AMF : Information about Financial Investment Advisor status (FIA)

Role and missions of financial investment advisors (FIAs)

Until the Law on Financial Security of the 1st of 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
  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 or one or more of the units mentioned at Article L.229-7 of the Environment Code (Art. D. 321-1 of the Monetary and Financial Code).

  investment advice (shares, bonds, shares in SICAVs or units in common funds, derivatives, etc.),
• advice on investment services (reception-transmission of orders for third parties, order execution for third parties, discretionary portfolio management, etc.), 
• advice on the execution of transactions in miscellaneous property (subscription of life annuities, etc.).

The FIA may also receive an order from a client who wishes to subscribe to shares or units in collective investment undertakings (for example UCITS or OPCIs) 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.

The AMF has specified the extent to which, and under what terms, what is generally known as "corporate finance advice" comes under number 3 of article L. 321-2 of the Monetary and Financial Code and may be undertaken without approval or any particular professional status. The DOC-2018-03 position paper produced together with ACPR clarifies the demarcations between corporate finance advice, which is not regulated, and non-guaranteed investment and investment advice services, which can only be provided by regulated professionals.

FIA professional requirements

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, good repute and professional skill.  

Conditions of age, good repute and 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.

Take out professional indemnity insurance

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.

Join a professional association

All FIAs must join one, and only one, professional association authorised by the AMF. This association monitors its members' professional work at the individual level and is responsible for their rights and interests at the collective level. The list of authorised associations may be viewed on the AMF website. When considering new FIA applications, the association checks that the applicant has a programme of activity and assesses the quality of that programme (article L.514-4 of the Monetary and Financial Code).

Be registered with the ORIAS

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, good repute, insurance cover and membership of an FIA association. This register also lists tied agents, banking transaction and payment service intermediaries and insurance intermediaries. The Financial intermediaries register (ORIAS). This register allows a single registration of financial intermediaries, thus making it possible to identify, for each of them, the various authorisations they have.

Not receive any funds that are not related to the exercise of its FIA functions, nor any financial instruments

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.

Pay an annual contribution to the AMF

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.

FIA organisation and business conduct rules

In order to carry out its mission and ensure investor protection, the FIA must comply with the organisation and good conduct rules set out in articles L.541-8 and L.541-8-1 and detailed in articles 325-3 et seq. of the AMF General Regulation

Duty of support and transparency

The FIA must in particular comply with the following obligations:

• behave honestly, loyally and professionally in the best interests of the clients,
• conduct its activity, within the limits allowed by its status, with the skill, care and diligence required in the best interests of its clients, in order to offer them a service that is adapted and proportionate to their needs and objectives,
• obtain information from its clients or potential clients, before offering any advice, about their knowledge and experience in investment matters, and their financial situation and investment objectives, in order to recommend operations, instruments and services that are adapted to their situation and when providing advice on investments or the supply of investment services must obtain information about their ability to absorb loss and their appetite for risk. When clients or potential clients do not provide the required information or if no service or instrument is suitable for the client, the FIA must refrain from making recommendations to them,
• inform clients in an appropriate manner of the legal nature and scope of any relations it might have with institutions promoting the products and mentioned in Point 1 of Article L.341-3 of the Monetary and Financial Code (establishments authorised to commission or undertake direct marketing activities), and provide all useful information for the client to make their decision, plus all information concerning their remuneration terms, notably the pricing of their services.
• provide the client with information on the costs and expenses of the recommended transaction or of the service being provided. The information must be given to the client in advance and if the relationship is on-going must be provided in advance each year.

All information sent by an FIA, including promotional information, must be accurate, clear and not misleading.

Unless it informs the client that the advice is being provided on an independent basis, 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 inform its client to this effect,
• the purpose of this payment, commission or non-monetary benefit must be to improve the quality of the advice service that is provided and must not be detrimental to compliance with the FIA’s obligation to act honestly, loyally, professionally and in the best interests of the client.

The AMF has published a guide for FIAs that presents the new analogue FIA regime that has come into force in France following the implementation of MIF 2 by illustrating its various impacts on FIA business.

