Investment Funds 2024 Comparisons

French law makes a distinction between two categories of AIF as defined under Directive 2011/61/EU (AIFMD), as amended by Directive 2019/1160/EU (CBDFD):

• per seAIFs (FIA par nature); and
• AIFs by object or “Other AIFs” (FIA par objet or Autres FIA).

The AIFMD and the CBDFD have been implemented under French law in the French Monetary and Financial Code (FMFC). This distinction is specific to French law and does not result from the AIFMD.

The FMFC provides for an exhaustive list of French legal forms which qualify as AIFs. Such AIFs are called per se AIFs (FIA par nature) because they are regulated by a specific layer of rules in the FMFC.

Other AIFs are not specifically regulated under the FMFC, other than through the legal definition of AIF provided in the FMFC.

Regulations implementing the provisions of the FMFC are provided for under the general regulations issued by the AMF (the “AMF General Regulation”).

Per Se AIFs

The categories of per se AIFs are the following:

• AIFs open to non-professional investors;
• AIFs reserved to professional investors;
• employees savings funds (fonds d’épargne salariale); and
• securitisation or financing undertakings (organismes de titrisation ou de financement).

Each category of AIF has been “designed” to implement a particular alternative investment strategy (with specific investment ratios and eligible assets) and/or to be marketed to a specific category of eligible investors (professional or retail investors or employees).

Each per se AIF can be set up under the form of:

• a contractual fund (fonds commun de placement – FCP) which corresponds to a co-ownership of financial instruments issuing units; or
• an investment company with variable capital (société d’investissement à capital variable – SICAV) which corresponds to a French corporate form issuing shares.

French per se AIFs can also be structured as umbrella funds. Each sub-fund is subject to the regulations applicable to the legal form chosen for the AIF (it is treated as a single separate AIF for that purpose).

The FMFC provides for several sub-categories of per se AIFs as follows:

• French per se AIFs open to retail investors:
1. generic investment funds (fonds d’investissement à vocation générale – FIVG);
2. private equity investment funds (fonds de capital investissement – FCPR, FCPI and FIP);
3. real estate investment funds (organismes de placement collectif immobilier – OPCI and sociétés civiles de placement immobilier – SCPI);
4. forest savings companies (sociétés d’épargne forestière – SEF or groupements forestiers d’investissement – GFI);
5. closed-ended investment companies with fixed share capital (sociétés d’investissement à capital fixe – SICAF); and
6. alternative funds of funds (fonds de fonds alternatifs – FFA).
• French per se AIFs reserved to professional investors:
1. generic professional investment funds (fonds professionnels à vocation générale – FPVG);
2. professional real estate investment funds (organismes professionnels de placement collectif immobilier – OPPCI);
3. professional private equity investment funds (fonds professionnels de capital investissement – FPCI); and
4. professional specialised investment funds (fonds professionnels spécialisés – FPS), including French limited partnerships (sociétés de libre partenariat – SLP);
• French employee savings funds (fonds d’épargne salariale) which include fonds commun de placement d’entreprise – FCPE and sociétés d’investissement à capital variable d’actionnariat salarié – SICAVAS.
• French financing undertakings (organismes de financement):
1. securitisation undertakings (organismes de titrisations – OT), the manager of which may be subject to the AIFMD if they meet certain criteria); and
2. specialised financing undertakings (organismes de financement spécialisés – OFS).

Other AIFs

An Other AIF corresponds to an entity (irrespective of its legal form) that meets – in practice – the definition of an AIF under the AIFMD, and which therefore falls within the scope of this definition. Other AIFs were not regulated before the implementation of the AIFMD. Other AIFs cannot be structured as umbrella AIFs.

The setting up of this type of AIF is not defined from a regulatory perspective. There is no specific French authorisation or notification requirements vis-à-vis the AMF applicable to Other AIFs. However, they are subject to regulations applicable to any AIFs arising from the AIFMD, including in terms of marketing requirements.

Other AIFs must, in principle, be managed by portfolio management companies regulated by the AMF. They can, however, be managed by non-regulated managers if they are only subscribed to by professional investors. This includes both per se professional clients and opt-out professional clients treated as such upon request as defined in Annex II of Directive 2014/65/EU (MiFID). In addition, the amount of assets under management managed by the non-regulated fund manager must be below the AIFMD thresholds (ie, EUR500 million in assets and EUR100 million where the assets are leveraged).

When an Other AIF is managed by a non-regulated manager, it cannot be marketed throughout the European economic area (EEA) on a passport basis according to the AIFMD.

