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When choosing a broker in the Netherlands, understanding how it is authorized forms the foundation of evaluating its regulatory standing and your own investor protection. The framework differs significantly depending on whether a broker holds a direct AFM licence or operates through EU/EEA passporting rules—and this distinction affects which rules apply to you.
The AFM is the licensing body for investment firms operating in the Netherlands. When a broker applies for and receives direct AFM authorization, it means the regulator has assessed the firm's compliance with Dutch law, including the Markets in Financial Instruments Directive (MiFID) as implemented in the Dutch Financial Supervision Act (Wft).
Direct licensees must comply with two layers of oversight: AFM exercises ongoing conduct of business supervision, while DNB exercises prudential supervision aimed at the soundness of individual institutions and financial sector stability. This dual approach covers both how the broker treats you as a customer and whether it maintains sufficient capital to operate safely.
An alternative authorization route exists for brokers established in other EU or EEA member states. These undertakings are subject to supervision in their country of origin, and if they wish to operate through a branch in the Netherlands or offer investment services by free movement of services, they must report this to their home supervisor. This is known as "passporting."
Investment firms from other Member States may provide investment services or perform investment activities in the Netherlands based on their European passport. While passported brokers must still comply with MiFID II conduct rules in the Netherlands, their prudential oversight remains the responsibility of their home-country regulator—not the AFM or DNB.
Both direct licensees and passported brokers must follow EU harmonized rules on investor protection, including segregation of client assets, suitability assessments, and cost transparency. However, the practical enforcement chain differs:
When evaluating a broker's authorization status, checking the AFM register is straightforward: use the AFM public register to confirm license details and approved activities. This register shows not only whether a firm is directly authorized or passported, but also the specific permissions it holds—such as whether it may accept client orders, provide advice, or manage funds.
Authorization is not a blanket permission to offer all services. In the register, you can see which licences an undertaking has obtained and from which prohibitions the undertaking has been granted exemption or dispensation. A broker may be authorized to receive and transmit orders but not to provide investment advice, or vice versa. Each permission carries specific conduct obligations under MiFID II.
Understanding whether a broker is directly licensed by the AFM or passported from another EU regulator is a foundational step in independent verification. Both pathways offer regulatory oversight, but they operate through different supervisory chains—a distinction that matters if a dispute arises or if you need to understand which regulator to contact with concerns.
Analysis, not investment advice.
