The AMF reminds financial investment advisors of their professional obligations when using financial product listing platforms

The Autorité des Marchés Financiers (AMF) has noted the use by some financial investment advisors (FIAs) of financial product listing platforms, that have often a regulated status. While such recourse is not in itself contrary to regulations, it does not exempt FIAs from their professional obligations.

Obligations of FIAs using platforms

The AMF has observed that platforms, sometimes referred to as groupings of asset management advisors, give FIAs access to a range of listed products analysed by the platforms, and even to templates of regulatory and contractual documents, or tools. The products concerned may include both financial instruments, which may be the subject of investment advice from FIAs, and other products that may fall within the scope of FIA’s "other asset management advisory activities", such as shares.

The use of a platform takes the form of a contractual membership under which the FIA undertakes to generate the majority of their sales from products listed by the platform. The FIA may therefore be required to pay back part of the sales generated to the latter.

The AMF found that the information provided to clients by FIAs could be ambiguous as regards their links with the platform, for example by emphasising the notion of independence from the platform, even though the FIA has a significant business relationship with the platform despite the fact that there is no shareholding link. The AMF reiterates that FIAs must provide their clients with clear, accurate and non-misleading information about the conduct of their business.

The AMF also noted that FIAs could rely heavily on the analyses carried out by platforms on the financial products they advise, without taking ownership of the content of these analyses, or supplementing or correcting them where necessary. The AMF reiterates that FIAs remain responsible for complying with their professional obligations when they use the services of third parties, whether regulated or not. It is therefore necessary for FIAs to carry out due diligence on the listed products they plan to advise without relying passively on these platforms, in order to be able to comply with the following professional obligations, to which they are subject, set out in Article L. 541-8-1 of the Monetary and Financial Code:

“to conduct their business with due skill, care and diligence, in the best interests of their clients, in order to provide them with a range of services suitable and proportionate to their needs and objectives”;
“to understand the financial instruments that they offer or recommend, assess their compatibility with the needs of the clients to whom they provide advice, in particular in relation to the defined target market, and ensure that financial instruments are only offered or recommended when it is in the client's interest”.

The AMF stresses that the contractual arrangements between the platform and the FIA must not encourage the FIA to advise financial products to their clients that are not suited to their profile.

The AMF further points out that:

FIAs are subject to an annual training obligation, which must be adapted to their activity and experience. This training must enable them to carry out appropriate due diligence to analyse and understand the products on offer;
if FIAs are not familiar with the economic and legal characteristics of the products listed, they must refrain from advising them.

FIA status possibly adopted by platforms

When providing investment advice, platforms must adopt a regulated status. In practice, this is sometimes FIA status. However, it can happen that these platforms do not provide investment advice even though they have FIA status.

In this regard, the AMF notes that FIA status is not appropriate for an entity that does not provide investment advice. In accordance with Article L. 541-4 III of the Monetary and Financial Code, an FIA's membership of its professional association may be automatically withdrawn by the association if the FIA has not started business within twelve months of becoming a member or has not exercised their business for at least six months.

It should also be noted that FIA status does not allow the platform to provide the non-guaranteed placement service referred to in Article L. 321-1 (7) of the Monetary and Financial Code. In addition, FIAs may only provide the order reception and transmission service referred to in (1) of the same article in respect of collective investment scheme units or shares that they have previously advised to the client, in accordance with Article L. 541-1 II of the Monetary and Financial Code, and Article 325-32 of the AMF General Regulation.

The AMF draws the attention of FIAs affiliated with platforms to the fact that the rules governing FIA status were designed to govern the activity of investment advice independently of any other, possibly unregulated, activities carried out by these platforms. The adoption of FIA status by the platforms can therefore in no way be used to reassure their partners.

As a general rule, FIAs are reminded that they may only market financial instruments as part of an investment advice service, which requires the production of regulatory documentation (initial relationship document, letter of engagement, suitability statement).

Before providing any investment advice, FIAs must comply with the following obligations in particular:

have analysed the recommended product as part of their obligation of due diligence and product governance (legal and economic characteristics of the product, identification and understanding of the target market, etc.) and verified the lawfulness of the marketing;
have obtained from their clients the necessary information about their investment knowledge and experience, as well as their financial situation, including their capacity to bear losses, and their investment objectives, including their risk tolerance and any sustainability preferences, and have assessed the suitability of the product in the light of each client's specific situation;
have provided clients with the information they need to make a decision, particularly on the risks associated with the financial instruments offered. All information, including promotional information, must be clear, accurate and not misleading.

These requirements are also accompanied by obligations, particularly with regard to transparency, in terms of the remuneration received and paid by FIAs, as well as the need to put in place an appropriate system for managing conflicts of interest.