I OVERVIEW OF RECENT ACTIVITY
France has one of the most dynamic investment fund markets in Europe. Various types of retail funds (such as undertakings for the collective investment of transferable securities (UCITS)) and professional investment funds have been available for investment by French and foreign investors for many years.
The French asset management industry is one of the largest in the world, with assets under management by French collective investment schemes (excluding discretionary mandates and securitisation vehicles) of €1,950 billion at the end of 2017.2 France is also the first asset management centre in continental Europe for financial management (funds and discretionary mandates).3
Over the past 17 years, the number of French asset management companies has almost doubled, from 350 in 1999 to more than 630 today, and 35 new management companies were licensed by the French Financial Markets Authority (AMF) in 2017.4
The French asset management industry is considered to be an ecosystem of skills and functions with global participants (three global custodians in the top 10 worldwide), as well as niche portfolio management companies specialising in alternative investment management strategies.
Assets under management in France (including discretionary mandates) amounted to €3.8 trillion at the end of 2017.5
II GENERAL INTRODUCTION TO the REGULATORY FRAMEWORK
i Applicable regulations for asset management activities
French regulations on asset management are provided in European regulations of direct application (such as MAR) and in the following documents, which specifically implement the European asset management regulations (the UCITS Directive and the Alternative Investment Fund Managers Directive (AIFMD)) into French law:
- the Monetary and Financial Code (MFC), with legislative and regulatory parts (Book II and Book V), sets out the main rules applicable to participants (portfolio management companies (SGPs) or custodians) and products (generally, investment funds);
- regulations of the AMF, which encompass the General Regulations of the AMF, and other instructions and recommendations; and
- the policies and by-laws of professional associations such as the French Asset Management Association and the French Association of Private Equity Funds, as their ethics codes may be subject to specific approval by the AMF.6
ii Asset management supervision
The AMF is an independent administrative authority entrusted with duties to protect savings invested in financial instruments and all other investments that give rise to public offerings, control the information provided to investors and ensure the orderly functioning of the markets in financial instruments.
As far as asset management is concerned, the AMF is the prudential supervisor of portfolio management companies and the investment funds they manage. The main duties of the AMF include:
- the preparation of regulations and rules of good conduct applicable to the asset management industry, including licensing procedures of SGPs and investment funds, as well as the regulations applicable to the activities of depositaries;7 the AMF has the power to draft its own regulations, which are subject to homologation (i.e., stamping) by the Ministry of Finance;8
- the licensing of French asset managers, SGPs and investment funds;
- the prudential and ongoing supervision of SGPs and investment funds;
- checks and investigations into the activities of SGPs and depositaries (including on-site inspections);9
- the imposition of disciplinary sanctions on SGPs, investment funds and depositaries by a separate and independent enforcement committee of the AMF;10 and
- supervision of the marketing conditions of French and foreign investment funds (in particular, those marketed to retail clients).
iii Regulation of asset managers
SGPs are legal entities that manage one or several UCITS (French or foreign), alternative investment funds (AIFs) (compliant with the AIFMD) or other collective investment schemes.11
In this respect, a company that wishes to manage French collective investment schemes, whatever their form (UCITS, private equity funds or real estate funds), must, as a matter of principle, first be duly licensed by the AMF as an SGP (the same requirements apply to self-managed investment funds).
Under the French licensing procedure, the licence given by the AMF is not generic.12 This means that an SGP authorised to manage UCITS and discretionary mandates will need to be further authorised by the AMF if it wishes to manage AIFs investing in real estate assets or receivables. In addition, the SGP may also be specifically authorised to perform certain investment services (investment advice, reception and transmission of orders for SGPs licensed to manage AIFs) and to perform ancillary activities (such as insurance brokerage).
The licensing procedure consists of submitting an application file to the AMF, which has a maximum of three months in which to grant the licence to the SGP.
Before licensing a company as an SGP, the AMF will verify in particular that:
- the company's registered office and central administration is located in France;
- the company has sufficient initial capital (minimum share capital of €125,000 plus additional amounts of share capital above certain thresholds depending on the assets under management);
- the company has provided the names of shareholders with significant equity holdings to allow the AMF to assess their qualifications; and
- the company is managed and its policies are determined by individuals with the necessary integrity, qualifications and experience commensurate with their positions.13
An additional and key condition is that SGPs must have a structure and procedures in place tailored to the specific asset management activities, most importantly skilled managers, sufficient human and technical resources, suitable internal controls and risk management (with internal procedures, preventing conflicts of interests), and a viable business plan.
