The annual report from the Autorité des Marchés Financiers deals with the developments in protection of retail investors, asset management regulation, financial operations, supervision and enforcement.
In 2010, the solutions to the financial crisis defined by the G20 began to be implemented. In Europe, several measures have already been adopted:
• a new financial supervision system has been set up with the creation of a European Systemic Risk Board, in which the AMF takes part, and three agencies in charge of markets (the ESMA replacing the CESR), banking and insurance;
• a net short selling supervision system was defined in 2010 introducing a transparency regime, enhanced securities settlement discipline and granting emergency powers to regulators. It will be implemented throughout the European Union in 2012;
• rating agencies are now regulated on the European level, with this regulation soon to be handled directly by the ESMA;
• finally, the regulatory agenda for 2010 was marked by the adoption of important texts in the field of asset management (AIFM Directive) and by the European Commission proposal on OTC derivatives markets and market infrastructures (European Market Infrastructures Regulation - EMIR).
Nationally, some of these measures were included in the Banking and Financial Regulation Act of 22 October 2010 reinforcing and extending the powers of the Autorité des Marchés Financiers. The AMF now has powers to:
• control and supervise rating agencies, pending the operational implementation of the ESMA;
• adopt emergency measures to restrict financial instrument trading conditions in the event of circumstances threatening the stability of the financial system;
• sanction market abuses concerning derivatives traded on a regulated market or on Alternext. In addition to this, the new AMF and market transparency regime for short selling has been applicable in France since 1st February 2011.
Protecting retail investors
In line with the Strategic Plan adopted in July 2009, the Autorité des Marchés Financiers carried on its action in 2010 in favour of protecting retail investors and controlling financial product distribution. The Retail Investor Relations Division is now operational: the AMF Investor Information Service takes calls from the public and professionals and handled over 4,500 files in 2010, and information and supervision systems were set up (mystery visits, monitoring of advertising and soon of mailings). The AMF has also clarified its doctrine on the distribution of complex products to the general public by clearly indicating the cases in which the product presents such a degree of complexity that it becomes very difficult for the distributor proposing it to the general public to comply with its professional obligations. This position elaborated jointly with the Autorité de Contrôle Prudentiel is one of the first practical outcomes of the joint unit of the two authorities launched in June 2010.
Still within the framework of its Strategic Plan, the AMF indicated that it wished to find means of improving compensation terms for individual prejudices. A working group dedicated to the subject was set up in April 2010. Chaired by AMF Board members, Jacques Delmas-Marsalet and Martine Ract-Madoux, the group published its recommendations for consultation in January 2011. It recommended giving preference to out of court settlement of disputes, taking account of the objective of victim compensation in the internal procedures of the AMF, and organising the contribution of the AMF to resolving the difficulties caused by judicial compensation of victims in stock market and financial matters.
Markets and asset management
In 2010, the asset management industry was marked by restructuring operations concerning the market players and products in a more positive market context. In regulatory matters, the AMF decided to seize the opportunity of transposition of the UCITS IV Directive to review the regulatory framework for asset management in France. In addition to UCITS, it has been decided to extend the Key Investor Information Document (KIID) to all collective investment schemes proposed to the general public, while allowing for specific presentations adapted to special funds. The objective is that the investor should have access to a simpler, more easily understandable document that offers real comparability between products. The AMF is also going to review its doctrine on documentation, to simplify it and avoid creating competitive distortions to the detriment of French management companies.
Financial operations and information
After a lull due to the financial crisis, there has been a gradual upturn in operations. 2010 was marked mainly by initial public offerings of small caps and a significant growth in bond issues. The number of approvals issued by the AMF therefore increased in 2010 to 444, against 358 the previous year. 17 approvals for admission to Euronext were issued by the AMF in 2010 (of which 7 to Alternext).
The Banking and Financial Regulation Act made modifications to the bids system, including the lowering to 30 per cent of the mandatory bid threshold on regulated markets and the extension of the scope of stock taken into account to calculate this threshold. In addition, the mandatory bid has been introduced on organised multilateral trading facilities such as Alternext. The working group launched in October 2009, chaired by AMF Board member Olivier Poupart-Lafarge and composed of representatives of listed companies, experts and members of professional organisations, made recommendations in its report published in June 2010 on the characteristics and scope of audit committees, seeking to define the motion of “monitoring”, and proposed a practical implementation method. It also addressed the specifics of small and midcaps.
In 2010, the AMF issued its first report on the environmental and social information published by listed companies in their 2009 reference documents. The AMF conducted its analysis from the perspective of the transparency of the information provided and made a certain number of recommendations concerning notably the use of a standard and indicators and the presentation of social and environmental risks.
Supervision, investigations, inspections and enforcement
69 inspections and 73 investigations were launched by the AMF In 2010. The Enforcement Commission ruled on 28 procedures in which it handed down sanctions against 35 legal entities and 15 individuals. Over the same period, 24 enforcement procedures were opened. In 2010, the AMF launched a certain number of projects to enhance the efficiency of its enforcement process. An investigations charter has been drawn up setting out the legal framework for investigations, principles of good conduct applying to investigators and the behaviour expected of persons called upon to take part in the proceedings. The dispatch of a “detailed letter” has been introduced at the end of the investigations and before writing the report to those persons likely to be charged subsequently by the Board.
In addition, the Banking and Financial Regulation Act of 22 October 2010 made a certain number of improvements to the enforcement function of the AMF. The dissuasive nature of the system was reinforced by a substantial raise of the ceiling on financial sanctions to €100 million, enforcement hearings are now public, the AMF Board is now represented from the statement of objections phase onwards, and the Chairman of the AMF has been granted the right to appeal against the decisions of the Enforcement Committee. Finally, this new law also gives the AMF the power to enter into transaction agreements, which will make it possible, among other things, to process “minor cases” more quickly and in all transparency. Under the terms of the Banking and Financial Regulation Act and further to the investments made by the AMF, the automated transaction supervision system has been extended to OTC markets in shares, and markets in bonds and credit derivatives.
Finally, a guide to preventing breaches of insider dealing rules by directors of listed companies was published in 2010. It is the fruit of the work conducted by the mission entrusted to Bernard Esambert, member of the AMF Board. The AMF will be performing regular evaluation of this guide.
© AMF - Autorité des Marchés Financiers
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