Investment funds cannot be “marketed” in France without prior authorisation. But exactly what does “marketing” mean? Recent decisions of the AMF’s Sanctions Commission provide some guidance.

Pursuant to articles L 533-1 of the Monetary and Financial Code and 314-3 and 411-9 of the AMF’s General Regulations, collective investment funds , whether French or foreign, may not be “marketed” (commercialisé) in France until they have been authorised either by the AMF (the French regulator) or, in the case of “passported” foreign funds, by their home state regulator.

But exactly what does “marketing” involve? Does it mean that a sale must have taken place?

There is no specific definition in the French Monetary and Financial Code but an important decision of the AMF’s Sanctions Commission of December 28, 2012, published on January 8, 2013, illustrates the AMF’s extensive interpretation of what constitutes “commercialisation” (marketing) of a fund in France.

In this case, one of several alleged violations related to the marketing of two French funds before they had been authorised.

For one fund (a French FIP or “proximity fund”) the sponsor’s internet page presented the fund before the AMF had authorised its marketing. Brochures had also been distributed at an investment forum, open to the public.

In the case of a second French fund e-mails had been sent to independent investment advisors and investment managers.

The Commission excluded any wrongdoing in the second case since only professionals were contacted. Art L 533-12 CMF, which is the legislative text behind articles 314-10, 411-9 and 411-14  of the AMF General Regulations, only refers to communications sent to clients and not to professionals.

In the case involving the FIP only promotional information was provided on the web-site and at the road show. There were no subscription slips or documentation materialising a sale.  But the Commission defined the notion of “commercialisation” as being when an investment service provider, an independent investment advisor or a person selling  banking or financial products takes the initiative of presenting, by various means – advertising, solicitation, placement or advice –a financial instrument with a view to inciting a client or prospective client to subscribe to or purchase such an instrument (our emphasis).

The Commission based this definition on previous texts published either by the COB (the precursor of the AMF), or the AMF itself and on the objectives pursued by the law, namely to protect the retail investor. This extensive interpretation has been criticised by legal commentary but it remains the AMF’s latest position and a sale is not necessary for marketing to have taken place .

The fact that the sponsor has taken the initiative excludes the “passive solicitation” defence available when the initiative is deemed to come from the client.

In an earlier decision on September 21, 2012 (published on October 1, 2012) relating to non-coordinated European funds, the Sanctions Commission, making reference to a 2003 position taken by the COB, gave a very restrictive interpretation of passive solicitation.

In this case it had been argued that there was no solicitation since the vendors only responded to the requests of their clients. The Commission did not share this view and made the point that to avoid censure such passive solicitation must pass two tests: (1) the initiative must be taken by the client and (2) the request must be product specific and not relate to a general category of funds. (our emphasis)

Fund sponsors should ensure that their marketing departments are aware of these developments before promoting investment funds inFrance.

The full text of these decisions may be found on the AMF’s website:

Charles Campbellat