SGPs managing AIFs are also subject to additional requirements (additional own funds, liquidity management, valuation policy, etc.).
French SGPs, once licensed, may take advantage of the passporting procedure provided for by European regulations to perform their activities in other EU Member States (for instance, managing AIFs domiciled in other Member States).
SGPs are presently defined under French law as investment firms and are therefore, as a matter of principle, subject to rules of good conduct deriving from the Markets in Financial Instruments Directive (MiFID).
To minimise any gold‐plating associated with applying MiFID II measures to all SGPs in their capacity as investment firms, the decision was made to exclude the SGPs that perform collective asset management from the category of investment firms. The new regime entered into force on 3 January 2018.14
SGPs, while managing investment funds, are subject to different regulations deriving specifically from European regulations (mainly MiFID II, the UCITS Directive and the AIFMD) that impose specific rules of good conduct and best practice with which they must comply, and to which they are required to adapt their organisation and procedures. SGPs must mainly comply with regulations and rules of good conduct and best practice relating to:
- categorisation of clients;
- best-execution policy;
- prevention of conflicts of interest;
- organisational requirements (remuneration policy, reporting (in particular, for SGPs managing AIFs and using substantial leveraging), subcontracting of activities (with specific regulations on the delegation of the financial management), compliance, risk control and periodic control);
- valuation of assets;
- liquidity management;
- market regulations (insider dealing and market abuse, short-selling restrictions); and
- the fight against money laundering and the financing of terrorism (as portfolio management companies of UCITS and AIFs).15
SGPs are subject to control by the AMF at the time of their creation and then on a regular basis throughout their existence.
iv Regulation of investment funds
As a matter of principle, French investment funds are divided into two categories: regulated funds, which are collective investment schemes comprising UCITS and certain types of AIFS listed in the MFC and supervised by the AMF (such as real estate collective investment schemes (OPCIs) and French private equity investment vehicles (FCPRs)); and non-regulated funds (mainly AIFs not listed in the MFC and therefore not supervised by the AMF).
With respect to regulated funds, the AMF generally grants the licence to the investment fund within one month of the submission of the application (containing all the requested documents and information). In the event that additional information is requested by the AMF, the review of the file is suspended until receipt of such information.
Certain types of regulated AIFs reserved to professional investors are not subject to licensing requirements (e.g., specialised professional funds or professional venture capital funds). SGPs of such investment funds need only notify their creation to the AMF within one month of the date of their constitution. Nonetheless, such funds are supervised by the AMF.
v Regulation of French depositaries
France has recently implemented under French law the provisions of the UCITS V Directive of 23 July 2014.16
The assets of investment funds (UCITS or AIFs) must be held by independent depositaries, which have the following main functions:
- to act as custodian of the assets of the investment funds, as follows:
• the depositary shall hold in custody those financial instruments that can be registered in a financial instruments account opened in the depositary's books, and all financial instruments that can be physically delivered to the depositary;
• for other assets, the depositary shall verify the ownership of the fund (UCITS or AIF), and shall maintain a record of those assets when it is satisfied that the SGP acting on behalf of the fund holds the ownership of such;
- the depositary shall, in general, ensure that the fund's cash flows are properly monitored, and shall particularly ensure that all payments made by or on behalf of investors upon the subscription of units or shares of an AIF or UCITS have been received, and that all cash of the AIF or the UCITS has been booked in cash accounts opened in the name of the AIF;17 and
- to monitor the SGP's decisions to ensure that they comply with French regulations and the articles of association or regulations of each investment fund.
