CFCL Investment regulation – France
Reference
Regulatory structure
Please refer to the Market infrastructure – France for the complete information about the Regulatory structure.
Holding restrictions
Holding restrictions – Register Market – France
Foreign non-resident investors can freely invest in the French securities market but there are specific sectors (defense, safety, public order) which require a prior declaration and subsequent authorization from the French Ministry of Finance. Non-resident holding may not exceed 5% without prior authorization from the company concerned and the AMF.
Disclaimer
The information contained in the Holding Restrictions is based on the legal opinion obtained by CBL that was issued on 9 May 2016. CFCL believes the information to be correct as of that date but disclaims any responsibility as to the accuracy and completeness of the information after that date. In the case of discrepancy between the information provided by CFCL and the local laws and regulations, the latter shall prevail. The Holding Restrictions do not constitute legal advice and Clients should seek advice from independent professional counsel. Clients are responsible for ensuring compliance with the holding restrictions and agree to indemnify and hold harmless, CFCL, for any loss, expense, liability, damage, or claims, whether direct or indirect, against or incurred by CFCL arising out of or resulting from such non-compliance.
Restrictions on clients
For investment funds in both bearer and registered forms, CFCL clients established or domiciled in France are not allowed to hold French investment funds on the Register market through CFCL. It is the responsibility of the client to ensure compliance with the restriction. Certain funds may impose other specific restrictions on investor domicile.
Clients must refer to and abide by the restrictions (if any) contained in the fund prospectus before entering into transactions.
Restrictions on settlement
There is no general restriction on settlement for French investment funds through CFCL. However, certain funds may impose specific settlement/transfer restrictions. Clients must refer to and abide by the restrictions (if any) contained in the fund prospectus before entering into transactions.
Holding restrictions – CSD Market – France
Foreign non-resident investors can freely invest in the French securities market but there are specific sectors (defence, safety, public order) which require a prior declaration and subsequent authorisation from the French Ministry of Finance.
Non-resident holding may not exceed 5% without prior authorisation from the company concerned and the AMF within four business days.
Disclosure requirements
Introductory information and categories
This section provides general information about the disclosure requirements for fund securities holdings with which Clearstream Fund Centre must, according to the information available at the time of the present publication, comply with each of the domestic markets and fund markets covered by the Disclosure Requirements.
Fund securities that are held remotely are usually not disclosed by CFCL. A disclosure request received by CFCL regarding such a holding will be forwarded to the relevant client without assessing its validity and the CFCL Client shall handle the request on a voluntary basis.
Disclosure Requirements are only available for those countries where CFCL has a link to the respective domestic market or direct access to local domiciled funds that are held in Clearstream’s name on the register.
For fund securities holdings where CFCL has no such link or direct access to the register, clients must be aware that local laws might provide for mandatory disclosure. A disclosure request in this regard will be forwarded to clients without assessing its validity. Clients commit not to unreasonably withhold their consent to such a request and agree to indemnify CFCL for damages resulting directly from non-compliance with mandatory local disclosure requirements.
In most cases, the obligation to disclose is based on the domestic equivalent of a Companies Act, relevant investment funds act or anti-money laundering act and covers all security types.
In some instances, the obligation to disclose is based on stock exchange laws or regulations and only applies to listed domestic and foreign securities.
The Disclosure Requirements do not constitute legal advice and the Clients should seek independent professional advice in relation to fund securities deposited with CFCL, especially as, for those jurisdictions in which no disclosure obligation falls on CFCL, there may be separate disclosure requirements that apply directly to clients of CFCL, shareholders and beneficial owners.
Please note that CFCL is not always given comprehensive information or advised of changes affecting local disclosure requirements.
It remains the sole responsibility of the Client to ensure compliance with local disclosure requirements. If a requirement is not met, it is the Client who will be liable to any related penalty. Clients are therefore advised to seek independent legal advice on the existence and interpretation of local disclosure requirements.
In the case of a discrepancy between the general information contained in this document and the information provided by CFCL for a specific market, as applicable (irrespective of whether this information has been obtained from an agent of Clearstream Fund Centre, or, as the case may be, a foreign regulator of a branch of CFCL), the information provided by CFCL for the specific market as applicable, shall prevail.
