The Autorité des marchés financiers (“AMF”) has finally released the list of the main French statutory and regulatory principles to be complied with when marketing shares or units of foreign UCITS in France!
This document, which has been issued pursuant to Article 91(3) of Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 (the “UCITS IV Directive”) was expected by the French market since 1 July 2011.
The following 8 points must be stressed out:
1. Definition of “marketing UCITS shares or units”
The AMF confirms its definition of “marketing financial instruments” as expressed in its position 2010-05 of 15 October 2010 on the marketing of complex financial instruments.
Indeed, the AMF expressly considers that marketing shares or units in an UCITS, or any other type of any financial instrument, covers their:
“presentation through different means (advertising, direct marketing, (…) advice, etc.) by an investment services provider [and a tied agent], a financial investment adviser or a direct marketer of banking financial services with a view to encouraging a client to buy [them]”.
The AMF also confirms that the two following situations do not fall within the concept of “marketing shares or units in an UCITS”:
(i) Replying to a client’s unsolicited request to purchase a specifically identified financial instrument, where allowed by the regulations in force; and
(ii) Investment made trough a portfolio management agreement, where the service is provided to the investment services provider (“ISP”) as long as the financial instruments in question are admissible for a client’s portfolio.
2. Ambit of direct marketing of banking or financial products and services
The AMF stresses that the provisions of Article L.341-1 et seq. of the French Monetary and Financial Code (the “MFC”) on cold calling apply whenever banking or financial products and services are marketed directly in France.
Unsurprisingly, the AMF recognizes the exceptions provided for by the MFC regarding qualified investors.
3. Marketing documents
The AMF also reminds investment managers that marketing documents must be identifiable as such, accurate, clear and not misleading. Otherwise, the AMF may order such marketing documents to be modified.
The marketing documents must also mention the existence of the prospectus and the availability of the Key Investor Information Document (“KIID”).
Furthermore, the AMF confirmed that the formal requirements applying to marketing documents must be complied with by all distributors as well as all ISP authorized in France or operating under the branch passport.
In our view, these rules should also apply to ISP marketing their products cross-border in France as the rules applicable to marketing activities do apply to the marketing activities as such and not only having regard to the legal status of the distributor.
4. Language in which information documents must be drafted
Whilst the KIID relating to a foreign UCITS marketed in France must be in French, the AMF also considers that distributors shall focus their marketing effort on investors categorized as professional clients (pursuant to Article D.533-11 of the MFC) when conducting marketing activities in France in respect of shares or units of UCITS which articles, rules or any other investor information documents are drafted in a language other than French.
In our view, this relative flexibility may contradict the principle of having all documents made available in French when the client is a consumer as it is yet not clear whether a person that qualifies as a professional client for the purpose of MIFID should also automatically qualify as a professional for the purpose of the consumer legislation.
5. Information available to the public in France
Notwithstanding the provisions of the UCITS IV Directive, the AMF confirmed that foreign SICAV remain subject to the requirement to release a BALO notice (publication in the French official gazette) when authorized in France.
6. Providing investment services when marketing share or units of foreign UCITS
The AMF also confirms that the marketing of a financial instrument generally implies that the distributor also provides at least one investment service: provision of investment advice on financial instruments or reception/transmission of orders for third parties.
Accordingly ISP duly authorized in France or operating under the branch passport, as well as their tied agents, must be authorized to offer in France, and comply with the French conduct of business rules governing the provision of, investment services. In our view, on the basis of French recent case law on the provision of investment advice, it appears extremely difficult not to provide such an investment service when carrying a positive marketing action in respect of UCITS.
7. Financial investment advisor (within the meaning of Article L.541-1 of the MFC)
The AMF expressly confirms that financial investment advisors (within the meaning of Article L.541-1 of the MFC) are entitled to receive a client’s order for transmission purposes to the extent that the order only relates to shares or units of collective investment schemes (namely UCITS, securitization funds, real estate funds, close-ended funds, etc.) for which the financial investment advisor has previously provided an investment advice service to the same client. Whilst this analysis is in line with past AMF’s positions, we also stress that, at this stage, the AMF did not change its analysis that financial investment advisors may neither conduct positive placement activities nor transmit orders in respect of non-collective investment schemes.
8. Remuneration of UCITS distributors
Finally, the AMF restated its position that rebates of management fees as well as subscription/redemption fees are either prohibited or regulated in accordance with the general rules of the AMF. This said, the AMF has expressly recognized in the past that such rebates may be valid in certain situations. We accordingly consider this restatement as a reminder that these exceptions to the prohibition’s principle must be strictly interpreted and complied with.
Please refer to:
- Catalogue of French statutory and regulatory measures applicable to the marketing of shares or units of foreign UCITS in France
