Name
Global FinTech Guide
Country _ Name
France
SectionTitle
Asset and portfolio management
Body
FinTechs belonging to this category offer asset and portfolio management services via an internet platform or software programs and usually manage and dispose of the assets of their customers long or short term according to their specifications without actually holding the property or the possession of those assets. FinTechs, which provide information about and access to overnight or time deposit accounts at national and foreign banks and which execute the transactions to these accounts, also belong to this category. Some FinTechs however only act on request of the customer.

Aside from that some FinTechs offer software or internet solutions enabling users to manage and plan their personal finances on their own by providing graphics, overviews and compilations of their financial data and sometimes indicating financial risks or opportunities, but without actually managing the assets.

Introduction

Attitude of the country towards modern asset and portfolio management services

The number of licensed portfolio management companies reached a climax of 702 in France on 31 December 2022.

The French industry's creation dynamic has witnessed a slowdown compared to the trend of the last decade, to 31 approvals issued in 2022. This contrasts with the average rate, around 38 creations per year, seen over the period from 2012 to 2021.

Three observations seem in order:

  • on the one hand, difficult economic circumstances, under the cumulative effect of rising interest rates and the fallout from the Russian-Ukrainian conflict, partly explain the slowdown observed during 2022;
  • on the other hand, the dynamism of non-traditional investment strategies remains, particularly in the case of private equity, which alone accounted for a historic 61% of new approvals in 2022. Although less dynamic, strategies based primarily on real estate still account for 26% of approvals issued in 2022.
  • Finally, the share of entrepreneurial projects also enjoyed an exceptional year, representing 77% of total approvals issued (AMF, Chiffres clés 2022 de la gestion d'actifs, January 2024).
The French financial markets authority, known as the Autorité des Marchés Financiers ('AMF'), regulates the French financial markets place, its participants and the investment services.

Following through, the main legal corpuses for asset management are two European directives:

  • Directive (EC) No 2009/65 of the European parliament and of the council related to Undertaking for Collective Investments in Transferable Securities ('UCITS');
  • Directive (EU) No 2011/61 of the European parliament and of the council on Alternative Investment Fund Managers ('AIFM').
Being transposed into French law, those two directives implemented transparency obligations on asset managers towards the regulator, investors and other key players in order to enhance the quality of the services and the trustworthiness in the management carried out.

They also implemented risk prevention mechanisms in order to alleviate certain risks and gain in robustness.

Legal affairs

Obligations and requirements to provide asset and portfolio management, or ancillary services described above

UCITS and, in principle, AIF management requires authorisation as a portfolio management company. Portfolio management companies need to be licensed by the AMF, in accordance with article L.532-9 of the CMF.

The said article defines portfolio management companies as any corporation that manages one of the following: UCITS (undertakings for collective investment in transferable securities), AIF (alternative investment funds), Foreign-law based UCITS, Foreign-Law based AIF, other collective undertakings and fix certain conditions required to obtain the license.

The authorisation application template is provided in AMF Instruction DOC-2008-03 (Annex 1) entitled 'Authorisation procedures for investment management companies, disclosure requirements and passporting'.

The authorisation application comprises six supplementary forms (Annexes 1 to 6 of Instruction DOC-2008-03).

The AMF will review in particular the program of operations required for each activity or service you intend to carry out or provide. It should be noted that it is by no means mandatory to use an external advisor to prepare applications and interact with the AMF, particularly as the AMF prefers company directors to be closely involved in the authorisation process. However, it is recommended that companies without the internal resources to ensure sufficient familiarity with the requirements of French regulations do use an external advisor.

Following through, the AMF should verify that:

  • The portfolio management company is headquartered in France and is effectively managed there;
  • The portfolio management company owns sufficient funds and capital;
  • The portfolio management company reveals the identity of its shareholders and the portion of their share;
  • The portfolio management company is effectively managed by at least two honorable and competent individuals;
  • The portfolio management company sets programs specific to each activity it intends to carry out;
  • The portfolio management company adheres to a securities guarantee scheme managed by the Fonds de garantie des dépôts et de resolution (being the national financial crisis operator).
    • The AMF delivers the license within a three-month scope after the date in which the license was solicited on the basis of the conditions mentioned above and those fixed by its general regulation.

    Some exemptions to the license can be made concerning portfolio management companies that only manages AIF whose investors are no one but the company itself. Others are exempted on the basis of their specific aspect such as central banks, international institutions, national authorities, holding companies, etc.

    When a company requires an outgoing passport to conduct business in another Member State of the European Union or in another State party to the Agreement on the European Economic Area, it may only conduct those activities covered by the authorisation issued in France. The European passport forms must be filled out in three copies (two copies drafted in English, except for Belgium and Luxembourg as French-speaking States) before being submitted to the AMF.

    The AMF serves notification of passport applications to the competent authorities in the relevant Host States and informs the management company of this notification. The AMF has a deadline for notification of:

    • one month for an application under the freedom to provide services, in accordance with the UCITS Directive or AIFM Directive;
    • two months for an application under the freedom of establishment, in accordance with the UCITS Directive or AIFM Directive.
    The annual contribution to the AMF varies depending on status. In principle, this is calculated on the basis of the assets under management, except for registered legal entities managing 'Other AIFs', which are required to pay a fixed amount of € 1,500. Information on the level of contributions and how to pay them can be found in the Guide to Contributions Due to the AMF.

    Additional comments regarding the legal situation for asset and portfolio management services or what FinTech’s must be aware of in this business area

    The European Commission recently adopted a comprehensive package of measures to reorient capital flows towards sustainable activities across the European Union, principally SFDR (Regulation (EU) 2019/2088) and Taxonomy (Regulation EU) 2020/852).

    Under these rules, financial market participants will provide detailed information about how they tackle and reduce any possible negative impacts that their investments may have on the environment and society in general. Moreover, these new requirements will help to assess the sustainability performances of financial products. Compliance with sustainability-related disclosures will contribute to strengthening investor protection and reduce greenwashing. This will ultimately support the financial system's transition towards a more sustainable economy.

    The measures adopted by the European Commission include several Delegated Acts on fiduciary duties and investment advice, published in August 2021, aiming at ensuring that investment services providers, UCITS management companies and AIFs managers incorporate sustainability into their procedures and their investment advice to clients.

    Economic conditions

    Market size for asset and portfolio management services and biggest companies in this business area

    France tops the list of European nations when it comes to Asset management.

    However, after a period of steady growth in assets under management between 2018 and 2021, the asset management sector will experience a significant decline in the value of assets under management in 2022. Overall, the level of total will total €4,570 billion by the end of 2022, a decrease of almost 11% compared to 2021. This area of expertise is also a big employment player with 85,000 job opportunities.

    Additional comments regarding the economic situation for asset and portfolio management services or what FinTech’s must be aware of in this business area

    The Brexit gave a big boost to French Asset managers. Known for their quality and their innovation, French actors are seen as very entrepreneurial in the field and account for two third of the asset managers in Europe. Many French corporations, around 153, are managing assets that reached the € 1 billion cap, which in itself is a great proof of the trustworthiness and the quality of the latter, with four of them making it to the top 20 globally.

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