AMF : The AMF has the power to impose sanctions

Sanctions

Who may be sanctioned?

The Enforcement Committee may issue sanctions against:

• professionals under AMF supervision if they breach their professional obligations under the law, regulations and professional rules approved by the AMF
• individuals acting under the authority or on behalf of these professionals
• any person that commits market abuse, including insider dealing, price manipulation or dissemination of false information, or any other breach that could impair investor protection or interfere with orderly markets.

What kinds of sanctions may be issued?

The applicable sanctions vary depending on the type of respondent and offence. Where issued, fines are paid either to the Treasury or to the guarantee fund to which the professional belongs.

 (*) For breaches committed on or after 24/10/2010 (cf. Act 2010-1249 of 22 October 2011).

Procedure and Enforcement Committee hearing

The Board opens sanction proceedings

After reviewing inspection and investigation reports, the AMF Board decides whether to open sanction proceedings. If it does initiate proceedings, it serves a statement of objections on the person whose conduct is in question. The statement is also sent to the Chairman of the Enforcement Committee. The respondent has two months to submit observations to the Chairman of the Enforcement Committee and may be assisted or represented by a counsel. The Board receives a copy of this document and may issue a written response.

The Enforcement Committee’s rapporteur examines the case

The Chairman of the Enforcement Committee appoints a committee member to act as rapporteur for the case and determines whether it will be assigned to the full committee or one of the six-member divisions. The rapporteur may interview the respondent, the Board representative or anyone else deemed necessary. If the rapporteur considers that there are additional grounds for complaint or that the charges concern persons other than the respondent, he or she may refer this matter to the Board. 

Disqualification of an Enforcement Committee member
If there is a serious reason to doubt his or her impartiality, the rapporteur, or any member of the Enforcement Committee, may be disqualified either at the person’s own request or at the request of the respondent (Article L.621-15 III bis of the Monetary and Financial Code).

The rapporteur draws up a report on the findings of the examination, which is sent to the respondent and to the Board representative, both of whom are entitled to add their observations. The respondent is then ordered to appear before the Enforcement Committee.

Enforcement Committee hearings are open to the public and adversarial

Enforcement Committee hearings are held in public, unless the chair of the committee or division decides to conduct some or all 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. Hearings are announced on the AMF website and usually take place at the offices of the AMF.

Hearings are based on an adversarial procedure. Firstly, the rapporteur presents the case. The Board representative explains the objections and proposes a fine and/or disciplinary penalty. The Director General of the Treasury may also submit observations. The respondents along with any advisors then present the arguments in defence at the end of the hearing.

Deliberations

When the hearing is complete, the Enforcement Committee rules on the case. Only its members and an AMF employee acting as secretary are present. Decisions are reached by majority vote. Unlike the Chairman of the AMF Board, the Enforcement Committee Chair does not having a casting vote in the event of a tie.

Enforcement Committee decision

Reasoned

The Enforcement Committee makes a reasoned decision, setting out the factual and legal grounds on which the ruling is based.
The decision is communicated to:

• the respondent, by registered letter with return receipt, or by hand-delivered letter with signed receipt, or by bailiff's order
• the Director General of the Treasury or his or her representative
• the Chairman of the AMF, who reports back to the Board
• the Autorité de Contrôle Prudentiel (ACP) if the decision concerns an investment services provider under its jurisdiction.

Public

The Enforcement Committee’s decision is published on the AMF website, unless publication could seriously disrupt financial markets or cause undue damage to the parties involved. The committee may also have the sanction decision published in any publication, journal or report it chooses, at the cost of the respondent. By publishing its decisions, the committee reminds participants of the legal rules and explains the reasoning, content and purpose of the sanctions imposed. Thus informed, professionals are in a better position to understand the rules they must abide by.

Appealable

Enforcement Committee decisions are subject to appeal by the respondent and by the AMF Chairman, after agreement from the Board, within a period of two months of the notification date.

Appeals are heard by:

• the Paris Court of Appeals, in cases of market abuse; or
• the Conseil d’État, in cases involving professionals, including ISPs, direct marketers, FIAs, depositories and members of regulated markets.

