset segregation (involving several legal issues), control in the cooperative, and the operational setup of processes. Just as the initiative’s board, with Sjako’s assistance, was working on formulating answers to these questions, something unexpected happened. One of the parties that would play a crucial role in relation to holding investor funds withdrew for internal reasons. A significant setback, and a necessity for the initiative to revise its structure. Sjako: “In consultation with the AFM, we had to temporize the licence application. Not only did the initiative’s board suddenly have to find a new partner, but the structural change also meant a lot of adjustments to the licence application.” 

Unusual Structure 

A few months later, the revised licence application was submitted to the AFM. However, after that, it became quiet. A response from the regulator was delayed. “The structure and setup of the initiative were entirely new to the AFM,” explains Sjako. “The regulator had difficulty understanding it. Additionally, the AFM was well aware that the initiative could have significant impact on the financial sector in the Netherlands. These two factors combined led the AFM to thoroughly review the entire licence application.” 

Sjako made efforts to convince the AFM of the initiative’s added value for the sector. “It’s logical for regulators to focus on the risks of a new initiative and how they are managed. However, that shouldn’t be the sole focus. The regulator should also consider the needs that an initiative fulfills. The initiative in question also reduces risks and challenges present in the market, which market participants face on a daily basis. The AFM should also approach entering parties with that perspective.” 

“I tried to encourage regulators to consider it from this angle as well. There are only a limited number of custodian banks in the Netherlands. This initiative reduces asset managers’ dependence on this limited group of banks. It’s a valuable addition to the market.” 

With Sjako’s assistance, they eventually succeeded in obtaining a licence. “Projective Group, and Sjako Weering in particular, are excellent partners for engaging in in-depth discussions on topics,” says the initiator of the project. “Furthermore, the knowledge and experience that Sjako and his colleagues gained from the AFM are significant added value in successfully completing our complex licence application.” 

Want to learn more?  

Licence applications that are complete and of high quality have the best chance of success. To assist organizations in preparing their licence applications well, we have developed a ‘Step-by-Step Guide to Licence Applications under the Financial Supervision Act (Wft)’. In this guide, we provide an overview of the thirteen most important steps for a smooth licence application process. 

If you need support in applying for a licence or in qualifying your services, feel free to contact us for an informal advisory conversation. 

About Projective Group

Established in 2006, Projective Group is a leading Financial Services change specialist. With deep expertise across practices in Data, Payments, Transformation and Risk & Compliance.

We are recognised within the industry as a complete solutions provider, partnering with clients in Financial Services to provide resolutions that are both holistic and pragmatic.  We have evolved to become a trusted partner for companies that want to thrive and prosper in an ever-changing Financial Services landscape.