The ELTIF Label

Pursuant to Regulation (EU) 2015/760 (ELTIF) (as amended by Regulation (EU) 2023/606) (the “ELTIF Regulation”), French legislation allows certain French AIFs to be authorised by the AMF as ELTIFs according to the ELTIF Regulation since 2016. The most common legal forms used in practice are the FPS, SLP or OFS as these funds are relatively flexible in terms of investment restrictions (allowing such legal forms to accommodate the ELTIF Regulation’s own requirements) and they can already originate loans under French law.

Registration/Approval Requirements for Most AIFs

The creation of most French AIFs (ie, retail AIFs and certain AIFs reserved to professional investors) requires the AMF’s prior authorisation for launch and marketing. Modifications of such funds may be subject to either the AMF’s prior approval or its immediate notification, depending on classification provided by the AMF doctrine.

In terms of the AMF process, the application for French AIF approval will vary from one product to another (regulated by different AMF doctrines, a doctrine per group of legal AIF forms). Moreover, depending on whether the AIF manager (AIFM) is regulated by the AMF or not, a filing via the GECO database (and end of Q1 2024, the ROSA Extranet) or by email to a dedicated email address, will be necessary. Nevertheless, the process is more or less similar across different products, the main differences being the type of assets that will be eligible to said product and other product-specific requirements.

Key required documentation

For AIFs open to retail investors and certain AIFs reserved to professional investors (FPVG and OPPCI), an application form must be submitted to the AMF, including the following documents (and ancillary documents):

• the relevant application form applicable to the type of AIF (which provides a list of attachments to be provided);
• an offering document (or prospectus);
• a constitutive document (by-laws for FCPs and articles of incorporation for SICAV);
• if the AIF will be marketed to retail investors, a key information document (KID) prepared according to Regulation (EU) 1286/2014 (the “PRIIPS Regulation”);
• a declaration, by the AIFM certifying inter alia that the manager and the fund’s service providers have the necessary regulatory approvals, that the fund legal documentation and the KID (if required) have been prepared in accordance with applicable regulation, that promotional documents comply with AMF requirements and certain declarations in relation to the liquidity management tools provided in the fund documentation;
• the acceptance letters from the depositary, the statutory auditor as well as other services providers, certifying that they have accepted their duties with the fund; and
• the working programme of the statutory auditor.

For certain AIFs open to retail investors (FCPR, FCPI, FIP) and reserved to professional investors (FPCI, SLP) the constitutive document is equivalent to the offering document/prospectus.

Process

When prior approval of the AMF is a requirement for the creation of an AIF, the regulatory approval process with the AMF is one month beginning from the acknowledgement of receipt from the AMF of a complete application. Such acknowledgement of receipt provides for the regulatory approval deadline.

The regulatory process with the AMF is free of charge. Nevertheless, in addition to the fees charged by the AMF to either French AIFMs or EEA AIFMs managing a French fund based on assets under management, a registration fee and an annual fixed fee per fund (and compartment if any) of EUR2,000 is due to the AMF.

Registration/Approval Requirements for AIFs Reserved for Professional Investors

Certain AIFs reserved to professional investors (such as the FPCI, the FPS (including the SLP) and the OFS – but with the exception of the FPVG and OPPCI), as well as Other AIFs, are not subject to the AMF’s prior authorisation.

AIFs reserved to professional investors are only subject to an AMF notification process while Other AIFs are not subject to any regulatory setting up formalities vis-à-vis the AMF (but are still subject to formalities before they can be marketed in France and in the EEA). Modifications made during the life of an AIF reserved to professional investors are not subject to AMF authorisation but are only notified ex post to the AMF.

Depending on whether the AIFM is regulated by the AMF or not, a filing via the GECO database (and end of Q1 2024, the ROSA Extranet) or by email to a dedicated email address, will be necessary. Nevertheless, the process is more or less similar between the products, the main differences being the type of assets that will be eligible to said product and other product-specific requirements.

Key required documentation

See above for key required documents applicable to AIFs reserved to professional investors which are subject to a mere AMF notification process.

With respect to per se AIFs reserved to professional investors, the offering document and the constitutive document are generally the same. This is the key document for these AIFs.

With respect to Other AIFs, there is generally an information note which is prepared in order to provide the investors with all information required under Article 23 of the AIFMD. Note that some choose to set up a shareholders’ agreement to cover this required information insofar as Other AIFs are often set up in the form of a French company.

Process

Although there is no approval process by the AMF, there is an ex post notification to the AMF one month after the setting up of the AIF. In practice, the notification process is generally made in two phases: (i) a first notification is made in order to obtain a marketing authorisation delivered by the AMF, and then (ii) a second notification is made in order to file the certificate of funds deposit issued by the depositary of the AIF when the minimum amount of required capital has been paid to the relevant AIF’s bank account.

The fees and costs are the same as those that apply to retail AIFs.

Liability is limited to the amount of commitment (for retail funds, the subscription commitments are generally fully paid upon the subscription). The losses that an investor will suffer will therefore be limited to the amount of its subscription.

