AMF AFG and ESMA Updates—August 2022

AMF: Order of June 27, 2022, Approving Amendments to the General Regulation of the Autorité des Marchés Financiers

August 2, 2022

From January 1, 2023, under Regulation (EU) No 1286/2014 (PRIIPS Regulation), AIFs and UCITS, with at least one retail investor, must provide such investor(s) with a pre-contractual information document, the PRIIPS Key Information Document (KID).

The UCITS Key Investor Information Document (KIID) is a document required by the UCITS Directive for both professional and nonprofessional UCITS clients. However, there is a new equivalence rule: the UCITS KIID can be replaced by the PRIIPS KID.

The AMF has amended the AMF General Regulation, namely 411-106 § I and 411-106 §II, to include this rule and require the KID in UCITS or PRIIPS format (applicable from January 1, 2023).
Similarly, for AIFs, there is the obligation to provide a PRIIPS KID to nonprofessional investors and the option to provide PRIIPS KID or UCITS KIID to professional investors. Article 422-67 will be amended from January 1, 2023.

From January 1, 2023, AIFs aimed at professional investors (FPVG and OPPCI) will have to provide the PRIIPS KID if it has retail investors. In case there are only professional investors, the FPVG can provide the prospectus or, when necessary, the PRIIPS SIC (or a UCITS SIC). To reflect this, articles 423-9 and 423-15 will be amended from January 1, 2023.

Read the article here.

AFG: AFG Response to the EFRAG Consultation on Extra-Financial Standards

August 3, 2022

AFG supports European Financial Reporting Advisory Group (EFRAG) efforts to ensure an appropriate framework for sustainability reporting. AFG mentions that investors will profit from a convergence on “international reporting standards on climate” and that this change shall include governmental and social objectives. At the same time, this will lower reporting costs and provide stakeholders with access to consistent and essential sustainability information.

The AFG highlights its recommendations, namely:

• Ensure discussion and interoperability between other bodies, such as ISSB, SEC and EFRAG.
• Make PAI indicators (additional and mandatory) a priority to enable firms to comply with their obligations.
• Apply a “double materiality” principle, as the firm’s impact on the economy, people and the planet is essential in assessing its value. Operational guidance should be provided.
• Implement the “rebuttable presumption” principle, which enables firms to disclose only sustainability information considered “material.” 
• Ensure coherence between sustainability and financial information.
• Facilitate the implementation and “operational burden” of EFRAG requirements to allow for flexibility.

Read the article here.

AMF: The AMF Complies With the ESMA Guidelines on Updating Stress Test Scenarios in Accordance With Article 28 of the Money Market Fund Regulation

August 4, 2022

Article 28 of the Money Market Fund Regulation (MMF Regulation) indicates that MMFs shall have stress testing processes in place to identify events or changes in economic conditions that may result in adverse effects on the funds. According to article 37 of the MMF Regulation, the MMF manager shall report quarterly to the competent authority “the results of stress tests.” Where the fund’s assets under management are above € 100 million, the MMF manager must report annually.

ESMA has published guidelines on “stress test scenarios under the MMF Regulation.” These guidelines establish “common reference parameters for the stress test scenarios to be included in the stress tests” and are updated annually. The AMF has decided to incorporate these Guidelines into its regulatory practices and to comply with them.

It is worth mentioning that, as of September 30, 2022, given that the MMF reporting is done quarterly for MMFs exceeding €100 million in assets, managers of these funds will be required to apply the updated stress test parameters.

Read the article here.

ESMA: ESMA Provides Comments on First Draft of European Sustainability Reporting Standards

August 8, 2022

ESMA responded to the European Financial Reporting Advisory Group (EFRAG) consultation on European Sustainability Reporting Standards (ESRS). It noted that high-quality “disclosure of material sustainability information” shall be promoted by the ESRS.

Furthermore, it recommended that EFRAG should:

• stress the key value of materiality assessment to ensure that reports include only relevant information;
• exclude the “rebuttable presumption”; and
• avoid explanations on the “lack of materiality” of disclosures, which can result in disclosure overload.

ESMA mentions that the ESRS should allow for uniform application in terms of format and content and that certain elements, such as standards, should be reviewed.

Furthermore, ESMA recommends that EFRAG be consistent with the definitions in other EU legislation and consider “EU sustainability requirements and objectives” to enhance interoperability with international norms.

ESMA mentions that EFRAG shall continue to engage with the International Sustainability Standards Board, as this benefits firms preparing the sustainability reports and clients.

Read the article here.

AFG: Guarantee Fund Applicable to Management Companies

August 25, 2022

The UCITS and AIFM directives require asset management firms to adhere to an investor compensation scheme when providing investment services and custody or administration of units of collective investment undertakings. The compensation does not cover situations of “mismanagement” or loss of assets value.

It is important to point out that France partially transposed the requirements of the UCITS Directive into the Monetary and Financial Code. The provisions relating to the investor compensation scheme have not yet been implemented due to challenges in sizing the guarantee fund. Nevertheless, French authorities are currently working on transposing these provisions into French law. In fact, a first order on the investor compensation rules has been published. French asset management firms and their branches in the EEA that either keep the register of units of their funds or provide an investment service will be required to adhere to the guarantee fund. The provisions also mention the assets covered by the guarantee.

The beneficiaries of the guarantee are natural persons for whom the firm keeps a register of its registered units or to whom it provides investment services. Institutions are excluded.

Following the consultation, the AMF must decide on the amount of the guarantee fund.

Read the article here.

AMF: The AMF Urges Market Participants to Notify It of Any Anomalies Found in Net Short Position Notifications

August 29, 2022

Under the European Regulation 236/2012 on short selling, “holders of net short positions accumulated above certain thresholds” must report the positions to the market and the regulator. When 0.1% of the threshold is exceeded, the financial market participant shall report the position to the regulator. In addition, if “successive supplementary thresholds set at 0.1% steps” are exceeded, the market participant shall notify the regulator. The information becomes public when the net short position amounts to 0.5% or more of the capital.

The AMF recently investigated a market participant who reported anomalies in the notifications submitted to the regulator. The holder’s collaboration and conscientious behavior have been considered when assessing the measures to be taken. The AMF stresses the importance of reporting anomalies in net short position notifications and of collaboration in implementing remedial actions.

Read the article here.