The depositary must be chosen from a limited list of entities, including a credit institution (or investment firm) authorised to perform custody activities by the French Prudential and Resolution Supervisory Authority (the regulator in charge of supervising credit institutions and investment firms).18
The depositary may delegate total or partial custody of the assets of the investment funds to a third party but remain, as a matter of principle, responsible for the return of any fund assets that may be lost while held in sub-custody. Any limitation of such liability may be contractually provided for AIFs under specific conditions. Such arrangements for the limitation of liability are, however, prohibited with respect to UCITS.19
vi Marketing regulations
Definition and perimeter of marketing activities
The AMF defines the marketing of shares or units of investment funds (be they UCITS or AIFs) as the presentation of the relevant shares or units of UCITS or AIFs through different means (advertising, solicitation, advice, etc.) with a view to encouraging an investor client to buy or subscribe to them.20
The AMF also admits that in certain specific cases, investors may become shareholders or unitholders of such UCITS or AIFs through the mere purchase, sale or subscription of shares or units of an AIF without a marketing action being characterised in France. The relevant cases are described as follows from an AMF position:21
In July 2016, the AMF introduced the concept of 'premarketing' of funds in France. In particular, the practice of management companies contacting up to a maximum of 50 investors (professionals or individuals whose initial subscription would be at least €100,000) to assess their interest prior to the launch of such UCITS or AIF is not an act of marketing, provided that the investors are not given a subscription form or documentation containing definitive information on the fund's characteristics. However, any subsequent subscription by the investors contacted will be considered to constitute an act of marketing.
In July 2016, the AMF also clarified other situations that would not trigger the application of marketing rules in France, such as the participation by a management company in conferences or meetings of professional investors, provided the investors are not asked to invest in a specific product, over-the-counter trades between investors, or the purchase, sale or subscription of units or shares in UCITS or AIFs in the context of a management company's compensation policy.
French asset managers must comply with specific rules when marketing the investment funds they manage.
Establishment of relationships with investors
Specific regulations apply to the content of promotional documents, which must, most importantly, be clearly identifiable as advertisements, and be accurate, clear and in no way misleading.
In addition, persons who market the shares or units of an investment fund in France whose articles, rules or any other investor information are written in another language customary in the sphere of finance (i.e., English) must ensure that documents distributed are targeting professional investors,22 and that they are not distributed to retail investors unless they are available in French.
Investment funds must also provide the public with a French version of the key investor information document, and also ensure that compulsory investor information is available on the premises of any institutions authorised to take subscription and redemptions.
The distributor must also enter into an agreement with the SGP whereby the SGP undertakes to review the advertising documents prepared by the distributor before their dissemination to ensure their compliance with the provisions of the fund's prospectus.23
Additional requirements may also apply when investment funds are marketed to retail clients (such as the requirements laid down in the AMF's policy relating to the marketing of shares or units in complex collective investment schemes).
Provision of investment services
Since the implementation of MiFID and MiFID II into French law, the distribution of investment funds falls under the provisions of the MFC and the General Regulations of the AMF applying to the provision of the investment services of reception and the transmission of orders and investment advice.
The provision of such investment services is restricted to duly licensed investment services providers (French, or passported from another EEA Member State, such as SGPs) and to French financial advisers that benefit from an exemption that authorises them to provide investment advice, or to receive and transmit orders in respect of units or shares of investment funds without necessarily being licensed as investment services providers.24
Marketing in France of foreign UCITS or AIFs
Any foreign UCITS must be notified to the AMF by the competent authority of the fund's home state before it can market its shares or units in France. Foreign UCITS in France must also appoint one or more financial correspondents whose duties are, inter alia, the treatment of subscriptions, redemptions, the information of shareholders and the payment of the AMF annual royalty.
The passport regime for marketing foreign AIFs in France towards professional clients was implemented in July 2013 and was specified by the AMF in July 2014.25 It should be noted that non-EU AIFMs managed by an AIFM based outside of the EEA or based inside the EEA do not benefit from the AIFMD passport when marketed towards professional clients, and must therefore be authorised by the AMF, subject to certain conditions. The passport mechanism may be extended to this type of fund at a later stage. The appointment of a centralising correspondent by the foreign AIF marketed in France is required only when the foreign AIF is passported in France and is marketed towards non-professional clients, or when the foreign AIF is marketed in France under a procedure of marketing without a passport.26
III COMMON ASSET MANAGEMENT STRUCTURES
French regulated funds (collective investment schemes) are subject to specific asset management regulations depending on the category to which they belong (an undertaking for collective investment in transferable securities (OPCVM), FCPR, OPCI, etc.). French regulated funds may elect to choose one of the following legal forms (i.e., whether they are constituted under a corporate form or not incorporated):
a an investment company with variable capital (SICAV): an open-ended company subject to general corporate regulations applicable to limited liability companies and to specific asset management regulations; and
b a mutual fund trust (FCP): a common fund that issues units to be subscribed to by its unitholders. The FCP is the most common form of investment fund on the French market (except for real estate AIFs, where the SICAV form is more commonly used). An FCP (which is not a legal entity but a co-owned form of assets) must be established by an SGP (which represents the FCP and manages its assets).