AIFMs are subject to several disclosure and reporting requirements to the AMF and the investors as provided for in the AIFMD and applicable French laws and regulations. Those requirements aim at protecting investors before their investment in an AIF and on an ongoing basis for as long as they hold units or shares in the relevant AIF.

Disclosures/Reporting Requirements

Annual report

Pursuant to the AIFMD, an AIFM must publish an annual report per financial year for each EU AIF it manages and for each AIF it markets in the EEA within six months after the end of the financial year.

This annual report shall comprise the following:

• an annual management report;
• the summary documents defined in the chart of accounts and the certification of the fund statutory auditor;
• any material changes, within the meaning of Article 106 of Delegated Regulation (EU) 231/2013 (the “AIFMD Level 2 Regulation”), to the information referred to in Article 3 of this instruction during the financial year covered by the report; and
• the accounting information, prepared in accordance with French accounting standards (Regulation No 2017-05 and No 2018-04 of the Autorité des normes comptables) or the accounting standards of the country in which the AIF is established.

Half-yearly report

An AIFM shall also publish a half-yearly report for each French AIF it manages within two months after the end of the first half of the year.

This half-yearly report shall include:

• an inventory of the portfolio of assets held by the relevant AIF with details about the number and value of the financial instruments;
• the amount of the net assets;
• the number of units or shares in circulation;
• the net asset value; and
• off-balance sheet commitments.

A document entitled “asset composition” shall be established by the AIFM at the day of the latest liquidation value of each half-year period, and statutory auditors shall verify the asset composition before publication of such document. This document must be sent to any shareholder or unitholder who requests it within eight weeks of the end of each half year.

Pre-contractual information

When an AIF is managed or marketed in the EEA, the AIFM must make certain pre-contractual information available to investors before they invest in the relevant AIF as well as any amendment thereto in accordance with French laws and regulations implementing Article 23 of the AIFMD. This information also includes sustainable finance pre-contractual information set out under Regulation (EU) 2019/2088 (SFDR).

Marketing materials of AIFs

In addition to the guidelines on marketing communications issued by the European Securities and Markets Authority (ESMA) (ESMA34-45-1244), the AMF has set its own set of rules in the AMF Position No 2011-24 on the content requirements of marketing materials. The AMF is entitled to review any marketing materials relating to an AIF marketed in France prior to their release to French investors.

Additional Disclosure Requirements

Additional disclosures requirements shall apply to French AIFMs. These include the following:

• A policy on the inclusion in their investment strategy of environmental, social and governance (ESG) quality criteria and the means implemented to contribute to the energy and ecological transition; this information relates in particular to the fight against climate change (ie, level of investment in climate protection, the contribution to meeting the international objective of limiting global warming and achieving the objectives of the energy and ecological transition).
• A policy on how the voting rights attached to the financial instruments held by the AIFs are exercised.
• A shareholder commitment policy describing how they integrate their role as a shareholder into their investment strategy; each year, the AIFM publishes a report on the implementation of this policy.
• Disclosures applicable to AIFMs (to the extent that they qualify as financial market participants), which are required pursuant to the SFDR and which are not analysed in this document.

A French AIFM is also required for compliance purposes to make specific reports to the AMF on a quarterly basis of:

• any case of non-compliance with its applicable investment rules and fund asset diversification by an AIF managed by a French AIFM or by a foreign AIFM (except for cases of non-compliance beyond the control of the management company and not resulting from the maturity of a financial instrument held by the AIF); and
• indemnification paid by French AIFMs to investors in French or foreign AIFs they manage, including by delegation, and to clients to whom they provide investment services.

Please note that other disclosures and reporting requirements vis-à-vis the AMF shall apply to AIFMs in such capacity but they are not analysed in this document.

The type of investors investing in a particular AIF will depend on the investment strategy implemented by such AIF and the existence or not of a tax incentive attached to an investment in such AIF.

Historically:

• French AIFs open to retail investors are generally structured to be marketed to French retail investors through French unit-linked life insurance contracts (please refer to 3.2.1 Types of Investors in Retail Funds for further details;
• French venture capital funds set up as FCPR, FCPI and FIP are mainly designed for retail investors, including those who intend to benefit from a favourable tax regime;
• AIFs reserved to professional investors (such as FPVG, FPCI, FPS and OPPCI) are mainly marketed to institutional investors (credit institutions, funds of funds, insurance companies, large corporate entities, etc) as well as family offices, other corporate companies and high net worth individuals; and
• French employees savings funds are set up in a very specific context: in order to incentivise the employees of a company or a group of companies.

The contractual form of the FCP (fonds commun de placement) and the SICAV (société d’investissement à capital variable) are the most common legal forms for retail funds. Nevertheless, SCPIs may be created with fixed capital.

