4.1.2.2. Tasks

4:20 Article 19 of the Brokerage Supervision Act provides that the statutory governing body assumes general responsibility for the firm. It does so in particular through exercise of the two functions described below.

4.1.2.2.1. Fonction de politique générale

4:21 The main task of the statutory governing body is to establish the firm’s strategy and general policy.

4:22 The statutory governing body is expected to determine the firm’s strategy and targets, as well as its organisation for the provision of investment services, the conduct of investment activities and the provision of ancillary activities; the skills, knowledge and expertise required from staff; and the resources, procedures and mechanisms with or according to which the firm provides services and carries out its activities. This responsibility extends to capital adequacy, outsourcing, business continuity, customer acceptance, conflicts of interest, and protection of the rights of customers with regard to assets held by the firm.

4:23 The statutory governing body defines the firm’s risk policy and determines its risk tolerance for all activities. It is expected to be primarily responsible for taking strategic decisions with regard to risks and is closely involved in the ongoing monitoring of the development of the firm’s risk profile. Therefore, the statutory governing body should at all times possess relevant and comprehensive information on the risks to which the firm is exposed.

4:24 Furthermore, the statutory governing body defines the firm’s fit and proper, integrity and remuneration policies. In accordance with Article 19 of the Brokerage Supervision Act, it also approves the governance memorandum.

4:25 For more information on the tasks of the statutory governing body, please see the Brokerage Supervision Act and paragraphs 22 to 31 of EBA/GL/2021/14.

4.1.2.2.2. Supervisory function

4:26 The supervision of the business and regular assessment of the firm’s governance structure, organisation and internal controls constitute the second major area of responsibility entrusted to the statutory governing body.

4:27 Pursuant to Article 56 of the Brokerage Supervision Act, the statutory governing body must periodically, and at least once a year, assess the effectiveness of the firm’s organisational structure, including specific organisational provisions related to the registration of investment services, the safeguarding of customer rights, the distinction between assets held for customers and its own assets, the validation process for financial instruments intended for sale, and the holding of funds. In addition, it must periodically monitor and evaluate the appropriateness and implementation of the firm’s strategic objectives in relation to the provision of investment services, the conduct of investment activities and the provision of ancillary services.

4:28 The statutory governing body should also assess the proper functioning of the independent control functions. In addition to its regular contacts and the information provided to it by these functions, the statutory governing body should rely in particular on the periodic report of senior management or, where applicable, the management committee. It should also ensure that senior management takes the necessary measures to remedy any shortcomings. The statutory governing body shall provide the NBB with an annual report on assessment of the compliance function, in accordance with Article 32 §2 of the Brokerage Supervision Act.

4:29 Responsibility for overseeing the firm’s operations lies with the statutory governing body in its supervisory capacity, in particular the non-executive directors who constitute the majority of this body. These directors should work in a coordinated manner to ensure the adequate exercise of supervision. Supervision may notably be based on the following:

  • reporting by the independent control functions;
  • effective use of the investigative powers vested in the members of the statutory governing body;
  • reporting on the development of the firm’s business by senior management to the statutory governing body; and
  • exercise of the right to access the information and documents needed to carry out its tasks, which may include minutes of meetings of senior management or, where applicable, of the management committee.[1]

4:30 The exercise of such supervision presupposes that information and proposals formulated by members of senior management are critically evaluated and, if necessary, challenged, to ensure that decisions are taken with full knowledge of the facts.

4:31 For more information, please see paragraphs 36 to 38 of EBA/GL/2021/14.

4.1.2.3. Functioning

4:32 The statutory governing body takes decisions in a collective manner. In accordance with Article 29 of the Brokerage Supervision Act, the nomination committee should ensure that the decision-making of the statutory government body is not dominated by a single individual or a small group of individuals in such a way as to harm the interests of the firm as a whole.

4:33 The minutes of meetings of the statutory governing body shall summarise the discussions held, record the decisions taken and specify the questions and diverging views expressed by directors, in accordance with paragraph 3.8 of the Corporate Governance Code published by royal decree on 12 May 2019.

4:34 It is recommended that the statutory governing body adopt by-laws[1] describing its composition, tasks and functioning. The NBB recommends that these by-laws be annexed to the governance memorandum.

4:35  The statutory governing body must meet on a sufficiently regular basis to carry out its duties effectively.  It is recommended that a strategy meeting be held at least once a year.

4:36 The statutory governing body should regularly assess the functioning of the management structure, including the powers, composition, size and number of meetings of the management bodies, as well as the individual attendance of directors. External experts may be called upon to carry out this assessment. Pursuant to Article 29 of the Brokerage Supervision Act, the nomination committee also has an important role to play in this regard. The NBB’s Fit & Proper Manual and EBA/GL/2021/06 specify the situations in which the individual or collective suitability of members of the statutory governing body should be reassessed.

4:37 The non-executive directors should assess their interaction with the executive directors at least once a year, where appropriate in the absence of the latter. The conclusions of these assessments, as well as the measures taken to improve the functioning of the management structure, should be set down in a report.

4:38 When a firm wishes to appoint a new director or to renew the term of office of an existing director, decides not to renew a director’s term of office or to remove a director from office or is informed of a director’s resignation, it must notify the NBB in advance in accordance with Article 61 §1 of the Brokerage Supervision Act. Pursuant to Article 61 §3 of this act, the firm should inform the NBB of any division of tasks between the members of its statutory governing body. Material changes to this division of tasks require the prior approval of the NBB.[2]

4:39 The members of the statutory governing body should undergo induction and training in accordance with paragraphs 95 to 101 of EBA/GL/2021/06.  This training should enable them to have a clear understanding of the relevant laws, regulations and administrative provisions, the firm’s structure, business model, risk profile[3] and governance arrangements, as well as their role.  In accordance with Article 56 §3, second subparagraph, of the Brokerage Supervision Act, the statutory governing body shall ensure that the firm dedicates sufficient human and financial resources to the ongoing training of its personnel. Please refer to the NBB’s Fit & Proper Manual for more information on this subject.

[1] See Article 56 §1, third subparagraph, of the Brokerage Supervision Act. The minutes of meetings of senior management or, where applicable, the management committee must be made available to all directors via a secure IT tool.

[2] The by-laws do not necessarily have to meet the conditions set out in Article 2:59 CAC.

[3] See footnote 129 to the NBB’s Fit and Proper Manual.

[4] Including in relation to environmental and climate-related risks.