Various mutual funds are leaving The Netherlands because of the mandatory listing at the Euronext stock exchange in Amsterdam. The funds complain that such listing is of no added value to them, because it entails a cost and administrative burden that is too heavy.
An initial request for quotation may cost up to €4,940 ($6,081) and the quotation costs, depending on the fund's magnitude, may vary from €3,000 to €20,000. Moreover, even higher costs could be added for obligatory announcements for distributing dividends, prospectuses and disclosures, and the supervision by the Authority for the Financial Markets.
Funds will not incur these costs once they are de-listed from the stock exchange. So, to evade costs, multiple funds have left The Netherlands for European countries that do not have a listing requirement. Luxembourg in particular is a popular destination, leaving the Euronext stock exchange with empty hands.
To end the competitive disadvantage of The Netherlands' financial legislation the Ministries of Finance and Justice are contemplating repealing the obligation for a Euronext quotation. It has already been agreed that the quotation requirement can be disposed of once an alternative has been created that matches the supervisory requirements of the EU.
The abolition of the costly quotation requirement fits the Dutch government's aim of reducing the administrative burden for businesses. New legislation will create a more favourable economic climate in The Netherlands. Policy makers are addressing the issue energetically and it is expected that liberalization for mutual funds will be implemented in 2005. The countermeasure to be taken is likely to stop the exodus of the mutual funds.
Peter L Coomans and Matthieu Ph van Sint Truiden
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