No specific restrictions apply on subscriptions to French AIFs open to retail investors (including in regard to the minimum amount of subscription). As heavily regulated vehicles, UCITS or retails AIFs can be subscribed to by anyone (retail or professional clients) having the legal capacity and investing the minimum that is required in the fund documentation.

On the contrary, subscriptions to French AIFs reserved to professional investors are generally restricted to eligible/professional investors who qualify as:

• per se or opt-out professional clients within the meaning of MiFID;
• investors whose initial subscription or acquisition of units or shares of such AIF is equal to EUR100,000 or more; and
• investors for whom the subscription or acquisition of units is performed in their name and on their behalf by an investment services provider in the context of discretionary portfolio management.

In addition to the foregoing, subscriptions to FPCI, OFS and FPS (excluding the SLP) are also open to specific categories of investors such as:

• investors, natural persons and legal entities, whose initial subscription is equal to EUR30,000 or more and who meet one of three specific criteria; and/or
• executives, employees or individuals acting on behalf of the AIFM, or the AIFM itself.

Subscriptions to SLP are also open to the following persons: the manager (legal representative of the SLP which is in practice the AIFM), the AIFM, the general partner, executives and employees of the AIFM or individuals and legal entities acting on behalf of the AIFM.

The categories of eligible investors in AIFs reserved to professional investors are generally referred to as “Qualified Investors” or “Eligible Investors”.

When French AIFs reserved to professional investors are authorised as ELTIF, they can also be invested in by retail investors according to the ELTIF Regulation.

Furthermore, marketing of non-French AIFs in France can be made as follows:

• in accordance with the AIFMD marketing passport, to French professional investors only;
• in accordance with national private placement regime (NPPR) as set out in Article 43 of the AIFMD, to French non-professional investors (in such case, the prior authorisation of the AMF is required; and
• in accordance with the ELTIF Regulation if the non-French AIF is authorised as an ELTIF, to French professional and non-professional investors.

The AIFMD was implemented under French law in the FMFC by ordinance No 2013-676 of 25 July 2013 and supplemented by the AMF General Regulation, the AMF doctrines issued in relation to these matters. It primarily regulates the AIFM as opposed to the AIFs directly.

All AIFs are indirectly subject to the common requirements set out in the AIFMD as implemented under French law in the FMFC and the AIFMD Level 2 Regulation (pre-marketing and marketing rules of AIFs, obligation to appoint a depositary, disclosures and reporting requirements, etc). The regulatory regime will also depend on whether AIFs are managed by an AIFM authorised pursuant to the AIFMD.

In addition to the common requirements, per seAIFs are subject to specific investment rules provided for in the FMFC and the AMF General Regulation, including:

• eligible assets;
• investment quotas regarding certain type of assets;
• diversification and control ratios; and
• limits on certain operations, such as the use of financial derivatives, cash borrowing and guarantees.

A distinction can be made between (i) AIFs open to retail investors, which are generally subject to strict investment restrictions; and (ii) AIFs reserved to professional investors, which are less regulated. FPS (including SLP) and OFS are not subject to any legal ratios or constraints.

When French AIFs reserved to professional investors are authorised as ELTIF, they are subject to the restrictions set out in the ELTIF Regulation, in addition to the regulation of the French AIF that is used as conduit.

The depositary of a French AIF must either have its registered office in France or have a branch in France provided that its registered office is located in another EU member state.

The depositary is a regulated entity and must be chosen from a list of entities drawn up by the French Minister for the Economy.

The fund administration of French AIFs is generally handled by the AIFM but can also be delegated to third parties under the supervision of the AIFM. French law does not require that a specific licence be held in order to carry out such function on a delegated basis.

French AIFs may be managed by an AIFM based in a member state of the EEA according to the management passport set out in the AIFMD. To that end, such AIFM must provide a notification to its home supervisory authority which will transmit it to the AMF.

The portfolio management of French AIFs can be delegated according to the AIFMD Level 2 Regulation.

As implemented under French law, such delegate managers can be located in a member state of the EEA (other than France) or in a third country to the EEA subject to certain requirements as more fully described in the FMFC and in the AMF General Regulation.

AIFMs which intend to delegate to third parties the task of carrying out functions on their behalf must notify the supervisory authorities of their home member state before the delegation arrangements become effective.

As mentioned above in 2.1.2       Common Process for Setting Up Investment Funds, the regulatory approval process of AIFs open to retail investors and certain AIFs reserved to professional investors (FPVG and OPPCI) is one month.

Other AIFs reserved to professional investors are not subject to any AMF approval process (but subject to a regulatory notification process on an ex-post basis).

