The Senate is discussing a bill on financial security, the purpose of which is to restore public confidence in the financial markets. The bill's main proposal is to merge the two financial supervisory authorities, the Commission des operations de bourse and the Conseil des Marchés Financiers, into a single authority, the Autorité des Marchés Financiers.

No such reorganization is contemplated with respect to the banking authorities. Nevertheless, this bill is important to the banking sector insofar as it reforms the rules governing banking solicitation activities.

First, banking and financial solicitation activities would be subject to the same set of rules. The bill proposes a broader definition of 'financial or banking solicitation activities', namely:

"any unsolicited contact, whatever the means used, with a determined individual or legal person, in order to persuade that person to enter into a transaction on financial instruments or banking transaction, or accept the provision of an investment service."

However, the bill expressly excludes certain situations from the scope of the rules governing financial and banking solicitation activities. The most important of these is contact with professional investors, as defined by French law, and with companies exceeding a certain size. Additional types of contact are also excluded from the scope of the rules governing financial and banking solicitation activities, including contact:

  • within the premises of intermediaries authorized to carry out financial and banking solicitation activities;

  • undertaken upon a legal person's request within its professional premises; and

  • with a person which is already a client of the soliciting party, when the transaction proposed is usual for that person.

The bill still requires that financial and banking activities be carried out by credit institutions, investment firms, insurance companies or their authorized European equivalents. However, it adds two categories of authorized intermediaries: investment advisers and companies proposing financial products to their employees in accordance with the regulations governing employee saving schemes.

The categories of instruments for which any kind of financial or banking solicitation would be prohibited are broad and imprecise. They include:

  • instruments the maximum risk of which is not known at the time of their subscription, or those which imply a risk of loss which would be higher than the financial amount initially invested;

  • instruments which are not authorized to be marketed in France (where such authorization is necessary);

  • instruments which are not listed on a regulated market or a recognized foreign market; and

  • units in certain collective investment vehicles.

These categories are likely to be amended by Parliament.

Finally, the bill clarifies the information duty imposed on the intermediaries carrying out financial or banking solicitation activities without appreciably changing its substance.

For further information on this topic please contact Philippe Portier or Raphaële Navelet-Noualhier at Jeantet & Associés by telephone (+33 1 45 05 81 96) or by fax (+33 1 47 04 87 98) or by email ([email protected] or [email protected]).