On 23 June 2021, the French financial markets authority, the Autorité des Marchés Financiers (the AMF) announced new quarterly reporting obligations relating to (i) indemnification payments to unitholders and (ii) breaches of investment ratios by UCITS managers and AIFMs. The new policy on reporting obligations, which is set out in an update to the AMF General Regulation and to several product-specific AMF policies (the Policy), enters into force on 1 July 2021. The first report is expected to be filed by in scope UCITS managers and AIFMs no later than 31 October 2021, for the quarter starting on 1 July to 30 September. In this Alert, we look at what the AMF is changing and what this means for in-scope entities.

The current requirements

Articles 318-6 (for AIFMs) and 321-35 (for UCITS managers) of the AMF General Regulation already requires French-regulated asset management companies to inform the AMF without delay of incidents that are likely to result in a loss or gain – for example, indemnification payments to unitholders, a payment of costs relating to civil or criminal liability, an administrative sanction or an incident that results in reputational damage - that represents more than five percent (gross) of their regulatory own funds.

Pursuant to this new Policy, both French and foreign UCITS managers and AIFMs are subject to new reporting obligations, which are described in more detail below.

New requirements with respect to indemnification payments and breaches of investment ratios

The new reporting requirements introduced by the Policy are intended to strengthen the AMF’s risk-based supervisory approach and enable it to improve data collection. The amendments to the AMF General Regulation as a result of the Policy require quarterly reporting, for the first time, of the following information:

• Instances where the UCITS or the AIF has not complied with legal, regulatory or contractual requirements relating to investment rules and asset composition. These requirements only apply in respect of “active” breaches (i.e. there is no obligation to report where the non-compliance is as a result of something that is beyond the control of the UCITS manager or the AIFM and is not as a result of the financial instrument maturing).

Significantly, this reporting requirement applies (i) to French UCITS managers and AIFMs in relation to both French and foreign collective investment schemes (CIS) that they manage - including by delegation – and (ii) to foreign UCITS managers and AIFMs with respect to the French funds they manage; and

• The amount of compensation paid by French UCITS managers and AIFMs to (i) their shareholders or unitholders in respect of both French and foreign CIS that they manage, including by delegation, and (ii) clients to whom they provide investment or related services, as well as foreign UCITS managers and AIFMs with respect to French CIS they manage, including by delegation.

It is important to note that even if there are no instances of indemnification payments or breaches of investment ratios in the reporting period, a report confirming the same must be submitted to the AMF.

What is the timeline?

The Policy sets out the procedures and format for the making of quarterly submissions. Asset management companies will be required to report this new information no later than 31 October 2021 for the reporting period 1 July 2021 to 30 September 2021. French UCITS managers and AIFMs are to submit the reports through the AMF’s platform, Extranet ROSA, and foreign UCITS managers and AIFMs are to submit the reports through a dedicated email address.

Any other changes?

The AMF has also amended its General Regulation to give itself the power to require, if it so requests, depositories and centralizing agents of French CIS to collect information on a daily basis relating to (i) non-compliance with investment and asset composition rules and (ii) subscription and redemption requests for units or shares in these schemes. There has been no announcement from the AMF as to how these requirements will apply in practice nor has the AMF indicated the timeline for such collection of information.