The CBDFD governing pre-marketing of AIFs managed by European AIFMs came into force in 2021 leading to a harmonised regulation of pre-marketing and of the content of marketing materials.

This new regime has been fully implemented into French law and has substantially modified the previous French (local) regime that existed before the harmonised framework came into force.

Pursuant to this new regime, an AIFM established in another member state which intends to carry out pre-marketing in France in respect of an AIF must notify the competent authority of its home member state no later than two weeks after the commencement of the pre-marketing activities. The AMF should be notified in turn by the competent authority of the AIFM’s home member state.

This notification should include inter alia:

• the targeted member state(s);
• the periods of time during which the pre-marketing took place;
• a brief description of the pre-marketing activities, including information on the investment strategies and, where relevant, a list of AIFs and compartments of AIFs which were the subject of the pre-marketing.

The AMF has extended the European pre-marketing regime to non-EEA AIFMs and to UCITS. The start of pre-marketing activities of an AIF in France by a non-EEA AIFM needs therefore to be notified to the AMF directly.

For pre-marketing to be recognised as such (and allowed) under French law, it should:

• be addressed only to professional investors or non-professional investors that would qualify as Eligible Investors (ie, investing at least EUR100,000 if the AIF subject to pre-marketing is an FPCI, FPS, including SLP or OFS); and
• concern an investment idea or investment strategy of an AIF which is not yet established, or of an AIF which is established, but not yet notified for marketing in the respective country.

During pre-marketing:

• investors cannot subscribe to the units or shares of the pre-marketed AIF;
• subscription agreements or similar documents whether in draft or final form cannot be provided to potential investors; and
• legal constitutive documentation of the pre-marketed AIF cannot be provided in final form to potential investors (it must be clearly stated that the information presented is unreliable, incomplete and subject to change).

When an AIFM carries out pre-marketing activities in respect of an AIF, any subscription by professional investors within 18 months as from the start of pre-marketing activities shall be considered as the result of marketing and shall therefore be subject to the applicable AIFMD marketing passporting requirements. See 2.3.8 Marketing Authorisation/Notification Process for further details.

Rules that apply to firms marketing French or foreign AIFs in France are provided for in the FMFC, the AMF General Regulation and the doctrine published by the AMF (instructions, positions and recommendations).

The marketing of AIFs in France is subject to the regulatory framework as summarised below (although this is not an exhaustive list):

• French lawmakers have implemented in the FMFC a definition of marketing which is substantially similar to the one provided under the AIFMD as amended by the CBDFD. The AMF has specified the scope of that definition in its AMF Position-Recommendation No 2014-04 and has expressly listed some situations which are not considered as marketing (such as pre-marketing activities).
• Marketing of AIFs in France is subject to either an AMF notification process (for marketing purposes to professional investors) or an AMF prior authorisation process (for marketing purposes to retail investors). See 2.3.8 Marketing Authorisation/Notification Processfor further details.
• The person marketing an AIF shall ensure that the investor satisfies the eligibility conditions to subscribe to the relevant AIF.
• Marketing of AIFs in France is subject to the provision to the investor of the by-laws and offering documents of such AIF in French. As an exception, these documents may be provided in English if (i) the marketing is geared towards professional investors and (ii) the firm marketing the AIF has ensured:
1. with respect to professional investors, they have agreed to receive the documents in English; and
2. with respect to non-professional investors, they understand English.
• Specific requirements are applicable in the content of marketing materials, which are set out in the above mentioned ESMA guidelines on marketing communications (ESMA34-45-1244) and in the AMF Position No 2011-24.
• The AMF is entitled to review any marketing materials relating to an AIF marketed in France prior to their release to French investors. The AMF is also entitled to ask for any amendment thereto in order to make sure that the information provided is accurate, clear and not misleading.

French and foreign AIFs can generally be marketed in France to the following categories of investors:

• for French AIFs open to retail investors – both professional and retail investors;
• for French AIF reserved to professional investors – professional investors and investors investing a minimum amount (EUR30,000 or EUR100,000) (depending on the legal form of the AIFs) as described in 2.2.3 Restrictions on Investors;
• for foreign AIFs located in EEA jurisdictions and managed by an EEA AIFM – (i) to professional investors only according to the AIFMD marketing passport and (ii) to retail investors subject to the prior authorisation of the AMF according to the French NPPR (see 2.3.8 Marketing Authorisation/Notification Process for further details);
• for foreign AIFs located in third countries – to professional and retail investors, subject to the prior authorisation of the AMF.

In any case, the firm marketing an AIF in France must first ensure that the investor is eligible to invest in such AIF.

An AIFM intending to market AIFs to professional investors in France must submit a notification to the competent authority of its home member state in respect of each EEA AIF that it intends to market.

