Summary of spot checks on promotional literature for French and foreign UCIs marketed by distributors – focus on ESG aspects

On 11 July 2024, the Autorité des Marchés Financiers (“AMF”), France’s financial regulator, released the results of an audit focusing on non-financial criteria in the promotional literature of French and foreign collective investment undertakings (“UCIs”) from six investment service providers (“ISPs”), primarily private banks and distributors. These ISPs either produced their own sales literature or used materials from asset management companies.

Key Findings

ISPs lacked specific systems for addressing non-financial criteria and failed to comply with ESG disclosure regulations. The AMF’s position-recommendation 2020-03 (the “AMF Doctrine”) was not widely adopted, and ESG characteristics were poorly promoted in marketing documentation.

Additionally, distributors either used asset management companies’ marketing documents without due diligence or created their own, often leading to non-compliant information. Specific checks on marketing materials for ESG-featured funds revealed many anomalies. According to the AMF, ESG characteristics in these documents must be proportionate and consistent with regulatory documentation, avoid misleading visuals, and correctly represent general ESG practices without overemphasis. Foreign funds frequently neglected to include required disclaimers in their marketing documents and failed to specify that they did not have prospectuses available in French. This resulted in unclear and misleading information.

AMF Doctrine

The AMF Doctrine sets stringent rules to prevent greenwashing in fund products marketed as sustainable or ESG-aligned to French investors. It requires these products to meet higher standards than those specified by the Sustainable Finance Disclosure Regulation (“SFDR”), including minimum investment criteria where a certain percentage of assets must support the non-financial strategy. Applicable to Undertakings for the Collective Investment in Transferable Securities (“UCITS”) and Alternative Investment Funds (“AIFs”) marketed to retail investors, the AMF Doctrine mandates clear communication of these criteria in marketing materials and Key Information Documents (“KIDs”). Non-French funds that do not meet these standards must include certain disclaimers. Compliance may require changes in fund management, subject to shareholder approval.

Best Practices Recommended

Recommendations include training employees on ESG criteria, providing checklists for mandatory checks, developing a compliance warnings library, integrating product governance with sales documentation, ensuring asset management companies approve marketing documents, and distributing unmodifiable promotional communications in PDF format.

How Zeidler Can Assist

The audit highlighted significant non-compliance with the AMF Doctrine, indicating a need for better adherence to regulations to ensure clear, accurate, and non-misleading ESG disclosures in marketing materials. If you market your funds in France, particularly if you promote ESG-related aspects, it is important that you consult with your advisors to ensure compliance with the AMF Doctrine.

We provide compliance analysis of the AMF Doctrine and assistance with completing the required AMF forms for all funds that mention non-financial characteristics in their KIDs and marketing materials. If you have any questions or need support, the ESG Division is here to help. Our global team of professionals stays up to date on the latest legal, regulatory, and compliance changes affecting the asset management industry.

For additional information or assistance, please get in touch with us.