Particular duties applying to independent advice

FIAs must tell their clients whether the advice being provided is independent. Where advice is provided on an independent basis, the FIA:

• must base that advice on assessment of a sufficiently wide and diversified range of financial instruments: and
• may not retain any benefits or remuneration received or given by third parties.

FIAs may not permit the natural persons they employ to provide both independent and non-independent advice.

Governance of financial instruments

FIAs must:

• identify the target market of each financial instrument they advise;
• ensure they understand the financial instruments they advise, assess whether they are compatible with client requirements, particularly in terms of the target market that has been identified, and must also ensure that no financial instruments are proposed or recommended unless they are in the client's interest.

Provide the client with all due information about its activity

The FIA must provide each new client with a document indicating as follows:

Information in correspondence or advertising documents
All correspondence or advertising issued on any medium by an FIA acting in that capacity, must indicate:
>its name or corporate name,
>its professional address or that of its registered office,
>its FIA status and the identity of the professional association it belongs to,
>its ORIAS registration number.

• its name or corporate name,
• its professional address or that of its registered office,
• its FIA status,
• its ORIAS registration number,
• the identity of the professional association it belongs to,
• its position as direct marketer and the identity of its principal(s), if applicable,
• 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.
• whether the FIA provides investment advice that is independent or non-independent or a combination of both types, explaining the scope of these types of advice,
• any other regulated status, if applicable,
• how the FIA and the client can communicate with each other

Draft a letter of engagement

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 may be drafted according to a template prepared by the professional association to which the FIA belongs. It will include the following in particular: 

• acknowledgement by the client of the existence of the letter,
• the nature and terms of the service to be provided,
• the terms on which information will be provided to the client by the FIA,
• the terms and conditions of the FIA's remuneration,
• whether the advice is provided on an independent or non-independent basis; whether the advice is based on a wide or more restricted analysis of various product types and whether the FIA provides a regular assessment of the suitability of the products recommended to the client,
• general information on recommended products and investment strategies and on the different levels of cost and expense.

Formalise its investment proposals

The advice provided to the client is formalised in a written declaration of suitability showing:

• the different proposals, 

• 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.

  their advantages, 
• the risks they involve.

These proposals must be based on:

• an appraisal of the financial situation of the client, 
• their knowledge of financial matters, 
• their investment objectives.

The document must explain why the recommendation is suitable for the client and how it meets the client's own aims and needs concerning investment term, the client's knowledge and experience and the client's appetite for risk and its ability to absorb loss.

Have adapted resources and procedures

The FIA must have the resources and procedures needed to undertake its business properly and must use those resources and procedures efficiently.

When it employs several people dedicated to its activity, the FIA must have the organisation and written procedures needed to ensure that its business meets all legal and ethical requirements..

It must also:

• implement written internal rules to ensure compliance with regulatory and legislative requirements against money laundering and the financing of terrorism;
• implement resources and written procedures to avoid, manage and handle conflicts of interest;
• introduce and maintain an efficient and transparent procedure for the reasonable and fast processing of complaints from its clients.

Take training courses adapted to their activity and experience

Each year, the FIA must take training courses organised by their professional association to keep their knowledge up to date.

Role and missions of the AMF…

FIAs are subject to two levels of regulation. FIAs are members of an association authorised by the AMF.

… relating to FIAs

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.

… relating to FIA associations

The AMF is in charge of the authorisation of FIA associations. The list of authorised associations is available on the AMF website.

No later than 31 May of each year, the professional association must provide the AMF with a copy of its balance sheet and income statement for the latest financial year, and of the annual report describing, among other things, for the previous calendar year, audits carried out and their filing, training courses dispensed or selected.

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.

The AMF has audit and enforcement powers over FIA associations.

The AMF may also withdraw the authorisation of a professional association when: 

• the association no longer meets the conditions or commitments of its initial authorisation,
• the association has not made use of its authorisation within the previous twelve months,
• the association has been inactive for at least three months.