UPDATE: New requirements for marketing UCITS and retail-AIFs in France

In our OnPoint dated 20 May 2020, we explained the new requirements that the French regulator (Autorité des Marchés Financiers (“AMF”)) has imposed on asset managers with the aim of ensuring that information they provide to investors in relation to non-financial criteria (and in particular relating to sustainable investing) is proportionate to the actual importance of these factors in the investment process. In this update, we report on the recent changes the AMF has made to its new doctrine. 

New forms to enforce the AMF Doctrine

On 10 July 2020, the AMF provided an update to its original Position/Recommendation DOC-2020-03 about the information to be provided by funds pursuing investment strategies comprising non-financial criteria (and in particular relating to sustainable investing) (the “AMF Doctrine”). The main change brought about by the update is the requirement that in-scope asset managers complete AMF notification forms, however the forms also provide valuable information as to how the AMF intends to enforce the AMF Doctrine, especially regarding non-French UCITS authorized to market in France. Most significantly, non-French UCITS wishing to make non-financial criteria a key element of their marketing communications will need to complete a new form (see link (the official version is available in French, but for information, we have provided an English translation¹ – see link) as part of the passport notification file sent to the AMF by their Home Member State Authority. It is applicable as from 10 July 2020.

This would seem to indicate that the AMF intends to carry out systematic monitoring of compliance with the AMF Doctrine.

The new form reflects the requirements of Positions 1 to 4 and 6 of the AMF Doctrine and completion of the form will enable the AMF to see whether these requirements are met and, if they are not, that the disclaimer provided for in Position 7 of the AMF Doctrine has been included in the marketing materials. The form is also an indication of the matters (described in detail in our OnPoint dated 20 May 2020) on which the AMF will focus its greatest attention.

Key takeaways:

The AMF Doctrine applies to all funds (AIFs or UCITS) which are authorised for marketing to non-professional clients in France (regardless of whether funds or units of these funds are actually only subscribed to by professional clients). Therefore, AIFs and/or UCITS which currently market, or intend to market, their financial products in France will need to undertake a full review of the requirements of the AMF Doctrine and will need to:

1. consider whether the current disclosure of non-financial objectives in the offering documentation and marketing materials are a “key aspect” of any communication with investors per the AMF Doctrine;
   
   
2. consider, whether the non-financial objectives can be said to form part of the investment strategy of the AIFs/UCITS in accordance with the AMF concept of “significant engagement”;²
   
   
3. consider, in light of the determinations made in assessing point (1) and (2) above, whether the AIFs/UCITS will incorporate the required investor disclosures or comply with the minimum standards stipulated by the AMF Doctrine; and
   
   
4. assess what steps need to be taken if the AIFs/UCITS elects to comply with the minimum standards and make sure that such steps are taken in compliance with the timeline below.

Timing of entry in force

Since the publication of the AMF Doctrine on 11 March 2020, any fund making a new notification of cross-border marketing of a foreign-based UCITS/AIF to the AMF needs to comply with the provisions of the AMF Doctrine. From 10 July 2020, any such fund also has to complete the form mentioned above. Existing funds will have to comply with the provisions of the AMF Doctrine, including completing the form, by 30 November 2020 at the latest. The AMF’s timeline is ahead of that of the EU Sustainable Finance Disclosure Regulation (SFDR)³ which requires financial market participants (as such term is defined in the SFDR and which includes UCITS ManCos and AIFMs) to disclose certain information relating to sustainable investment criteria but does not come into force until 10 March 2021. This may result in ManCos needing to update their fund documentation more than once where they fall within the scope of the AMF Doctrine as well as the SFDR.

Footnotes

1. The English translation has been provided by Dechert LLP, and is not an official translation of the original form. It has not been approved by the AMF and is included merely to aid interpretation.
   
   
2. In French: "approche fondée sur un engagement significatif”.
   
   
3. Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector, as amended.