The notification file must contain certain information, as follows:

• a notification letter (template provided by the competent authority of its home member state) with a programme of operations identifying the AIFs identifying the AIFs the AIFM intends to market and information on where the AIFs are established;
• the AIF rules or instruments of incorporation;
• the identification of the depositary of the AIF;
• a description of, or any information on, the AIF available to investors;
• information on where the master AIF is established if the AIF is a feeder AIF;
• the indication of the member state in which the AIFM intends to market the units or shares of the AIF to professional investors; and
• information about arrangements made for the marketing of AIFs and, where relevant, information on the arrangements established to prevent units or shares of the AIF from being marketed to retail investors.

The competent authority of the home member state of the AIFM shall transmit the complete notification file to the AMF in order to implement the AIFMD marketing passport. This transmission must be made no later than 20 business days after the date of receipt of the complete file. Marketing in France can begin as from the date of notification of such transmission to the AMF.

An AIFM intending to market French AIFs to retail investors in France must comply with specific conditions set out in the AMF General Regulation. This regime requires obtaining the prior authorisation of the AMF in respect of the relevant AIFs before marketing them to retail investors in France.

Among the conditions to be satisfied:

• an instrument in relation to the exchange of information and mutual assistance in the field of asset management on behalf of third parties should have been set up between the AMF and the competent authority of the AIFM; and
• the AIFM shall meet the conditions provided in a mutual recognition agreement entered into between the AMF and the competent authority of the AIFM defining the specific requirements applicable to the approval of management companies of AIFs that may be marketed to non-professional clients.

When units or shares of an AIF have been marketed in France, the AMF considers that these units or shares are deemed to have been marketed in France as long as investors to whom such units or shares have been marketed in France remain investors in the relevant AIF. It is therefore necessary to maintain the marketing authorisation or marketing notification as long as investors continue to hold units or shares in the relevant AIF.

An AIFM must notify any material change in the information contained in the initial marketing notification file to its home state competent authority by indicating the change concerned.

All material changes planned by the AIFM must be notified to the AMF at least one month before their implementation or immediately after an unplanned change has occurred.

As explained in 2.1.4 Disclosure Requirements, there are also annual and half-yearly reporting requirements for AIFMs vis-à-vis the investors and the AMF.

In order to cease marketing a passported AIF in France, notification to de-register the AIF should be made to the competent authority of the AIFM’s home state according to the procedure set forth in the CBDFD. From the date of de-notification, a 36-month “black-out” period is triggered during which any pre-marketing of the relevant AIF or in respect of similar investment strategies or ideas is prohibited.

Only Eligible Investors are allowed to subscribe to AIFs reserved to professional investors. The offering documents may provide further restrictions on the types of investors that an AIF reserved to professional investors may be marketed to (eg, reserve the subscription of shares or units of such AIF for professional investors only – if so, no PRIIPS KID must be prepared and provided to them).

As explained in 2.1.4 Disclosure Requirements, there are also annual and half-yearly reporting requirements for AIFMs vis-à-vis the investors.

Furthermore, the AIFMD provides additional investor protection rules that must be complied with by the AIFM, such as the following:

• the establishment by the AIFM of risk management, liquidity management and conflict of interests internal procedures;
• the valuation of the AIFs’ assets in accordance with valuation rules compliant with the AIFMD; and
• the description of how the AIFM ensures fair treatment of investors and, whenever an investor obtains preferential treatment or the right to obtain preferential treatment, a description of that preferential treatment, the type of investors who obtain such preferential treatment and, where relevant, their legal or economic links with the AIF or AIFM.

Finally, AIFMs shall provide the following in respect of retail investors:

• the facilities required under the CBDFD (as implemented under French law) to carry out certain tasks with regard to AIFs marketed to retail investors in France; and
• a complaint handling system and information on such system (in advance of their investment).

The AMF has adopted a pragmatic approach and although the whole process is done online through a portal (or via regulator-to-regulator notification mechanism), the AMF is approachable and open to face-to-face meetings, especially for new market participants. The AMF personnel in charge of reviewing the filings can be contacted by email (contact details are provided when the filing is acknowledged as complete) or by phone.

There are two main categories of retail fund structures in France: UCITS and some French AIFs that are open to retail investors (but not only to retail investors).

UCITS

UCITS are highly regulated, with strict investment and liquidity restrictions and must be open-ended. They are managed by an approved UCITS management company, which can be either approved by the AMF or by another regulator within the EEA thanks to the UCITS management passport.

UCITS can be “passported” into any EEA country via a regulator-to-regulator process and once passported, the UCITS can normally be sold to any investor in the host country. Investors will subscribe for shares or units of French UCITS, depending on whether, respectively, the legal structure is an investment company with variable capital (SICAV) or a fonds commun de placement (FCP).

