Duty of care 

Since January 2014, the duty of care has been extended by section 4:24a Wft, which contains the general duty of care for financial service providers. This ensures that financial service providers act in the customer’s interest. It also enhances customer protection when purchasing financial products and services. 

Why a duty of care for financial service providers?

Financial decisions can have a major impact on a person’s living situation. It is therefore important to make such decisions in a well-considered manner. However, customers may struggle to obtain the necessary information, oversee the consequences of a financial decision and appreciate the risks. The duty of care ensures that customers are better protected when purchasing financial products and services. 

What does the duty of care entail?

The duty of care applies to financial undertakings, such as banks, insurers, investment firms, intermediaries and financial advisers. A financial undertaking must behave with due care, as can be expected of a reasonably competent and reasonably acting professional. Most importantly, the firm must put the customer’s interests first. The service must be appropriate to the customer’s situation. 

Actually, one cannot speak of THE duty of care. Indeed, on the one hand, the duty of care consists of supervisory obligations set out in Part 4 of the Wft. The Wft has both concrete duty of care obligations (know your client, information obligations, cost transparency, etc.) and more general obligations. On the other hand, there is a civil duty of care. This can arise from Article 7:401 of the Civil Code (good contracting practice), general conditions such as the general banking conditions and the ‘special duty of care’ developed in case law. In short, the civil duty of care implies that the financial undertaking should behave with due care towards a customer and put the customer’s interests first. 

Two types of duty of care

The two types of duty of care overlap and complement each other. They cannot therefore be seen entirely separately. The supervisory rules of conduct from the Wft are often used to concretise the special duty of care. Also, the special duty of care fulfils a role precisely where the supervisory rules have proved insufficient to protect the client. Indeed, the special duty of care can extend beyond the obligations under the supervisory rules. 

Obligations under the duty of care

The special duty of care includes the following obligations, among others:  

  • An information obligation: prior to the agreement, the financial undertaking must provide the customer with sufficient information to make an informed choice about the advised product. During the term of the agreement, the company must keep the customer informed of material changes to this information;
  • An obligation to investigate: proper research must be conducted into the client’s income and asset position, expertise and objectives (know-your-client rules or KYC rules). If the income position is not sufficient, the financial company may have the obligation to advise not to purchase the service or product (advisory obligation); 
  • A duty to warn: the customer should be warned intrusively of the risks associated with the service or product; 
  • An obligation to provide appropriate advice: in order to provide appropriate advice, the financial firm must obtain sufficient information from the customer, including the customer’s financial situation, knowledge, experience, risk appetite and goals. 
  • A knowledge test: the financial firm must determine whether the customer has sufficient knowledge and experience to assess and understand the risks of the financial product. 
  • A generic duty-of-care provision: this cap provision allows the regulator to take enforcement action if a duty-of-care is breached. 

Supervision by the AFM

The Financial Markets Authority (AFM) is in charge of supervising the duty of care. If there is insufficient compliance with the duty of care and this results in abuses that can damage confidence in the financial markets, the AFM can take enforcement action.  

Want to know more?

Do you have questions about the scope of or compliance with the duty of care? Our consultants will be happy to help. Read more about how we can help you comply with the duty of care, or contact us.