The asset management industry is governed by regulations that both protect investment and stimulate innovation.
The industry is subject to a set of strict statutory and regulatory rules stemming from national and European regulation. The regulations are derived primarily from European Directives, the French Monetary and Financial Code, and the General Regulation, decisions and instructions of the securities regulator, Autorité des Marchés Financiers (AMF).
These regulations evolve constantly as the industry changes. Management companies and their products are subject to AMF supervision. Management companies incorporated in other countries must be authorised by the equivalent market regulator in their home country in order to do business in France.
External oversight of a management company’s compliance with regulations takes place at several levels, starting with the industry supervisor, the AMF, but depositaries and statutory auditors also oversee compliance. The Decree of 9 March 2006 requires management companies to implement internal control as well.
Supervision by the AMF
The AMF was created from the merger of the Commission des Opérations de Bourse (COB), the Conseil des Marchés Financiers (CMF) the Conseil de Discipline de la Gestion Financière (CDGF). Its remit includes:
- Regulating the asset management industry, as well as authorising management companies and approving new investment funds;
- But it is also tasked with supervising management companies and sanctioning breaches of rules and regulations.
The creation of collective investment products
Including investment funds, is subject to prior approval by the AMF, which ensures that such products are lawful before they are marketed. The AMF pays close attention to the information in the prospectuses provided to potential investors.
The AMF also ensures that the information provided to investors during the life of an investment fund is clear. For more complex products, such as structured funds, the AMF ensures that the special features of the products are presented clearly to investors.
When authorising management companies
the AMF ensures that they have adequate financial resources (capital), technical resources (accounting system, analytical tools, decision-making aids, performance tracking tools, etc.) and human resources (sufficient manpower for the nature and growth of business, etc.) for the investment services being offered. It then monitors the companies to ensure that their resources remain adequate. The AMF General Regulation also lays down the rules of conduct and obligations for authorised investment services professionals.
The AMF carries out inspections and investigations
To ensure that the management companies’ and investment funds’ practices comply with their obligations. The AMF Sanction Committee can impose sanctions for infractions, up to and including withdrawal of a company’s authorisation.
The AMF ombudsman’s department
Is available to help non-professional investors, including individuals and non-profit organisations. The department is also responsible for providing public information and education, as well as dealing with complaints about financial disclosures, order execution, securities account transfers and asset management. It also offers to mediate disputes between retail investors and market professionals.