The harmonisation of UCITS under European law is maximised (ie, all UCITS must comply with the same minimum set of rules), and there are investment restrictions to be taken into consideration such as leverage restrictions (up to 10% of their net assets for short-term liquidity purposes) and the 5/10/40 rule (limit of 5% in any one issuer, which may be extended to 10% provided the aggregate of those issuers in which you hold more than 5% does not represent more than 40% of the net assets of the fund).

French AIFs Open to Retail Investors

France has been a very active (domestic) market for retail funds, funds that would either be eligible to French unit-linked life insurance contracts or subscribed to directly, with a tax incentive often attached. They all share a prior approval process and strict monitoring by the AMF.

The categories of French AIFs open to retail investors are listed in 2.1.1 Fund Structures.

Investors will subscribe for shares or units of the French retails AIFs, depending on whether the legal structure is an investment company with variable capital (SICAV) or a fonds commun de placement (FCP). As AIFs, and provided that they are managed by full scope AIFMs, such retail funds can be passported in the EEA thanks to the AIFMD passport, but only to professional clients.

Registration/Approval Requirements

As a principle, the creation and marketing of retail funds in France require the prior approval of the AMF (save to the case of ELTIFs, which are subject to a different regulation, at EU level and benefit from a specific AIFMD marketing passport for marketing to retail investors). For the purpose of this section and as an EU wide label, ELTIFs will not be analysed in detail.

See 2.1.2 Common Process for Setting Up Investment Funds for further details on the AMF process.

An application form must be submitted to the AMF including at least the following documents (as well with some ancillary documents and the AMF may always request further information or document):

• name of the fund, and identity of the AIFM, the depositary and the statutory auditor;
• existence or not of compartments (in each case, a separate application shall be made);
• whether the retail fund is a master or a feeder;
• whether the retail fund benefits from a guarantee or protection;
• whether administration, accounting or financial management is delegated or not;
• periodicity of establishment of the net asset values;
• modalities of calculation of the risk; and
• details on the liquidity management tools.

Key required documentation and process

See 2.1.2 Common Process for Setting Up Investment Funds for a discussion of the key required documentation and the costs involved.

As from the acknowledgement of receipt from the AMF of a complete application, the process takes one month (23 business days). The aforementioned acknowledgement of receipt provides for the regulatory approval deadline.

Please refer to 2.1.3 Limited Liability.

UCITS

In addition to keeping the primary offering documents (being typically the prospectus) and the KID up to date and compliant with UCITS regulations as implemented in France and AMF Instruction No 2011-19, UCITS are required to publish an annual audited report for each financial year and an unaudited biannual report. The annual report must be published within four months of the year end, the biannual report within two months of the period end, and both must be sent to the AMF.

French AIFs Open to Retail Investors

Please refer to 2.1.4 Disclosure Requirements.

In practice, the vast majority (if not almost all) of the investors in French retail funds are French investors, except for UCITS which can be marketed easily within the EEA. The French retail funds market for retail AIFs is typically, as of today (this may change with ELTIF 2.0), a domestic market. Distribution of French retail funds is often made via French unit-linked life insurance contracts or French personal equity saving plans (plan d’épargne en actions – PEA) for the UCITS, while French retails AIFs are often subscribed to directly by the end-investor, especially those funds with a tax incentive attached.

The contractual form of the FCP and the SICAV are the most common legal forms for retail fund. Nevertheless, SCPIs may be created with fixed capital.

There are no specific restrictions. As heavily regulated vehicles, UCITS or retail AIFs can be subscribed to by anyone (retail or professional clients) having the legal capacity and investing the minimum that is required in the fund documentation.

UCITS

UCITS may only invest in “eligible assets” which broadly include transferable securities, money market instruments, other UCITS (or UCITS-equivalent funds) and deposits. The following restrictions shall be complied with:

• compliance with the 5/10/40 rule (see 3.1.1 Fund Structures);
• the use of derivatives (including counterparty exposure limits) is very regulated and involves detailed global exposure calculations, as well as back testing and reporting requirements;
• UCITS may only take short positions synthetically through derivatives;
• UCITS may only borrow up to 10% of their net assets for short-term liquidity purposes; and
• UCITS are prohibited from investing directly, or through derivatives, in commodities.

AIFs Open to Retail Investors

Each type of AIF open to retail investors is subject to its own set of rules, given that these products have been created for specific purposes. For example, while the FIVG will have investment restrictions similar to the UCITS; the OPCI or the SCPI will be limited to real estate investments, including liquid assets or shares of real estate companies. FCPR will need to comply with a legal quota of private assets, although the FCPI must ensure, in addition to such legal quota, that the companies comply with certain size and innovation characteristics requirements.

To be exhaustive, a case-by-case detailed analysis of investment restrictions in such AIF open to retail investors would be necessary, given that, except for borrowings and leverage restrictions which are quite similar, each vehicle can be dramatically different from the next.

