AMF's Enforcement Committee
AMF Sanction Proceedings
AMF's Enforcement Committee
A novel feature of the Autorité des marchés financiers (AMF) is that it consists of two bodies with collective responsibility: the Board and a committee with exclusive powers to impose penalties and sanctions.
This Enforcement Committee has twelve
members, none of whom is also a member of the Board:
- two councillors of the Conseil d’Etat designated by the Vice-President of that body;
- two justices of the Court of Cassation designated by the Chief Justice of that court;
- six qualified persons with legal and financial expertise and experience in securities issuance and financial-instrument investments, designated by the finance minister after consultation with organisations representing securities-issuing industrial and commercial companies, fund management companies and other investors, investment services providers, market undertakings, clearing houses, operators of settlement systems, and central securities depositaries;
- two representatives of the employees of investment services providers, fund management companies, market undertakings, clearing houses, settlement systems and central securities depositories, designated by the Finance Minister after consultation with representative labour unions and employee associations.
The Chairman is elected by the members of the Committee from among the four judges of the Conseil d’Etat and Court of Cassation serving on it.
The Committee may establish divisions of six members each, chaired by one of its serving Conseil dEtat or Court of Cassation judges.
The functions of members of the Enforcement Committee are incompatible with those of Board members
Enforcement Committee members serve a five-year term of office, renewable once.
One-half of the Enforcement Committee is renewed every thirty months.
AMF Sanction Proceedings
Enforcement Committee hearing
Enforcement Committee decision
The creation of an Enforcement Committee, which is separated from the Board, meets the requirement that the AMF's prosecutorial and disciplinary functions should be segregated.
There are four stages in the enforcement process:
Opening of a sanction proceedings: decided by the AMF Board, which issues a statement of objections and refers the case to the Enforcement Committee after examining the inspection or investigation report;
Examination of evidence: conducted by a member of the Enforcement Committee serving as rapporteur;
- Imposition of sanctions or penalties: ordered by the Enforcement Committee.
The Enforcement Committee may not hear a case based on facts that occurred more than three years previously if no action contributing to the uncovering, declaration or punishment of those facts has taken place during that period.
Reports on the inspections and investigations ordered by the Secretary General are referred to the Board. In the light of these, the Board may decide to initiate a sanction proceedings or not.
•Sanction proceedings (Art.R621-38 et seq, Monetary and Financial Code)
If the Board decides to initiate a sanction proceedings, it serves a statement of objections to the person whose conduct is in question, by registered letter with return receipt, or by hand-delivered letter with signed receipt, or by bailiff's order, together with the inspection or investigation report.
The statement of objections is referred to the Chairman of the Enforcement Committee.
The person who is the subject of the complaint ("the respondent") has two months in which to submit a written response to the Chairman of the Enforcement Committee. The statement of objections confirms the duration of the response period; it also informs the respondent that further information and copies of the evidence can be otained from the Enforcement Committee and that he or she can be assisted or represented by an advisor.
The Chairman of the Enforcement Committee assigns the case either to the full Committee or to one of its divisions, and appoints a member of the Enforcement Committee to act as rapporteur. The rapporteur may seek the assistance of the AMF's staff if required. The respondent may be heard at his own request or if the rapporteur considers it expedient. The rapporteur can also hear anyone else he deems necessary.
If the rapporteur considers that there are additional grounds for complaint or that the charges concern persons other than the respondent, he submits a request to that effect to the Board. The Board acts on the rapporteur's request in accordance with provisions of the Monetary and Financial Code.
The rapporteur draws up a report on the results of these proceedings and sends it to the respondent by registered letter with return receipt, or by hand-delivered letter with signed receipt, or by bailiff's order.
The respondent is ordered to appear before the Enforcement Committee or one of its divisions within a period that may not be less than thirty clear days. Notice is served by registered letter with return receipt, or by hand-delivered letter with signed receipt, or by bailiff's order. The letter informs the respondent that he or she has fifteen clear days in which to submit written observations on the report.
Any member of the Enforcement Committee is entitled to withdraw from sanction proceedings. In this case, when the Committee meets, the person is replaced in accordance with the terms of Article R.621-7.
The respondent may challenge a Committee member in the following conditions:
1° the rapporteur can be challenged within one month of the announcement of his appointement;
2° a member of the division due to deliberate the case can be challenged within 14 days of the announcement of the division's membership;
3° if the respondent is not informed of the motive of disqualification within the period specified in paragraphs 1° or 2°, he may challenge any member no later than the end of the meeting of the Enforcement Committee.
The request for disqualification is made by the respondent or his representative. It takes the form either of an instrument filed with the Enforcement Committee secretariat, which issues a receipt, or a statement recorded by the secretariat in a report. To be valide, the request must state precisely the grounds for disqualification and be accompanied by supporting evidence.
The secretariat sends a copy of the request to the Committee member concerned, who must then stand down from the case until a decision has been taken. Once informed of the request, the member has eight days in which either to accept disqualification or to reject it and explain why.
If the member accepts the disqualification request, he or she is replaced. If not, the Committee votes on the request. The respondent or his representative is informed by any means of the date on which the request will be examined as well as the possiblity of submitting verbal comments. The challenged member is not present when the Committee makes its decision. The rapporter takes part in the deliberations providing he is not the challenged member. The Committee informs both the person making the request and the challenged member of its decision. If the disqualification is accepted, the member in question is replaced.
