II-6.3 : The Autorité des Marchés Financiers (French Financial Market Authoritiy) approves the code of deontology for asset management, April 28th and December 15th 2009

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Context and Summary

Since 1990 and the first codes of good practice published by the Association Française de la Gestion Financière (French Asset Management Association – AFG), asset management professionals have played a major role in defining the rules of good practice. Indeed, every AFG member must comply with the good practice rules applying to its business. In this regard, two board meetings of the AMF unified the rules applying to the asset management industry. The first step of this harmonisation was the meeting of April 28th, 2009, during which the AMF approved the good practice provisions of the Code prepared by the AFG. These new professional standards were extended on a second meeting on December 15^th, 2009. After having collected the opinion of the industry’s professional associations, that is to say the Association Française des Etablissements de Crédit et des Entreprises d’Investissement (French Association of Banks and Investment Firms – AFECEI), the Board decided that the provisions of this Code will apply to non-AFG asset management firms and to other investment services providers offering portfolio management services for third parties. 

Brief commentary

The decisions of the AMF Board illustrate the increasing collaboration between regulators and professionals in the lawmaking process. Three remarks can be made on this specific process. First, it reveals the ever more technical nature of regulated areas. Regulation therefore requires precise knowledge of both the economic and legal rules applying to the area concerned, and the goals and expectations of the sector’s actors and users. It therefore means that regulators have major powers in the implementation and the formation of public policy in major economic areas such as financial markets, energy, etc. However, the trend is towards involving professionals in the lawmaking process, in order to benefit from a better understanding of the issues at stake, and also to facilitate compliance with the rules. In this regard, it must be recalled that article 314-2 of the AMF’s General Regulations stipulates that professional organisations can draw up a code of conduct, thus contributing to self-regulation of the industry. Each code has to be officially approved by the AMF. Pursuant to this monitoring power, the AMF ensures that these private rules are compatible with its General Regulation. Following this official approval, violations of these private professional standards may be sanctioned by the AMF. Such a process bears witness to an inversion of the lawmaking process, where rules originate from professionals before being confirmed and made binding by the AMF. However, this system reveals that professionals still need the legitimacy of the AMF in order to appear credible before the market and investors.