As one of the leading financial services law firms in France, we have compiled the first in a series of regular market updates on the latest enforcement trends of the French prudential and resolution authority (Autorité de contrôle prudentiel et de résolution – ACPR) and the French financial markets authority (Autorité des marchés financiers – AMF).
Large fines – a wakeup call
The year 2014 marked the largest-ever fines imposed by the French regulators: aggregate penalties of over (i) €100M spread across nine decisions from the Enforcement Commission of the ACPR, and (ii) €32M covering twenty-four decisions from the Enforcement Commission of the AMF. The ACPR, in particular, imposed unusually high penalties (between €10 million to €50 million each) against insurance companies for failure to adequately process unclaimed life insurance contracts. Although 2015 has not so far thrown up similar large penalties, we believe the trend towards higher sanctions and penalties is here to stay.
Tougher sanctions on financial institutions and individuals
In recent years, both the AMF and the ACPR have been given greater powers to impose sanctions and fines. In 2010, the AMF’s powers to impose financial penalties against legal persons was raised from €10 million to €100 million. The recent European directives and regulations (such as CRD IV, AML IV, MAR) show the same trend towards an ever-growing sternness, of fines of up to 10 % of the total annual net turnover (on a consolidated basis), with a recent legislative proposal of the French Senate even suggesting up to 15% of the total annual net turnover.
With regards to individuals, the AMF already has powers to impose up to €15 million in fines. Following the CRD IV implementation, the Enforcement Commission of the ACPR can impose penalties against employees and senior managers of up to €5 million. The implementation of the Market Abuse directive will further strengthen existing criminal sanctions.
What are the hot enforcement themes?
In 2014, the majority of sanctions imposed by the Enforcement Commission of the ACPR were related to unclaimed life insurance contracts, whereas in 2015 the focus was on anti-money laundering and terrorism financing obligations. While most of the decisions were imposed against credit institutions, insurance companies and bureaux de change, the ACPR recently sanctioned an electronic money issuer in relation to the safekeeping (ring-fencing) of funds belonging to the electronic money holders.
The majority of sanctions imposed by the Enforcement Commission of the AMF are related to (i) corporate issuers of securities not complying with the disclosure rules, (ii) non-respect of the good conduct and organisation rules by professionals subject to the supervision of the AMF (in particular portfolio management companies and financial investment advisers) and (iii) market abuse cases.
The legal safeguard against double condemnation for the same infringement
On 18 March 2015, the French Constitutional Court ordered that, in a case of market abuse, the same person cannot be prosecuted and condemned twice by both the Enforcement Commission of the AMF and a criminal court for the same facts.
The French legislator has been given until 1st September 2016 to draw up new rules.
The Constitutional Courts ruling has given rise to numerous discussions and consultations over the past few months on the new legal framework relating to the enforcement of market abuse (see the AMF report dated 19 May 2015 and the yearly seminar of the AMF Enforcement Commission held on 8 October 2015). The French Senate published a legislative proposal on 7 October 2015.
Extension of the settlement procedures (composition administrative)
As an alternative to the full sanctions proceedings, financial institutions can opt to take up the AMF’s settlement procedure. Settlement agreements are negotiated between the General Secretary of the AMF and the concerned institution, and then approved by both the board and the Enforcement Commission of the AMF. The settlement procedure does not currently cover market abuse or offences by central securities depositories, securities settlement system operators, clearing houses and market operators, but a recent legislative proposal aims to extend it to those offences in the near future.