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A new regulator for French funds

Private equity firms operating in France have recently begun to operate under a new financial markets regulator, the Autorité des Marchés Financiers. The new body's remit includes procedures relating to buy-outs and IPOs and is backed by unprecedented legal powers, explains SJ Berwin.

Following a major reorganisation of the French regulatory landscape, financial services providers in France (including private equity fund managers) will have to learn to work with a new financial markets regulator: the Autorité des marchés financiers ("AMF").

The last few years has seen an increasing overlap between the functions performed by the three authorities responsible for regulating France's financial markets: the Commission des opérations de bourse ("COB"), the Conseil des marchés financiers ("CMF"), and the Conseil de discipline de la gestion financière ("CDGF"). To remedy that, the French parliament passed a law in August merging these three authorities into a single authority, the AMF. The new "super-regulator" will commence operations once a decree has been published later this year. In the meantime, the COB, the CMF and the CDGF will remain in place.

The AMF will have a threefold mission: protecting invested savings, informing investors and overseeing market operations. Its rulebook - when drafted - will include procedures relating to flotation on the stock market, capital increases and takeover bids. The AMF will also ensure compliance with obligations imposed on public companies, and on those who manage securities issued by public companies or provide individual or collective management of portfolios; it will have the power to oversee various matters including marketing of securities, transactions by directors, auditors of public companies, and corporate governance.

The AMF has an unprecedented status in France: it will be an independent public authority with legal personality. As such, the AMF will have the power to impose sanctions, to require courts to issue injunctions or emergency measures or to report information on facts constituting criminal offences, as well as the power to act as a party to civil proceedings; moreover, it may be formally called upon to advise other jurisdictions on matters relating to its field of expertise. In addition, if someone thinks that it has suffered loss as a result of an AMF decision, it may file a claim in the French courts directly against the AMF - and not against the State. However, this significant transfer of power from central government to the AMF will be counterbalanced by the presence of a government representative who may attend all AMF deliberations (except those regarding sanctions).

While the immediate impact of these reforms on private equity fund managers is limited, the AMF will have far greater powers than its predecessors to enforce its rules and oversee the French marketplace. The presence of a new "super-regulator" will oblige French fund managers to take regulatory compliance more seriously than ever before.

Recent press reports indicate that the first president of the AMF will be Michel Prada, a former president of the COB. He will be assisted by Gérard Rameix, the COB's current managing director.

SJ Berwin is a pan-European law firm with a particular focus on private equity. It has offices in London, Frankfurt, Munich, Berlin, Madrid, Paris and Brussels. If you would like further information on our services to the private equity industry please contact Jonathan Blake or Simon Witney in our London office 020 7533 2222 or visit our website at www.sjberwin.com.