Investment Funds Update: Europe: Legal and regulatory updates for the funds industry from the key asset management centres and primary European fund domiciles - Issue 5, 2017: France

by Dechert LLP

Dechert LLP

AMF Priorities in the EMIR Review

The Autorité des Marchés Financiers (the “AMF”, the French financial markets authority) published two position papers on 2 May 2017 relating to the EMIR review:

  • “EMIR review: What are the priorities for the AMF?”
  • “Third countries: What form of equivalence for post-market infrastructures?”

The AMF makes the following suggestions and comments in relation to the EMIR review:

  1. The AMF supports the objective of strengthening the proportionality of the obligations specified by EMIR and recommends the rationalization of the obligation to report derivative contracts to trade repositories and the exemption of small financial counterparties that occasionally use derivatives from the clearing obligation.
  2. The AMF takes the view that the EMIR review needs to be the occasion to rethink Europe’s relationships with third countries and calls for (i) the reform of the equivalence of third-country regimes, which is further analyzed in the dedicated study and (ii) the need for infrastructures of critical importance carrying out activities denominated in euros to be located in the European Union.
  3. The AMF insists on paying attention to client clearing

The AMF further observes that the implementation of EMIR central clearing obligation of OTC derivative contracts give rise to inconsistencies with the rules specified by the UCITS and AIFM directives. The AMF makes proposal to amend the UCITS Directive accordingly.

Read the AMF News Release and Reports (in French)

Read the AMF News Release and Reports (in English)

AMF and ACPR Update of Crowdfunding Guide

The AMF and ACPR (the French Authority For Credit Institutions And Insurance Companies, Autorité de Contrôle Prudentiel et de Résolution) amended the Crowdfunding Guide on 9 May 2017. This Q&A document specifies the regulatory framework applicable to crowdfunding professionals. The update incorporates in particular:

  1. The provisions related to crowdfunding platforms in the form of securities and “minibons”, (a new type of bonds) subscription; and
  2. The professional public liability insurance obligation of crowdfunding advisers and intermediaries.

Read the AMF news release and Crowdfunding Guide (in French)

Launch of a Public Consultation on Amendments to the GRAMF Ahead of the Commission Delegated Directive of 7 April 2016 Supplementing MiFID II - AMF

Pursuant to the Delegated Directive of 7 April 2016 supplementing MiFID II that sets out provisions on the safeguarding of financial instruments and funds, product governance and inducements, the AMF launched a public consultation on 10 May 2017 on proposed changes to the Book III – Service Providers of the General Regulations of the AMF (“GRAMF”).

As a result, the AMF submits proposed amendments of the GRAMF to public consultation, including:

  • The update of existing measures and the creation of new provisions relating to the safeguarding of financial instruments belonging to clients;
  • The creation of a chapter dedicated to product governance obligations; and
  • The replacing existing provisions of Article 314-76 of the GRAMF with new provisions on inducements.

The AMF also specifies and provides guidance on the following measures applicable to asset management companies:

  • Safeguarding of financial instruments and funds belonging to clients;
  • Product governance obligations; and
  • Inducements.

Consultation responses must be sent before 10 June 2017.

Read the AMF News Release (in French) 

Read the AMF News Release (in English)

Read the AMF Public Consultation (in French)

Changes to the Intermediation in Miscellaneous Assets System: Amendment to the General Regulation of the AMF (“GRAMF”) and Publication of a New Instruction

Pursuant to Sapin 2 Law, changes to the intermediation in miscellaneous assets system were introduced, including among others:

  • The prior control by the AMF on all proposal investments (whereas the control was a posteriori until now);
  • The authorisation of the AMF to determine in its GRAMF the “minimum guarantees required for an investment intended for the general public” for all investment transactions in miscellaneous assets; and
  • The possibility for the AMF to sanction miscellaneous property intermediaries for any breach of the GRAMF.

As a result, pursuant to the Arrêté of 27 April 2017, the GRAMF was updated to address the new provisions. Therefore, the AMF incorporated on 17 May 2017 in a new Instruction n°2017-06 the new provisions related to the registration procedure and preparation of an information document that must be filed with the AMF by the miscellaneous assets intermediaries. This Instruction details:

  • The resources required from intermediaries in miscellaneous assets that fall under Article L. 550-1, I and II of the French Monetary and Financial Code;
  • The procedures for registering the information documents to be filed with the AMF;
  • The content of the information documents;
  • The conditions of allocation of a registration number on the information document for investors; and
  • The information to provide investors and the AMF after the transaction.

Read the AMF News Release (in French)

Read the AMF News Release (in English) 

Read the Arrêté of 27 April 2017 (in French) 

Read the AMF new Instruction n° 2017-06 (in French)

AMF New Recommendation n°2017-07 on the Performance Simulations Offered to Investors

Following the results from the public consultation on the provision of future performance simulations to investors and the Arrêté of 27 April 2017, the AMF published a new Recommandation n°2017-07 published on 22 May 2017.

As a reminder, the policy document primarily:

  • Contains a reminder of the scope of the applicable regulations to professionals (including investment service providers, crowdfunding investment advisers and now financial investment advisers) offering performance simulations;
  • Recommends professionals to incorporate a standardised message warning investors about future performances simulations; and
  • Provides a list of the best practices to be adopted when designing future performance simulations.

Read the new AMF Recommandation n°2017-07 (in French)

AFG Publication - Liquidity Risk Management Tools in Open-Ended Funds

The Association Française de la Gestion Financière (the French Asset Management Association, the “AFG”) published on 12 May 2017 a report on the tools of liquidity risk management used for open-ended funds to ensure the liquidity announced to the investor in accordance with the fundamental principles of the equal treatment of investors and the market integrity.

The AFG lists and details the current mechanisms used by French Funds which are:

  • Swing pricing, and adjustable subscription and redemption fees paid to the fund;
  • Notice period;
  • Redemption gate mechanisms;
  • In-kind redemption;
  • Side pocket mechanisms; and
  • Suspending subscription or redemptions.

The AFG insists on the appropriate use of these protection tools in case of a deterioration in market liquidity and to manage the liquidity mismatch between cash and portfolio assets in the collective management.

Read the AFG report (in French)


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Dechert LLP

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