print from the website of the AMF
Published on May 17, 2013
Introduced by Law n° 2003-706 on Financial Security of 1st August 2003, the purpose of Financial Investment Advisor (FIA) status is to enhance investor protection through better supervision of these players in financial product distribution. Each FIA is subject to a certain number of obligations and prohibitions, supervised by the AMF.
Until the Law on Financial Security of 1st August 2003, financial investment advice was provided by professionals under a number of different names: asset management advisors, financial advisors, financial experts, etc. To protect investors, the role and missions of the financial investment advisor (FIA) are now governed by the Monetary and Financial Code and the AMF General Regulation.
The regular business of FIAs consists in providing:
Investment advice is defined as providing personalised recommendations to third parties, either at their request or at the initiative of the company providing the advice, concerning one or several transactions in financial instruments (Art. D. 321-1 of the Monetary and Financial Code).
The FIA may also receive an order from a client who wishes to subscribe to shares or units in collective investment undertakings (CIS, OPCI, securitisation schemes, SCPI, SEF, SICAF) for which it has provided advice services beforehand.
The FIA may prospect clients to propose its financial investment advice. It may also appoint natural persons to carry out such direct marketing on its behalf.
When the FIA is a legal entity
When the FIA is a legal entity, it is the natural persons holding management or administration powers over that legal entity that must fulfil the conditions of age, fitness and properness, and professional skill.
Conditions of age, fitness and properness, professional skill, having insurance and membership of an authorised professional association, etc. All financial investment advisors (FIA) must comply with a certain number of administrative, professional and moral obligations.
The FIA must be able to provide proof at any time of the existence of an insurance policy covering it for the financial consequences of its professional civil liability in the event of a breach of its professional obligations. The minimum cover levels of this professional liability policy are set out in Art. D. 541-9 of the Monetary and Financial Code.
All FIAs must join one, and only one, professional association authorised by the AMF. This association is responsible for collective representation of its members and the defence of their rights and interests. The list of authorised associations may be viewed in the GECO database.
The FIA must not receive any funds from its clients other than those intended as remuneration for its financial investment advice service. Nor may it receive financial instruments from its clients.
FIAs must pay the AMF an annual contribution of a fixed sum of €450 for the AMF’s mission in supervising compliance by FIAs with the provisions applicable to them.
Each FIA must be listed in a register held by the ORIAS, after checking that the FIA fulfils the professional requirements in terms of professional skills, fitness and properness, insurance cover and membership of an FIA association. This register also lists tied agents, banking transaction and payment services intermediaries and insurance intermediaries.
In order to carry out its mission and ensure investor protection, the FIA must comply with good conduct rules.
The FIA must comply with the following obligations:
All information sent by an FIA, including promotional information, must be accurate, clear and not misleading.
When the FIA pays or receives a fee, commission or non-monetary benefit to or from a third party relating to the advice service it provides to its client:
The FIA must provide each new client with a document indicating:
if applicable, the identity of the institution(s) promoting the products and mentioned in Point 1 of Article L.341-3 of the Monetary and Financial Code (investment companies, credit institutions, etc.) and in which it holds a significant stake or commercial interest.
Before offering advice, the FIA must submit a letter of engagement to its client, written in duplicate and signed by both parties. This letter of engagement is drafted according to a template prepared by the professional association to which the FIA belongs. It includes notably:
The advice provided to the client is formalised in a written report showing:
Confidentiality of client information
The FIA must not disclose or make use of information relating to the client outside the scope of its mission, on its own behalf or that of any third party, without the express authorisation of the said client.
These proposals must be based on:
The FIA is subject to the rules governing agreements between producers and distributors of financial instruments (Art. L.533-13-1 of the Monetary and Financial Code).
The FIA must implement the technical resources and procedures required for the exercise of its activity.
When it employs several people dedicated to its activity, the FIA must define an organisation and written procedures. It must also implement written internal rules to ensure compliance with regulatory and legislative requirements against money laundering and the financing of terrorism.
The FIA must implement resources and written procedures to avoid, manage and handle conflicts of interest.
The FIA must attend each year training arranged for or selected by their association to update their knowledge.
FIAs are subject to two levels of regulation. FIAs join an association which is authorised by the AMF.
The AMF has powers to audit FIAs.
The AMF Enforcement Committee may sanction FIAs in the event of a breach of the rules and obligations applicable to them. The applicable sanctions may include a warning, a reprimand or a temporary or permanent prohibition from providing all or part of their services.
Instead of or in addition to these sanctions, the Enforcement Committee may pronounce a fine of an amount not exceeding €100 million or ten times the amount of any profits that might have been made.
Also, since the Law on Banking and Financial Regulation of 22 October 2010, the AMF may delegate audits of FIAs to FIA associations. It may also sanction FIAs in the event of any breaches revealed by such delegated audits.
The AMF is in charge of the authorisation of FIA associations. The list of authorised associations is available on the AMF website.
At the latest by May 31 of each year, Within six months of the close of the fiscal period, the professional association must provide the AMF with a copy of its balance sheet and income statement for the last reporting period, and of the annual report describing, among other things, audits carried out and their filing, training courses dispensed or selected for the previous calendar year.
It must also inform the AMF of any changes to the characteristics indicated in its initial authorisation application. The AMF then informs the association of any consequences there might be for its authorisation.
Any modification of the Code of Ethics must be submitted for the prior approval of the AMF.
Since the Law on Banking and Financial Regulation of 22 October 2010, the AMF has had audit and enforcement powers over FIA associations.
The AMF may also withdraw the authorisation of a professional association when:
Head of publications: Florence Gaubert, Executive Director of AMF Communication Directorate.
Contact: Communication Directorate – Autorité des marches financiers 17 place de la Bourse – 75082 Paris cedex 02