October 2022 Regulatory Updates

Key dates

11 April 2022

- AMF Enforcement Committee issues decision SAN-2022-04, imposing bans and fines

9 September 2024

- Conseil d'Etat judgment (no. 464877) dismisses appeal, upholds sanctions, and orders €1,500 costs each to AMF

Suggested considerations

• Immediate review: Audit client portfolios for recommendations in unauthorized products (e.g., non-French AIFs); remediate via disclosures or unwind if needed.
• Conflicts enhancement: Implement/maintain a conflicts of interest register; map, document, and mitigate all potential conflicts with operational procedures.
• Policy updates: Revise investment recommendation processes to include pre-advice marketing authorization checks via AMF registers or legal confirmation.
• Training: Mandatory staff training on FIA professional obligations, focusing on client diligence and unauthorized marketing risks.
• Documentation: Ensure all advice is fully documented; prepare for AMF inspections with honest, diligent cooperation.

What changed

• This is an enforcement action, not a regulatory change, but it clarifies and reinforces existing obligations for FIAs under AMF rules:
• FIAs must verify marketing authorization of recommended products in France before advising clients; recommending unauthorized AIFs breaches competence, care, diligence, and client-best-interest...
• FIAs require effective, operational procedures for identifying and managing conflicts of interest, including maintaining a conflicts register; failure to do so is a standalone breach. No new rules...

Key dates

October 24, 2022

- AMF requests suspension of ORPEA's financial instruments before market opening

October 26, 2022

- Trading resumes upon market opening following ORPEA's disclosure of conciliation procedure and financial restructuring plan

November 8, 2022

- Q3 2022 revenue announcement (after market close)

November 15, 2022

- ORPEA to present detailed transformation plan to market

December 31, 2022

- Anticipated asset impairment recognition date

Suggested considerations

• *For ORPEA (and comparable listed companies):
• *Immediate disclosure obligations: Publish a Regulated Information Service (RIS) announcement under MAR Article 17 disclosing all material information regarding financial difficulties, covenant breaches, and restructuring plans before trading resumes.
• *Ongoing periodic updates: Provide quarterly updates on conciliation procedure progress, covenant amendment status, and asset disposal program execution.
• *Governance remediation: Establish or strengthen disclosure committees with clear protocols for identifying and escalating material information within 24-48 hours of discovery.
• *Creditor communication: Maintain transparent dialogue with financial creditors regarding covenant amendments and restructuring timelines.

What changed

• The AMF's suspension order represents a temporary halt to all trading in ORPEA's financial instruments across regulated markets.
• Financial covenant breaches: The company faced potential acceleration of €3.3 billion in financing lines due to anticipated breaches of "R1" and "R2" financial covenants.
• Asset impairments: Anticipated write-downs at December 31, 2022, related to a stalled real estate disposal program.
• Debt restructuring needs: €4.3 billion in unsecured debt requiring conversion or restructuring.

Key dates

June 10, 2019 Deadline

- EU Member States' transposition deadline for SRD II into national law (e.g., France via law of May 22, 2019)

September 3, 2020

- SRD II go-live date for operational requirements like shareholder identification and voting processes

October 3, 2022

- European Commission request to ESMA/EBA for SRD II input, contextualizing ESMA's ongoing review

Suggested considerations

• Submit feedback to ESMA: French participants must review ESMA's call for evidence and provide input on SRD II implementation challenges, such as intermediary processes, data transmission, and cross-border voting (immediate action urged by AMF).
• Review current compliance: Audit internal systems for SRD II adherence, including electronic formats (e.g., seev.008 messages, MT 260SRD mandates), vote confirmations, and engagement policy disclosures.
• Enhance processes if needed: Align with Implementing Regulation (EU) 2018/1212 for shareholder ID requests, meeting notifications, and voting (e.g., VOTACCESS adaptations for French market).
• Monitor ESMA/EC outputs: Prepare for potential rule changes from the review, such as harmonized documentation or deadlines.

What changed

This AMF notice itself introduces no new regulatory changes; it promotes participation in ESMA's review of SRD II (Directive (EU) 2017/828), implemented via national laws by June 2019 and effective from September 3, 2020. SRD II's core requirements include: shareholder identification without delay, electronic/machine-readable transmission of voting and meeting information along the intermediary chain, confirmation of vote recording/counting, transparency on institutional investor and asset manager engagement policies/strategies, and extended scope to EEA-listed shares.