Actions taken by the disqualified member before he was informed of the disqualification request may not be challenged.
The Committee's decision cannot be appealed separately; it must be appealed along with the final decision regarding the complaints.
•Enforcement Committee hearing
The hearing is based on an adversarial procedure. The hearing may be held in public. However, without consultation or at the request of the respondent, the Chairman of the Committee (or the division) may conduct all or part of the proceedings in camera for the sake of public order, national security or if a public hearing would compromise business secrecy or any other legally-protected secret.
The Chairman of the Committee (or the division) is responsible for keeping order during the hearing.
The Board is represented at the hearing by a person appointed for that purpose by the AMF Chairman. The person is not necessarily a member of the Board or the AMF staff.
Firstly, the rapporteur presents his case. The Director General of the Treasury or his representative may submit observations. The Board representative may also submit observations in support of the complaints made against the respondent. The respondentand his advisor, if he has one, then present the arguments in defence. The Chairman of the Committee (or the division) can hear any person he deems necessary. The respondent and his advisor are entitled to have the last word. If the Committee (or the division) decides it does not have sufficient information, it instructs the rapporteur to pursue his enquiries.
When the hearing is complete, the Committee (or the division) reaches its decision. Only its members and an AMF employee, acting as secretary for hearing, are present; the rapporteur and the Director General of the Treasury or his representative leave the chamber.
The secretary for the hearing draws up a report, which is signed by the Chairman of the Committee (or the division), the rapporteur and the secretary himself before being forwarded to the members of the Enforcement Committee and the Director General of the Treasury or his representative.
•Settlement (Art. L621-14-1, Monetary and Financial Code)
When the investigation or inspection report drawn up by the Autorité des marchés financiers (AMF) cites a breach of professional obligations by any person referred to in 9 of II of Article L.621-9, in a and b of II of Article L.621-15, with the exception of persons referred to in 3,5 and 6 of II of Article L621.9, involving the professional obligations referred to in Article L.621-17, the Board sends a statement of complaint to the relevant person, which may be accompanied by an offer of settlement.
This proposal suspends the relevant time period in which action must be taken. Any person to whom a settlement has been proposed undertakes to pay a sum to the Treasury not exceeding the total fines applicable under III of Article L.621-15, in an agreement with the AMF Secretary General.
The agreement is submitted to the Board for validation, upon which it then goes to the Enforcement Committee for approval. The approved agreement then becomes public. If no agreement is approved or if there is a breach of this agreement, the Enforcement Committee receives the statement of objections.
Decisions taken by the Board and the Enforcement Committee are subject to appeal.
•Sanction (Art. L621-15, Monetary and Financial Code)
The Committee may impose sanctions on the following persons:
- professional entities under the supervision of the AMF, for any breach of professional obligations established by law; regulations or rules of professional cinduct approved by the AMF;
- natural persons (individuals) under the authority of or acting on behalf of such entities;
- any other person whose practices contravene legislative or regulatory provisions, when such practices infringe upon investors' rights or impair the orderly operation of markets.
Professionals supervised by the AMF are liable to sanctions related to the conduct of their business activity, i.e. a warning, reprimand or temporary or permanent ban on providing some or all of the services previously provided. In lieu of, or in addition to, these sanctions, the Enforcement Committee can also impose a fine of up to €100 million or ten times any profit earned. The money is paid into the guarantee fund to which the sanctioned person is affiliated or, failing that, to the Treasury.
Individuals acting under the authority or on behalf of professionals may be liable to a warning, reprimand, temporary suspension or withdrawal of their professional licence, and a temporary or permanent ban on conducting some or all business activities. In lieu of, or in addition to, these sanctions, the Enforcement Committee can also impose a fine of up to €15 million or ten times any profit earned in the case of the practices referred to in II c. and d. of Article L621-15, or, in other cases, up to €300,00 or fifteen times any profit earned. The money is paid into the guarantee fund to which is affiliated the person on whose authority or behalf the sanctioned person is acting; failing that, the money is paid to the Treasury.
Other persons perpetrating acts referred to in II s. and d. of Article L621-15 may be subject to fines of up to €100 million or ten times the amount of profits earned. The money is paid to the Treasury
• Enforcement Committee decision
The Enforcement Committee decision mentions by name the members of the Committee (or the division) that dealt with the case. The respondent is informed by registered letter with return receipt, or by hand-delivered letter with signed receipt, or by bailiff's order.
The decision is communicated to the Director General of the Treasury or his representative and to the Chairman of the AMF, who reports back to the Board.
A decision concerning an investment services provider other than an investment management company, is also communicated to the Autorité de contrôle prudentiel (ACP).
The decision also stipulates any prosecution fees that are to be borne by the person who has been sanctioned.
The Enforcement Committee may publish the sanction decision in any publication, journal or report it chooses. If, however, publication could serioulsy disrupt financial markets or cause undue damage to the parties involved, the Committee may decide not to publish the decision.
The Enforcement Committee'e decisions are suject to appeal by the respondent and by the AMF chairman, after agreement with the Board, within a periode of two months of the notification date. In the case of appeal by the respondent, the AMF chairman may, by the same right, institute an appeal.
Appeals are heard by the Paris Appeals Court, except for sanctions concerning regulated firms or individuals (ISPs, direct marketers, investment advisors, custodians, members of regulated markets, etc.) which are heard by the Conseil d'Etat.
Updated: 5 July 2011