The agreed settlement provides for the payment of a sum of 1,000,000 euros, a commitment to transparency and a publication, with names, on the website of the Financial Services and Markets Authority (FSMA).
Failure to comply with the rules of conduct
Banque Degroof Petercam is active in the field of employee profit-sharing plans in the form of stock-option plans. Between January 2018 and October 2023, the bank was involved in two kinds of plans: plans linked to a financial instrument that replicates the performance of the “EuroStoxx 50” index (EuroStoxx Plans) and others linked to listed shares of the employer itself (Listed Company Plans).
Under the Listed Company Plans, Banque Degroof Petercam offered employees the opportunity to issue mirror options and sell them to the bank in order, among other things, to cover the tax payable by employees when the stock options are allocated. The theoretical value of these mirror options was determined by Banque Degroof Petercam, which deducted various value adjustments to arrive at the final sale price.
The purchase by Banque Degroof Petercam, at the request of employees, of mirror options under the Listed Company Plans constituted an investment service subject to the MiFID rules of conduct. In the view of the FSMA, Banque Degroof Petercam breached several of those rules:
- First, Banque Degroof Petercam was obligated to inform employees of the costs and charges of the investment service. However, between January 2018 and February 2023, Banque Degroof Petercam failed to inform them of certain costs and charges in the form of value adjustments made when the sale price of mirror options.
- Furthermore, as counterparty to the employees, Banque Degroof Petercam had a conflict of interest as regards determining the parameters of the mirror option price. Yet the bank failed to ensure that the determination of one of these parameters, intended to cover its credit risk, was fair and not biased by conflicts of interest. Nor did it draw up, implement and maintain an effective conflict of interest policy.
Within the EuroStoxx Plans, Banque Degroof Petercam provided employees with a digital platform on which their instructions could be processed. The said service constituted an investment service. The bank was therefore required, as in the case of the Listed Company Plans, to assess whether the investment product envisaged (options) was appropriate for the employees. The test designed by Banque Degroof Petercam, however, was inadequate, given that it relied exclusively on a self-evaluation by employees.
Banque Degroof Petercam has since remedied all the matters that, according to the FSMA, constitute breaches.
In 2020, the FSMA had already accepted an agreed settlement with Banque Degroof Petercam in connection with shortcomings, some of which were analogous to the present breaches, in the application of the MiFID rules of conduct to another activity.
An agreed settlement of 1,000,000 euros accompanied by a commitment to transparency and publication of the settlement including disclosure of names
The FSMA’s investigation resulted in an agreed settlement. The agreed settlement entailed a fine of 1,000,000 euros and a publication, with names, on the FSMA’s website.
Under the terms of the agreed settlement, Banque Degroof Petercam also undertook to respond to requests made by employees who sold mirror options under the Listed Company Plans during the period in question. Upon request, Banque Degroof Petercam will inform them of the value of the mirror options sold and of the overall adjustment the bank applied. Employees can, to this end, contact Banque Degroof Petercam via the email address info.mirroroptions@degroofpetercam.com.
The full text of the agreed settlement is available on the FSMA’s website.