A range of investment vehicles is commonly used for asset management activities in France, depending on the type of investor and the investment strategy to be implemented (see Section VI).
IV MAIN SOURCES OF INVESTMENT
During the first quarter of 2017, the main investors in French investment funds (with the exception of money market funds) were insurance companies (37 per cent) followed by retail clients (19 per cent).27 The situation is different for French money market funds where, during the first quarter of 2017, the main investors were non-financial companies (28 per cent) followed by insurance companies (28 per cent). Non-residents account for less than 15 per cent of investment in money market funds.28
V KEY TRENDS
In 2016, the AMF and the French Asset Management Association launched a working group, the French (Routes and Opportunities) Garden (FROG), to improve the competitiveness of the asset management industry. The FROG working group published its recommendations in October 2016, and the AMF updated its doctrine and instructions in March 2017 to take such recommendations into account.
The improvement of French asset management regulations relate, in particular, to the following areas:
- the delegation of the financial management of collective investment schemes: it is now possible to delegate the financial management of a French UCITS or AIF not only to another portfolio management company of collective investment schemes, but also to an investment services provider licensed to provide the investment services of portfolio management;
- in the case of transformation of an FCP into a SICAV, it will be possible to keep historical reports of past performance (i.e., track record) of the FCP;
- relaxation of the rules relating to classifications of collective investment schemes: as a matter of principle, the classification of a UCITS or an AIF will only have to be maintained by its SGP on an optional basis; and
- gating mechanisms: following the authorisation given by the law of 9 December 2016 to UCITS and AIFs to put in place gating mechanisms under exceptional circumstances, the AMF specified the way to implement such gating mechanisms in an instruction dated 13 March 2017 (including requirements to describe the use of the gates, a fund's prospectus, thresholds for triggering the gates and the maximum duration of such gates).29
VI SECTORAL REGULATION
French insurance companies are under the obligation to invest regulated liabilities corresponding to life insurance policies subscribed to by their clients (unit-linked life insurance policies and euro life insurance policies) in assets that are of sufficient quality under the application of the Solvency 2 regulations, and are subject to diversification rules in their investments.30 Mainly, they invest their assets in investment funds, real estate assets and receivables.
For the purpose of the management of such assets, French insurance companies may conclude discretionary mandates with SGPs or invest such assets in dedicated investment funds.
The structure of the French pension system is fragmented and complex, and dominated by mandatory pension schemes and mandatory supplementary schemes organised on a professional basis.
Such schemes are subject to specific investment rules provided for by regulations or by their internal rules, but they do not qualify as investment funds per se. They may, however, invest some of their assets in investment funds, depending on their internal rules.
iii Real property
Categories of investment structure and licensing requirements
French real estate funds that qualify as AIFs are divided into two categories: OPCIs, which are a type of AIF open to retail investors; and professional OPCIs, which are a type of fund open only to professional investors.31
Both OPCIs and professional OPCIs must be licensed by the AMF before starting investment activities.
Categories of investors to whom funds may be marketed
Subscriptions to professional OPCIs are available to French and foreign professional investors (e.g., banks, investment firms or insurance companies),32 and also to other categories of investors (companies and individuals) subject to a minimum investment of €100,000 and compliance with certain conditions as to resources or professional competence, as defined in the General Regulations of the AMF.
The main feature of OPCIs' investment policy is that they must invest at least 60 per cent of their assets in eligible real estate assets (rental properties), directly or through other eligible companies.
To maintain liquidity for their unitholders, OPCIs must invest at least 5 per cent of their assets in cash, deposits and liquid financial instruments.35 Professional OPCIs benefit from relaxed liquidity rules.