History of the AMF’s enforcement powers

When the AMF was established in 2003 the Enforcement Committee was set up to ensure that the authority’s enforcement powers were consistent with the principles of due process and fair trial. Separating the prosecutorial and enforcement bodies ensures compliance with the requirements of Article 6 of the European Convention on Human Rights. Read on for a short history of the AMF’s enforcement powers.

Timeline of the AMF’s enforcement powers. In 2003, prosecutorial and enforcement powers have been separated. In 2007, the ability to disqualify members of the Enforcement Committee was introduced. In 2008, the maximum fine that the Enforcement Committee may issue was increased and the principle of Board representation at Enforcement Committee hearings was introduced. In 2010, sanction decisions were published and sanction hearings were open to the public. The maximum fine that the Enforcement Committee may issue was increased again

2003:prosecutorial and enforcement powers separated

Separation of prosecutorial and enforcement powers: other examples
Other regulatory authorities also have an Enforcement Committee that is separate from the Board, including the ACP, the Autorité de Régulation des Jeux en Ligne (ARJEL), which regulates online gambling, and the Commission de Régulation de l’Energie (CRE), the energy regulator, which has a separate Dispute Settlement and Enforcement Committee.

Financial Security Act 2003-706 of 1 August 2003 established the AMF and its Enforcement Committee, putting an end to the previous situation, which involved several enforcement authorities (Conseil des Marchés Financiers, Commission des Opérations de Bourse, Conseil de Discipline de la Gestion Financière). Now the AMF Enforcement Committee alone is empowered to issue administrative and financial penalties. The law clearly separates the Board and its Enforcement Committee and thus separates the authority’s prosecutorial and enforcement powers (Article L. 621-2, I of the Monetary and Financial Code). Accordingly, each stage in sanction proceedings is assigned to a distinct collegial authority (Article L. 621-15 I of the Monetary and Financial Code) and the functions of Enforcement Committee member may not be combined with those of Board member (Article L. 621-2, IV of the Monetary and Financial Code).

2007: ability to disqualify members of the Enforcement Committee

In the wake of rulings by the Conseil d’État in 2006 and 2007, in which several Enforcement Committee decisions were overturned owing to non-impartiality of an Enforcement Committee member, Act 2007-1774 of 17 December 2007 introduced the ability to disqualify Enforcement Committee members (Article L. 621-15, III bis of the Monetary and Financial Code) either at their own request or at the request of the respondent. The implementing decree for this legislation was published on 2 September 2008.

2008: tougher penalties and Board representation at hearings

In 2008 Economic Modernisation Act 2008-776 of 4 August 2008 increased the maximum fine that the Enforcement Committee could impose on AMF-supervised ISPs and professionals and on persons charged with market abuse: the limit was raised from €1.5 million to €10 million (or ten times any profits earned). Meanwhile, Decree 2008-893 of 2 September 2008 introduced the principle of Board representation at Enforcement Committee hearings. The representative, appointed by the AMF Chairman, may be a Board member or a member of an AMF department (Article R. 621-40 I bis and II of the Monetary and Financial Code).

2010: a complete and transparent enforcement process

Banking and Financial Regulation Act 2010-1249 of 22 October 2010 put the final touches to the operating arrangements and transparency of the AMF enforcement process.

1. Enhanced role for the Board

During the sanction procedure, the Board representative may:

• be interviewed by the rapporteur reviewing the case
• have access to the case file
• make observations in response to the rapporteur’s report and be aided or represented by AMF departments.

During the hearing, the representative, who does not have a vote, may:

• offer observations to support the objections
• suggest a sanction.

Once the decision is made and with the Board’s agreement, the Chairman of the AMF may appeal against Enforcement Committee decisions.

2. Announcement of committee decisions and public hearings

The legislation provided for sanction decisions to be published as an exception, but they were eventually published in principle. The Banking and Financial Regulation Act introduced measures to enhance transparency still further by making sanction hearings open to the public.

3. Increased maximum fine

The maximum fine that the Enforcement Committee may issue was increased again:

• from €10 million to €100 million (or ten times any profits earned) for ISPs and professionals under AMF supervision and for persons charged with market abu
• from €1.5 million to €15 million for individuals acting under the authority or on behalf of an ISP or a professional under AMF supervision.