N.B.: In all countries, if it is suspected that a disclosure obligation has been breached (for example, that a threshold of holdings under custody has been crossed without being reported), the regulators and the authorities may have the power to investigate. Moreover, in all countries, disclosure obligations might be triggered by enforceable judgements of the competent jurisdiction of the country in question.
Disclosure categories
Clearstream Fund Centre classifies disclosure scenarios according to the following market categories:
Category 1
Markets where disclosure by Clearstream Banking as a custodian of Clearstream Fund Centre to issuers, investment fund managers and/or to regulators or market authorities is mandatory under applicable law;
Category 2
Markets where disclosure by Clearstream Banking as a custodian of Clearstream Fund Centre of account holders to issuers, investment fund managers and/or foreign regulators or market authorities is a legal obligation in respect of securities in specific circumstances;
Category 3
Markets where there is no obligation for Clearstream Banking as custodian of Clearstream Fund Centre to disclose account holders to issuers, investment fund managers and/or regulators, notwithstanding any disclosure requirement falling directly on clients of Clearstream Fund Centre, shareholders and/or beneficial owners or notwithstanding disclosure necessary to obey an enforceable judgement of the country in question.
Disclosure requirements –Register Market - France
Disclosure Category: 1
According to the Commercial Code and the Monetary and Financial code, Clearstream Fund Centre S.A. (“CFCL”) falls under a legal obligation of disclosure in the case of holding French investment funds.
Consent
In order to comply with the applicable legislation, clients with holdings in French investment funds or entering into transactions in the French market must consent, and are hereby deemed to consent, to the required legal disclosure. Such consent includes the appointment of the requestor (for example, the Fund Manager, Transfer Agent, Regulator) as their attorney-in-fact, under power of attorney, to collect from CFCL the required information to be disclosed. Clients who do not grant such authority cannot hold such investment funds or financial instruments in their accounts with CFCL.
Disclosure Requirement
Clients are advised that the local laws and regulations oblige CFCL to disclose the requested information on CFCL clients and ultimate beneficial owners to the party that is entitled by law to receive such information. Upon receipt of the disclosure request, CFCL is required to disclose within 10 business days.
If the requestor (for example the investment fund or its agents) knows or believes that it was not provided with the actual beneficial owner of the relevant fund units or shares, the requestor (Article L. 228-3) is entitled to request such person or entity to disclose the identity of the true beneficial owner.
Background and legal basis
If holding French investment fund units or shares, CFCL is obliged under the following legislation to disclose the identity and holdings of clients or ultimate beneficial owners.
- The Monetary and Financial Code, Article L. 211-5;
- The Commercial Code, Article L. 228-3, and R. 228-5.
Sanctions
Failure to comply with the disclosure request within the prescribed deadlines (for example, inaccurate or incomplete information being disclosed), the Investment fund manager may suspend the relevant voting rights and the postponement of dividend payments until the requested information is fully and accurately disclosed.
The fund manager may also bring the claim before a French court to issue a court order for the disclosure of the requested information. Delay in complying with the court order may result in fines. The suspension of the relevant voting rights and dividend payments may be extended by the French court for a period of up to five (5) years should wilful disregard of the obligation to disclose be found.
Disclosure requirements – CSD Market – France
Disclosure Category 1
In the case of holdings in registered and bearer securities, Clearstream Fund Centre S.A. (“CFCL”) is under an obligation, under Articles L.228-2 and L.228-3 of the French Commercial Code, to disclose the identity and holdings of customers holding applicable positions.
Consent
In order to comply with the legislation as mentioned below, customers entering into transactions in the French domestic market consent and are hereby deemed to consent to disclosure and to the appointment of the requestor (for example, the listed company or its agent) as their attorney-in-fact, under power of attorney to collect from Clearstream Banking such information as is required to be disclosed.
Disclosure requirements
As per Article L.228-1 of the French Commercial Code and in the scope of the French Registered Securities, when those securities are qualified as Valeurs Essentiellement Nominatives – VENs, there is an obligation for French resident holders of such securities to be duly registered and known by the issuer or registrar.
Failure to comply with this obligation may result in sanctions described in below Sanctions paragraph.
