AMF’s Supervisory Priorities for 2020

On January 8, 2020, the Autorité Des Marches Financiers (AMF) published its 2020 supervisory priorities for asset management companies and market intermediaries, including those regarding distribution. The document notably lists the themes involving Supervision des Pratiques Opérationnelle et Thématique – “operational and thematic supervision of practices” (SPOT) inspections, a new shorter format of inspections introduced in 2018 as part of the AMF’s strategic plan #Supervision2022.

Objective

This publication serves to highlight certain areas of risk that the regulator has identified and to encourage regulated firms to look more specifically at some of their practices in light of applicable professional obligations. It is also an opportunity for the regulator to draw attention to specific areas of focus and identify the operational issues associated with practical implementation of the regulations.

Target audience
  • Collective investment management firms, including portfolio asset management companies
  • Investment services providers other than portfolio asset management companies – Investment firms and credit institutions authorized to provide investment services
  • Financial investment advisers 

 
Focus Areas for 2020 – Portfolio Management

Outsourcing of Compliance Controls
AMF will focus on asset management companies using external service providers to carry out their permanent compliance controls since the control function plays a key role and companies remain in any case responsible for performing this function.

Liquidity Risk Management
As part of the European Securities and Markets Authority’s (ESMA) common supervisory action, the AMF will conduct work on liquidity risk management in Undertakings in Collective Investments in Transferable Securities (UCITS). The aim is to check whether asset management companies managing UCITS comply with their obligations, by analyzing, in particular, the liquidity of portfolios, processes involved, methodologies and data used, and implemented governance and control arrangements.

Granting Loans
Since November 2018, specialized professional funds and professional PE funds have been able to grant loans. The AMF notes that this new activity is growing steadily among asset management companies and will consequently carry out targeted inspections on this activity, which will include examining the system for selecting, assessing and measuring borrowers’ credit risk, the legal and operational framework for loans granted and the associated debt recovery.

Cyber Security
Following on from the SPOT and regular inspections carried out in 2019, and in view of the risk areas identified, the AMF has decided to repeat the theme of cyber security for its 2020 inspections. The investigations will focus more specifically on the process for collecting and managing cyber security incidents and the supervision and monitoring by portfolio asset management companies of their critical IT service providers, whether internal or external (e.g. providers of business applications and tools for communicating with depositaries, valuers and account-keepers).

Anti-Money Laundering and Counter-Terrorism Financing
Since the fifth European directive on preventing the use of the financial system for money laundering and terrorism financing has to be transposed into national law at the beginning of 2020, the AMF has decided to implement its supervisory policy based on its understanding of the risks arising from information collected from asset management companies. Where appropriate, the AMF will focus on this theme in its standard inspections and will gather information and hold meetings with stakeholders.

Focus Areas for 2020 – Market Intermediaries

Markets in Financial Instruments Directive (MiFID 2) – Implementation of Reporting, Post-Trade Transparency and Best Execution Provisions
A campaign of SPOT inspections will be run in 2020 involving institutions that distribute financial instruments to assess their compliance with these obligations relating to the identification of a target market and distribution strategy.

Liquidity Contracts
As a reminder, the AMF introduced liquidity contracts as an “accepted market practice” despite the negative view published by ESMA. Given this background, the AMF plans to conduct SPOT inspections of investment services providers, as agreed with ESMA, with the objectives of assessing the relevance of the organization put in place by market makers.

Provision of Cross-Border Services
The AMF will take part in ESMA’s work on cross-border cooperation and will continue to assess French institutions’ compliance arrangements.

Provision of Cross-Border Services
The AMF will keep on accompanying market participants through the transitional use of benchmarks to alternative risk-free rates.

Focus Areas for 2020 – Distribution

Markets in Financial Instruments Directive (MiFID 2) – Product Governance
A campaign of SPOT inspections will be run in 2020 involving institutions that distribute financial instruments to assess their compliance with these obligations relating to the identification of a target market and distribution strategy.

Markets in Financial Instruments Directive (MiFID 2) – Suitability Requirements
The AMF will conduct SPOT inspections on the implementation of the MiFID 2 requirements in order to review how investment services providers implement the provisions on suitability (information on the knowledge, experience, financial situation and investment objectives of the client, including its ability to bear losses and its risk tolerance). This supervision priority is part of ESMA’s common supervisory action.

Monitoring of Financial Investment Advisers
The AMF will in 2020 implement the framework for sharing information conceived with professional associations last year and plans to amend its General Regulation in order to establish legally, within each association, the function responsible for the mechanism for sharing information with the AMF. One of the purposes of such information sharing will be to inform associations of potential breaches identified by their members, which they can then review at the request of the AMF.

Action Taken by the ACPR-AMF Joint Unit
In 2020, the Autorité De Contrôle Prudentiel et de Resolution- Autorité Des Marches Financiers (ACPR-AMF) Joint Unit – set up in 2010 in order to enable staff from both authorities to work together on client protection issues – will focus on marketing around savings products as well as on the information provided to clients when marketing products described as “sustainable”, once the applicable framework has been clarified.

The 2020 supervisory priorities can be read in its entirety here.   

 
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