As with other investment funds, OPCIs must be managed by an SGP (specifically licensed by the AMF for activities relating to investment in real estate assets) and their assets entrusted to a French depositary.
As the valuation of real estate assets held by an OPCI is a fundamental element of its viability, another feature of OPCIs is that the real estate assets held by the OPCI must be valued on a regular basis by two property appraisers, who must act jointly and draft a written report on such36 (the requirement is to have only one property appraiser for professional OPCIs).
iv Hedge funds
Categories of investment structure
French hedge funds that qualify as AIFs are divided under French regulations into two categories: non-professional investment funds (funds of alternative funds)37 and professional funds, subdivided into professional funds with general purpose38 and specialised professional funds.39
Funds of alternative funds and professional funds with general purpose must be licensed by the AMF, whereas specialised professional funds are not subject to licensing requirements, but need only be notified to the AMF within one month of the date of their constitution.40
Categories of investors to whom funds may be marketed
Units of funds of alternative funds may be subscribed to by any type of investor investing a non-minimum amount of subscription.
Conversely, investment in professional funds with general purpose and specialised investment funds is open to any investor subscribing to the units or shares of the funds for above €100,000 or to professional investors (within the meaning of MiFID) or, with respect only to specialised investment funds, to individuals and companies subscribing to the units or shares of the funds for above €30,000 and meeting certain criteria (concerning in particular their previous experience in the private equity sector).41
As far as their investment policy is concerned, the main feature of French hedge funds is that they benefit from relaxed investment rules compared with those applicable to French UCITS (relaxed rules for using leverage and derivatives, and the right to invest up to 35 per cent of their assets in a single security or 50 per cent of their assets in a single UCITS). Specifically, funds of alternative funds may invest up to 100 per cent of their assets in foreign funds (meeting certain criteria) or in other types of French AIFs.
It should also be noted that the investment policy of the specialised professional fund is freely determined in its articles of association or in its regulations, and this type of investment fund may invest in any type of goods (not only in financial instruments and cash), including in real estate assets meeting specific conditions (in particular, evidence of ownership rights and the ability to value the goods accurately and regularly).42
To allow SGPs to manage the liquidity of French hedge funds, French regulations authorise the implementation of the following specific mechanisms in relation to this type of fund:
- gating mechanisms, whereby French hedge funds may provide in their articles of association or regulations that the redemption of their units or shares may be limited, at each date of establishment of their net asset value, to a fraction of the units or shares issued by the fund, subject to certain conditions;43
- side-pocket mechanisms, allowing the SGP of the hedge fund, in the event that the fund contains illiquid assets, to split the original funds into two new funds, one of which (contractual side-pocket fund) will receive the illiquid assets to be managed in a run-off mode;44 and
- mandatory notices for subscription and redemption orders (every 15 days where the net asset value is established on a daily basis and 60 days where the net asset value is not established daily).45
The implementation of the above-mentioned mechanisms is not subject to specific conditions regarding specialised professional funds, whose articles of association or regulations may freely determine the terms of subscription and redemption requests. It is possible to specify a lock-up period, the duration of which may freely be determined.46
Like other investment funds, French hedge funds must be managed by an SGP (specifically licensed by the AMF for activities relating to alternative investment strategies) and their assets entrusted to a French depositary.
The use of prime brokerage by SGPs managing French hedge funds is regulated. Specifically, the prime broker and the SGP must prepare and sign a conformity letter to be submitted to the AMF, summarising the terms and conditions under which the prime broker carries out its activities.
In addition, regarding French hedge funds constituted as specialised investment funds and professional funds with general purpose, it is possible for the French depositary to enter into an agreement with the hedge fund whereby it limits its obligation of return of the financial instruments under custody in the event of delegation of this function to a third party.
v Private equity
Categories of investment structure
French venture capital funds belong to the category of AIFs and are subdivided in two categories of investment vehicles: non-professional AIFs (private equity funds, including joint venture capital mutual funds, innovation mutual funds and local investment funds) and professional AIFs, subdivided into professional venture capital funds (FPCIs) and specialised professional funds (FPSs).
To improve French competitiveness, the Macron Law on growth, activities and equality of chances47 introduced a new type of private equity for professional investors, a free limited partnership called an SLP, inspired by its English equivalent, the limited partnership (but with legal personality).