There are, under French law and the by-laws of French companies, a number of ownership restrictions applicable to French equities and to public tender offers. See also the section on holding restrictions in the Market Profile (France).
Customers are advised that local laws and regulations (for example Companies Act Law no. 2001-420 of 15 May 2001, Article 119) may require CFCL or its depository to disclose securities trading and holding information and details of beneficial ownership with respect to CFCL’s securities account.
Directive (EU) 2017/828 of 17 May 2017 amending Directive 2007/36/EC with regard to the encouragement of long-term shareholder engagement (the second shareholder’s rights directive “SRD II”) has been partially transposed via Décret n° 2019-1235 dated 27 November 2019 (SDR II Law).The French transposition is still considered a partial one because there are still some points that have not been taken into account in the French transposition that are currently being discussed between the AFTI and the French government. The two texts in the French law that currently do not cover all SRD II requirements are:
- Law n° 2019-486 dated 22 May 2019 related to the growth and transformation of companies.
- Ordonnance n° 2019-1234 dated 27 November 2019 related to the remuneration of the Board of Directors of listed companies.
Background and legal basis
In relation to bearer securities (Article L.228-2 of the French Commercial Code), the bylaws of an issuer may provide that such issuer is entitled at any time to require from the Central Securities Depository (CSD - Euroclear France) the name, nationality, date of incorporation or birth and address of the holders of securities in bearer form. Euroclear France will obtain the relevant information from such holders’ custodian. The relevant custodian must answer within 10 business days following Euroclear France’s request and Euroclear France must in turn transmit such information to the issuer within five business days of receipt.
Upon obtaining such information in relation to the holders of securities, the issuer is entitled to further require similar information with respect to the beneficial owners of the securities either from the CSD or directly from the registered intermediary as provided for in Article L. 228-1 (in which case, the registered intermediary must provide the answer either directly to the issuer or to its custodian, which must in turn provide the information to the issuer).
In relation to registered securities (Article L.228-3), upon the request of the issuer or of the issuer’s representative, the registered intermediary must disclose the identity of the beneficial owners for which it holds securities in nominative form. The registered intermediary must respond to the issuer (or to its agent) within 10 business days of such request being made.
For both bearer and registered securities (Article L.228-3-1), in the event that the issuer believes that the information received relates to a person or entity that is merely holding securities on behalf of a third party, the issuer is entitled to require such person or entity to disclose the identity of the beneficial owner.
The applicable legislation is as follows:
- Articles L.228-1, L. 228-2 and L. 228-3 of the French Commercial Code (specifically in relation to the identification of the holders of securities);
Law no. 2001-420 relating to the new economic regulations of 15 May 2001, Article 119 (Chapter VI - Identification of shareholders), which provides that the owner of securities may be represented by a registered intermediary.
Obligation to report threshold crossings
For the acquisition or sale of company capital or voting rights of 5%, 10%, 15%, 20%, 25%, or 33⅓%, 50%, or 66⅔%, 90% and 95%, the beneficial owner must make a declaration to the company concerned and to the “Autorité des Marchés Financiers” (AMF) simultaneously within five trading days of crossing the threshold. The obligation therefore falls on the beneficial owner.
The local regulator (that is, the AMF) may request CFCL or its French agent to disclose the shareholder’s identity in the case of non-respect of the requirement to report the crossing of the above-mentioned thresholds.
The basis for disclosure is Article L. 233-7 of the French Commercial Code (in relation to the significant acquisition or sale of shares in listed companies).
Please refer to the Disclosure Requirements - France (clearstream.com) for more information.
Disclaimer
The information contained in the Disclosure Requirements is based on the legal opinion obtained by CBL acting as a sub-custodian for CFCL that was issued on 9 May 2016. CFCL believes the information to be correct as of that date but disclaims any responsibility as to the accuracy and completeness of the information after that date. In the case of discrepancy between the information provided by CFCL and the local laws and regulations, the latter shall prevail. The Disclosure Requirements do not constitute legal advice and Clients should seek advice from independent professional counsel.
Clients are responsible for ensuring compliance with the disclosure requirements and agree to indemnify and hold harmless, CFCL, for any loss, expense, liability, damage, or claims, whether direct or indirect, against or incurred by CFCL arising out of or resulting from such non-compliance.