UCITS or French AIFs may be managed respectively by a French or EEA UCITS management company or by a French or EEA AIFM according to the management passport set out in respectively the UCITS directive and the AIFMD.

The depositary of a French UCITS or AIF must either have its registered office in France or have a branch in France provided that its registered office is located in another member state of the EEA.

The depositary is a regulated entity and must be chosen from a list of entities drawn up by the French Minister for the Economy.

The fund administration of French UCITS or AIFs is generally handled by, respectively, the UCITS management company or the AIFM but can also be delegated to third parties under the supervision of the UCITS management company or the AIFM. French law does not require any specific licence to be held to carry out such function on a delegated basis.

French UCITS and French AIFs may be managed by, respectively, a UCITS management company or an AIFM based in a member state of the EEA according to the management passports set out respectively in the UCITS directive or in the AIFMD. To that end, such UCITS management company or AIFM must provide a notification to its home supervisory authority which will transmit it to the AMF.

The portfolio management of French UCITS and AIFs can be delegated to delegate managers according to the regime set forth under, respectively, the UCITS regulation and the AIFMD Level 2 Regulation.

As implemented under French law, such delegate managers can be located in a member state of the EEA (other than France) or in a third country to the EEA subject to certain requirements as more fully described in the FMFC and in the AMF General Regulation.

UCITS management companies and AIFMs which intend to delegate to third parties the task of carrying out functions on their behalf must notify the supervisory authorities of their home member state before the delegation arrangements become effective.

Please refer to 2.1.2 Common Process for Setting Up Investment Funds.

This is not applicable in France as pre-marketing of UCITS or AIFs to retail investors is not allowed.

UCITS

French UCITS must receive an authorisation issued by the AMF prior to marketing their units or shares in France. Notification of this authorisation therefore constitutes authorisation of marketing in France. UCITS incorporated under foreign law must be the subject, prior to marketing their units or shares in France, of a notification of the AMF by the competent authority of the home EU member state of the UCITS.

AIFs Open to Retail Investors

French AIFs open to retail investors must receive an authorisation issued by the AMF prior to marketing their units or shares in France. Notification of this authorisation therefore constitutes authorisation of marketing in France.

With respect to the marketing of foreign AIFs to French retail clients, there is no marketing passport available. Therefore, prior authorisation by the AMF shall be sought and, in practice, it is a very lengthy and complicated process.

UCITS and AIFs can be marketed to professional (as defined under MiFID) or non-professional investors. Specific attention shall be drawn to the fact that distributors of the funds shall ensure that such investment corresponds to the profile of the investor, following a suitability test.

An AIFM intending to market AIFs to retail investors in France must comply with NPPR (if available) which generally requires the prior authorisation of the competent authority of its host member state where it is envisaged that the AIF will be marketed. No passporting regime is available for AIFs for marketing purposes to retail investors.

For UCITS, the passport authorisation process is a regulator-to-regulator process.

Please refer to 3.1.2 Common Process for Setting Up Investment Funds and 3.3.6 Rules Concerning Marketing of Retail Funds for further details.

UCITS & AIFs Open to Retail Investors

Please refer to 2.3.9 Post-marketing Ongoing Requirements.

Marketing authorisation or marketing notification shall be maintained as long as French shareholders or unitholders continue to hold units or shares in the relevant UCITS or retail AIF. Therefore, until this time, a payment of an ongoing fee to the AMF (in 2023, EUR2,000 per fund or sub-fund and per year) until the marketing of the fund is closed is required.

Depending on the changes to the UCITS or the retail AIFs, the AMF must be either immediately notified or give its prior approval.

At the latest one month after the end of every quarter, French AIFMs with respect to French UCITS or French retails AIFS, or EEA AIFMs managing a French UCITS via the UCITS management passport, must send the AMF the form on compensation paid out for any non-compliance with investment restrictions, via the ROSA Extranet.

Please also refer to 3.1.4 Disclosure Requirements for ongoing reporting requirements.

In order to cease marketing a passported UCITS in France, notification to de-register the UCITS should be made to the competent authority of the UCITS manager’s home state according to the procedure set out in the CBDFD as implemented under French law. From the date of de-notification, a 36-month “black-out” period is triggered during which any pre-marketing of the relevant AIF or in respect of similar investment strategies or ideas is prohibited.

As heavily regulated vehicles, UCITS or retails AIFs can be subscribed to by anyone (retail or professional clients) having the legal capacity and investing the minimum that is required in the fund documentation.

Please also refer to 3.1.4 Disclosure Requirements for ongoing reporting requirements and to 2.3.10 Investor Protection Rules.

See 2.3.11 Approach of the Regulator.