Private equity funds must be licensed by the AMF, whereas professional venture capital funds are not subject to any licensing requirements but need only be notified to the AMF within one month of their constitution.
Authorised investors to whom funds may be marketed
The investment thresholds are as follows:
- units of funds of private equity may be subscribed by any type of investor (individuals or legal entities) subject to limitations in the fund's prospectus or regulations, such as a minimum amount of subscription; and
- units of professional venture capital funds may be subscribed, by professional clients or by an SGP and its managers, by any type of investor without additional conditions if such person invests at least €100,000. In addition, individuals and companies meeting certain criteria (concerning in particular their previous experience in the private equity sector)48 may invest in professional venture capital funds, if such persons invest at least €30,000.
Investment policy and liquidity mechanisms
The main feature of these funds is that they have the obligation to invest the main part of their assets in securities issued by unlisted companies and then, although formally open, to behave like closed funds whose units are intended to be held by investors until maturity. From a practical point of view, these funds are constituted for seven to 10 years, and unitholders will not be authorised to redeem their units during such period (lock-up period).
As with other collective investment schemes, French venture capital funds must be managed by an SGP (specifically licensed by the AMF for activities relating to private equity) and their assets entrusted to a French depositary.
Regarding remuneration arrangements, a specific feature of venture capital funds is that the individuals involved in the management may carry over interests represented by the units or shares of venture capital funds to be taxed under the regime applicable to financial capital gains. To benefit from this regime, the beneficiaries of the carried-over interests must meet specific conditions laid down by the French tax administration.
vi Securitisation vehicles and debt funds
French securitisation vehicles that qualify as AIFs exist only as professional investment funds49 and are necessarily subject to licensing rules. They must be managed by an SGP licensed by the AMF for activities relating to investment in receivables and their assets entrusted to a French depositary.
For a long time, certain types of French funds (such as securitisation vehicles) were only authorised to purchase loans on the secondary market and could not directly extend loans to corporates. To diversify the available source of financing of the economy, Law No. 2015-1786 of 29 December 2015 authorised certain types of French professional funds (FPSs and FPCIs) to extend loans to undertakings either under the conditions provided for by Regulation (EU) No. 2015/760 of 29 April 2015 on European long-term investment funds (ELTIF)50 or under conditions specified by an implementing decree of November 2016.51
The conditions to be met by French professional funds (FPSs and FPCIs) to extend loans are, in particular, that their SGPs implement a programme of activity approved by the AMF consisting of having in place a credit risk analysis system and a due diligence procedure to ensure that the management company complies with obligations applicable to lenders (such as anti-money laundering and terrorism financing rules). Other conditions relate to the loans to be extended (such as the requirement that the contemplated loans shall not be granted for a term exceeding the residual life of the fund, or requirement that the beneficiaries of the loans be only individual undertakings or private legal entities whose main business activities are of a commercial, industrial, agricultural, crafts or real estate nature with the exclusion of financial activities and collective investments).
The first French ELTIF funds were authorised by the AMF in April 2016.
VII TAX LAW
Each type of investment vehicle is governed by specific (and sometimes complex) tax rules; the following therefore only constitutes a very brief and high-level summary.
Funds that do not have a legal personality (including all types of FCP, local investment funds and real estate investment funds) are not subject to tax – the income they earn is taxed at the level of their investors. The latter are generally taxed as if they had earned the income directly (i.e., the income retains its qualification – dividends, interest, capital gains, etc. – and its source – French or non-French – for tax purposes), but as and when the income is actually distributed by the funds. Proceeds allocated to non-resident investors are subject to withholding taxes in France at rates depending on the nature of the underlying income, the source of such income and the location of the investors, subject to any applicable tax treaty.
Funds that do have a legal personality (such as SICAVs, SPPICAVs,52 venture capital funds and SICAFs) generally fall within the scope of French corporate income tax but are exempt from such tax (in respect of all or certain items of income), so income earned by these funds is therefore also taxed as and when distributed to their investors. Certain funds (such as SPPICAVs) are obliged to make regular distributions, failing which they could lose their tax exemption. Income allocated to investors sometimes keeps its qualification and source, and otherwise is treated as distributed income (in principle subject to a 30 per cent withholding tax).
