Dutch Authority for the Financial Markets publishes exploratory findings on pension fund compliance functions and participants’ interests

The Dutch Authority for the Financial Markets (AFM) published an exploratory study, “Compliance at pension funds: in the interest of the participant”, setting out observations and practical examples on how pension funds approach compliance with (open) conduct norms. The AFM concludes that a well-positioned and engaged compliance function can help pension fund boards make choices that better reflect the interests of participants by focusing not only on legal requirements but also on the purpose behind them. The work follows the introduction of the new Pension Act, under which the AFM has new supervisory responsibilities including information provision, choice guidance, risk-preference research and handling participant complaints, for which it has developed guidance. The AFM interviewed several pension funds about the set-up, position and operation of their compliance functions and found that compliance can go beyond an ex post legal check by acting as an independent counterweight to the board, prompting reflection on legislative objectives and the participant impact of policies, processes and decisions. While a formal compliance function is not legally required and is designed within the framework of De Nederlandsche Bank (DNB), the AFM observed significant variation in practice, with clearer processes, defined responsibilities and more visible involvement in decision-making linked to earlier identification of participant risks and better support for careful board decision-making.