AMF calls on investment services providers to take account of the specific nature of temporary ownership dismemberment when marketing SCPI units

Protecting investors is the AMF's top strategic priority. During a series of short, thematic inspections at four distributor institutions, the AMF found that very little attention was paid to the specific features of temporary ownership dismemberment in the provision of investment services involving units in real estate investment companies (SCPIs). In its summary, it recalls the regulations, explains its expectations, and highlights the good and poor practices observed.

Temporary ownership dismemberment splits ownership rights between bare ownership on the one hand, and usufruct on the other, over a predefined period. This particular method of subscribing to SCPI units, to meet the specific needs of some investors, adds complexity to an investment in what is already a complex financial instrument, such that distributor institutions must be particularly vigilant about complying with the rules on investors’ protection laid down by MiFID II.

Carried out between April and August 2023, short, thematic audits, known as SPOT (Supervision of Operational and Thematic Practices), analysed how institutions took account of the specific features of this subscription method when marketing SCPI units.

The AMF focused on how the specific features of temporary ownership dismemberment were taken into account in the system that manages subscriptions to SCPI units, in addition to the characteristics of the dismemberment itself, and the management of potential conflicts of interest and the compliance system.

Given the complexity of this type of investment, the regulator might have expected a tightened marketing system, however, on the contrary, it noted numerous shortcomings in the practices of the four institutions on the panel. For example, some were unable to justify why they recommended this particular subscription method over a full ownership investment, or may have provided insufficient or even incorrect information about the costs and charges for these investments. More generally, the four institutions tended to rely too heavily on the responsibility of their partner asset management companies, at the risk of failing to protect and act in the best interests of their clients.

With the aim of stimulating distributor institutions, the AMF is publishing a summary of its observations, highlighting both the good and poor practices found.

About the AMF

The AMF is an independent public authority responsible for ensuring that savings invested in financial products are protected and that investors are provided with adequate information. The AMF also supervises the orderly operations of markets. Visit our website https://www.amf-france.org/en