4.1.2.1. Composition
4.1.2.1.1. Members and status
4:6 The statutory governing body is composed of both non-executive directors and executive directors (i.e. members of senior management or, where applicable, of the management committee). In order to safeguard the supervisory function of the statutory governing body, a majority of its members should be non-executive directors and it cannot be chaired by a person who is involved in senior management or, where applicable, a member of the management committee.[1] Day-to-day management, where provided for by the CAC for the relevant corporate form, cannot be assigned to a non-executive member of the statutory governing body.[2]
4:7 The size of the statutory governing body is determined based on the nature, scale and complexity of the firm’s activities, its internal organisation and its capital structure. It should be sufficiently small to allow for effective decision-making, but large enough to ensure that directors bring experience and knowledge from fields relevant to the firm’s proper management and that changes to its composition can be managed without undue disruption, in order to ensure continuity.
4:8 Pursuant to Article 15 of the Brokerage Supervision Act, the (executive and non-executive) members of the statutory governing body must be natural persons.
4:9 In terms of employment status, a directorship of a stockbroking firm may not be exercised within the framework of an employment contract (in other words, it must be performed in a self-employed capacity) and combining two statuses (i.e., self-employed and employee) within the same firm or a company in which the firm holds a stake is incompatible with the principles of sound governance applicable to stockbroking firms[3] (Article 64 of the Brokerage Supervision Act). However, exceptions are possible if the firm is required to comply with obligations of foreign law that require the presence of employees on the statutory governing body.
4.1.2.1.2. Independent directors within the meaning of Article 3(64) of the Brokerage Supervision Act
The independent non-executive directors should specifically ensure that the decision-making process takes into account the interests of all internal and external stakeholders, including minority shareholders, investors, etc. In this way, they contribute to the supervision of management.
4:11 Pursuant to Article 24 of the Brokerage Supervision Act, firms that are required to establish a risk committee and a remuneration committee must ensure that each of these committees includes at least one independent director. However, small stockbroking firms that are exempt from the obligation to establish a risk committee and a remuneration committee pursuant to Article 25 of the Brokerage Supervision Act are not required to have an independent director.
4:12 Prior to the entry into force of the CAC, the Brokerage Supervision Act referred to Article 526ter of the former Company Code with regard to the definition of an independent director and the criteria to be met in this regard. These requirements are now set out in Article 3(64) of the Brokerage Supervision Act and refer to the criteria in EBA/GL/2021/14. Failure to meet one of the independence criteria does not automatically mean that the person concerned can no longer be considered independent. The firm may demonstrate to the NBB that, although not all criteria have been met, the independence of the person concerned is not compromised (the “comply or explain” principle). In this case, the firm should submit a request for an exemption. The NBB will then decide whether to grant the request.[4]
4.1.2.1.3. Selection of directors – suitability and diversity
4:13 Directors should at all times be of sufficiently good repute and have adequate expertise, both individually and collectively, for the performance of their duties.
4:14 Specifically, directors should: (i) be of sufficiently good repute; (ii) possess sufficient knowledge, skills and experience to perform their duties; (iii) be able to act with honesty and independence of mind; (iv) be able to commit sufficient time to perform their functions; and (v) contribute to the collective suitability of the statutory governing body and, where appropriate, the management committee.
4:15 With regard to collective suitability, the statutory governing body should at all times possess adequate knowledge, skills and experience to be able to understand the firm’s activities, including the main risks to which it is exposed.[5] In terms of the areas of competence to be represented on the statutory governing body, please refer to the NBB’s Fit & Proper Manual (Chapter 3).
4:16 The composition of the statutory governing body should also be diverse in terms of gender, educational and professional background, age and - for firms that are active internationally - geographical provenance. Indeed, having a range of backgrounds, experience, values, opinions and views within the statutory governing body improves the process for taking decisions on strategy and risk-taking within the firm. The promotion of diversity is anchored in the Brokerage Supervision Act. For instance, Article 29 of the Brokerage Supervision Act obliges firms to use diversity as a criteria for the composition of the statutory governing body and to draw up a diversity policy that at least refers to the above aspects.
4:17 In the area of gender diversity in particular, the Brokerage Supervision Act considers gender balance of particular importance for ensuring an adequate representation of society on the governing bodies of stockbroking firms. In this regard, the legislation provides for the setting of a target for the representation of the under-represented gender on the statutory governing body and for the development of a plan to increase the number of representatives of this gender in order to reach the target. The target should be quantitative (a percentage of targeted participation by the under-represented gender) and defined for the statutory governing body collectively. If the management committee is large enough, the target may be split between the statutory governing body and this committee. This target, the aforementioned plan and the arrangements for its implementation must be made public in accordance with Article 48(b) of Regulation No 2019/2033 and notified to the NBB. When setting diversity objectives, firms should consider the results of the EBA’s diversity benchmarking report.
4:18 As part of their annual review of the composition of the statutory governing body, firms should document their compliance with the objectives and targets set. In the event diversity objectives or targets have not been met, firms should document the reasons for this, the measures to be taken and the timeframe for these measures, in order to ensure that the diversity objectives and targets are met. Certain stockbroking firms must also report to the NBB on diversity in accordance with circular NBB_2024_03.
4.1.2.1.4. Chair of the statutory governing body
4:19 The chair of the statutory governing body leads this body, contributes to the efficient flow of information within and between this body, its specialised committees and senior managers (and where applicable, the management committee) and is responsible for its effective overall functioning. For more information on the specific tasks of the chair, please see paragraphs 39 to 43 of EBA/GL/2021/14.
[1] This does not apply to small stockbroking firms pursuant to Article 20 §2 of the Brokerage Supervision Act.
[2] This does not apply to small stockbroking firms pursuant to Article 20 §2 of the Brokerage Supervision Act.
[3] These principles include independence of mind, collective decision-making by the statutory governing body, etc.
[4] The NBB generally takes a decision at the same time on the suitability of the person concerned and the request for exemption from a criterion set out in Article 3(64) of the Brokerage Supervision Act. However, these decisions may be taken separately if the issue of independence has a broader scope and implications for sound governance.
[5] The monitoring of collective suitability forms part of both sound governance and fit & proper supervision (collective suitability being an aspect of adequate expertise).