Capital gains earned by resident investors are in most cases taxable in France (as personal or corporate income tax, either upon disposal or every year on a mark-to-market basis for corporations), whereas non-resident shareholders are generally exempt when disposing of their shares in funds.
Specific regimes furthermore exist for certain types of funds, providing for an exemption at investor level subject to certain conditions being met. As an example, French-resident individual investors investing in certain types of FCPs can benefit from a full personal income tax exemption if they invest for at least five years and do not receive any income from the funds during this period.
The continuous efforts of the French management industry (particularly with the recent FROG initiative of the AMF and the French Asset Management Association) combined with the ongoing consequences of Brexit will most likely create new opportunities to favour the development of the French asset management industry and of French funds, which, in the current context, will continue to contribute to the financing of the economy as a whole.
1 Arnaud Pince is a counsel at De Pardieu Brocas Maffei.
2 The French Asset Management Association, Annual Report for 2017, March 2018.
3 See footnote 2.
4 Figures from the annual report of the AMF, May 2018.
5 See footnote 2.
6 Article 314-2 of the General Regulations of the AMF.
7 Article L621-7 V of the MFC.
8 Article L621-6 of the MFC.
9 Article L621-9 et seq. of the MFC.
10 Article L621-9 and L621-15 of the MFC.
11 Article L532-9 of the MFC.
12 The limits of the licence will depend on the type of investment vehicles to be managed (UCITS funds, AIFs, discretionary mandates, etc.) and on the type of assets to be used by the SGP within the scope of its investment activities (investments in real estate assets, receivables, private equity, etc).
13 Article L532-9 of the MFC.
14 Ordinance No. 2017-1107 of 22 June 2017 relating to markets in financial instruments and the separation of the legal regime of portfolio management companies from the legal regime of investment firms.
15 Article L561-2 of the MFC.
16 Ordinance No. 2016-312 of 17 March 2016.
17 Articles L 214-10-5 and L 214-24-8 of the MFC.
18 Article L 214-10-1 and L 214-24-7 of the MFC.
19 Article L 214-11-2 of the MFC.
20 The AMF, Position on the marketing regime of UCITS and AIFs in France (DOC 2014-04), updated on 15 March 2017.
21 See footnote 17.
22 Article 411-129 III of the General Regulations of the AMF.
23 Article L533-24 et seq. of the MFC.
24 Article L531-2 2° k) of the MFC.
25 AMF Instruction 2014-03 of 30 June 2014, as updated in September 2017.
26 Article 421-27 of the General Regulations of the AMF and AMF Instruction 2014-03 of 30 June 2014, as updated in September 2017.
27 Bank of France net subscriptions in investment funds – France, May 2017.
29 Such gating mechanisms are already possible, but only for certain types of open-ended funds, such as real estate collective investment schemes.
30 Article R332-2 of the French Insurance Code.
31 Another investment vehicle is available on the French market for investing in real estate: the real estate investment company (SCPI), which is open to retail investors.
32 Article L423-14 of the MFC.
33 Article R214-36 of the MFC.
34 Article R214-194 et seq. of the MFC.
35 Article L214-37 of the MFC.
36 Article L214-55 of the MFC.
37 Formerly the OPCVMs of alternative funds.
38 Formerly the OPCVM ARIA EL (OPCVM with relaxed investment rules), which were subdivided in two categories (OPCVM ARIA EL and OPCVM ARIA SEL, the latter being authorised to use leverage).
39 Formerly the contractual OPCVM.
40 Article L214-153 of the MFC.
41 Article 423-2 and 423-27 of the General Regulations of the AMF.
42 Article L214-154 of the MFC.
43 Article L214-141 of the MFC.
44 Article L214-24-41 of the MFC.
45 Article 422-251 of the General Regulations of the AMF.
46 Article L214-157 of the MFC.
48 Article 423-49 of the General Regulations of the AMF.
49 Article L214-167 of the MFC.
50 European long-term investment funds regulated under Regulation (EU) No. 2015/760 of the European Parliament and of the Council of 29 April 2015.
51 Law No. 2015-1786 of 29 December 2015 and Decree No. 2016-1587 published on 24 November 2016.
52 Investment trusts or companies investing predominantly in real estate.