All the investment services mentioned in Article L 321-1 of the Monetary and Financial Code constitute fertile ground for the occurrence of conflicts of interest and more specifically between the investment service provider and the clientele.
This is the reason behind the introduction, by Directive 2004/39 / EC on financial products (MIF) , of a protection system subsequently transposed to the national level of the investor, based on on information from the latter concerning the remuneration of investment service providers. This scheme was sharpened by Directive 2006/73 / EC Level II, specifying the implementing rules for MiFID. We can also recall here the work of the Committee of European Securities Regulators (CESR, now ESMA), and in particular its May 2007 document entitled “Inducements under MIFID, recommendations (CESR / 07-228b)”., as well as the April 2010 report entitled “Advantages: reports on good and bad practices (CESR / 10-295)” , which was later adopted by the AMF.
The reason for this is twofold: firstly, the overlapping of investment service providers in integrated networks linked to issuers , which favors retrocession, but also, on the other hand, the enlargement of range of activities carried out by investment firms.
Situations in which the respect of customers’ interests rule of thumb is most likely to be undermined are primarily those in which the investment service provider may influence decisions taken by investors: Board or, all the more so, those in which he makes the decision instead of the customer: management on behalf of third parties . However, the entirety of the investment activities referred to in Articles L.321-1 and D.321-1 of the Monetary and Financial Code is covered by the mechanism laid down in Article 314-76 of the RGAMF.
The following services are therefore concerned, as well as the services related thereto:
- Service 1: Receipt-transmission of orders on behalf of third parties
- Service 2: Execution of orders on behalf of third parties
- Service 3: Own Trading
- Service 4: Individual and / or collective management
- Service 5: Investment Consulting
- Service 6-1: the underwriting
- Service 6-2: guaranteed placement
- Service 7: unsecured placement
- Service 8: the operation of a multilateral trading system
The system for preventing conflicts of interest in the field of remuneration and benefits is organized around three main pillars, which are first and foremost the identification and classification of remuneration and benefits , as well as the idea of their transparency as a tool for dealing with conflicts of interest , and finally the criterion of improving the quality of customer service and the ability to act in the best interests of the customer .
This analysis will firstly decode Article 314-76 of the AMF General Regulation, and then discuss, in a second step, the practical arrangements for implementing the above-mentioned article.
The provisions of Article 314-76 of the AMF General Regulation
The AMF General Regulation, in its article 314-76, addresses, as part of its investor protection framework, two essential emotions, which should be considered here.
These are, on the one hand, the concepts of remuneration and benefits and, on the other hand, the notion of customer.
Identification and classification of remuneration and other benefits paid or received
Article 314-76 of the AMF General Regulation (RGAMF), amended by the decree of 3 October 2011 transposing the MiFID implementation directive, refers to ” remuneration, commissions or non-monetary benefits ” and presents both the different types of remuneration and the conditions they must meet in order for the investment services provider to be considered to be acting in an honest, fair and professional manner in the best interests of a client in the context of the payment or collection of remuneration, commission or non-monetary benefit, in the event of an investment servicea service related to a customer.Clearly, Article 314-76 of the RGAMF lays down and defines the requirements for determining the regularity and validity of remuneration, commissions or non-monetary benefits, and thus prohibit benefits that may give rise to situations of conflict of interest.
Regarding the nature of remuneration itself, it is important to make a distinction, distinction made by article 314-76 of the RGAMF.
Article 314-76 (1) does not identify any major conflict of interest issues because it contemplates the traditional assumption of a remuneration, commission or non-monetary benefit paid or provided to the customer or by the customer, or to a person in the customer’s name or by the latter.
It should be noted, however, that ESMA, in its April 2007 “Inducements” (CESR / 07-228b), makes the recommendation that the economic cost of a commission or remuneration or a non-monetary benefit is borne by the customer is not sufficient to consider that they fall into this category.
2 ° of the article refers to remuneration, commissions or non-monetary benefits paid or provided to or by a third party, or to a person acting on behalf of or by such third party . It is here that the AMF considers the particular case of a payment from a producer of financial products to the investment services firm, which may introduce a conflict of interest between the customer and the investment firm. the investment services business. With regard to the remuneration or benefits mentioned above, Article 314-76 sets out a dual requirement, both for informing the client and also for improving the quality of the service provided by the investment services company to the latter. (cf.
Point N ° 3 of article 314-76 of the RGAMF envisages for its part the question of the appropriate remunerations allowing the provision of services of investments or being necessary for this service. This mainly concerns custody fees, foreign exchange and settlement fees, fees due to regulators and litigation fees . Regarding this category of remuneration, article 314-76 of the RGAMF unequivocally excludes the hypothesis of conflicts of interest.
It is important to note, however, that the ESMA report dated 19 April 2010 (CESR / 10-295) makes it a requirement to verify the conditions required for remuneration to fall into this category at the expense of the claimant.
investment services . Similarly, the aforementioned report defines the category of remuneration envisaged in 3 ° of article 314-76 in a limiting manner and excludes from this scope the remuneration received for the service itself.
The notions of customer and third parties under Article 314-76 of the AMF General Regulation
The notion of customer is fundamental in Article 314-76 of the AMF General Regulation, particularly in point 1, which considers this notion with a broad conception. At first glance, the term client refers to the investor who uses an investment services firm. The classic example here is the case of an investment advisory service delivered by the company to an investor. Nevertheless, the term “customer” can take on a different meaning, especially in the event of a tangle of
customer-service relationships. Thus, an investment service provider may be the client of another investment service provider