June 2023 Regulatory Updates

Key dates

19 June 2023

- AMF Enforcement Committee decisions issued, imposing fines and warnings

Suggested considerations

• Conduct immediate gap analysis of investment advisory processes against AMF expectations for suitability assessments, client classification, product matching, and control systems.
• Enhance traceability and documentation of suitability checks, client categorizations, and cost disclosures to demonstrate operational effectiveness.
• Review and strengthen internal procedures for marketing instruments, ensuring alignment with client profiles and regulatory marketing authorizations (cross-reference to similar past cases).
• Implement or audit remedial measures, as considered in fine calculations, including staff training on professional obligations.
• Test controls for providing clear cost information to clients, avoiding misleading disclosures.

What changed

• This is an enforcement action rather than new legislation, but it reinforces existing regulatory requirements under French Monetary and Financial Code and MiFID II transposition:
• Obligation to implement an effective operational system for assessing investment suitability in advisory services.
• Requirement for compliant client classification procedures aligned with regulations.
• Duty to market only financial instruments suited to client profiles.
• Mandate for effective control systems over investment advisory activities.

Key dates

June 19, 2023

- AMF publishes initial discussion paper on DeFi regulatory issues

September 30, 2023 Deadline

- Deadline for stakeholder contributions to the discussion paper

July 10, 2024

- AMF publishes summary of responses to the discussion paper

Suggested considerations

• Submit feedback (past deadline): Stakeholders could contribute by September 30, 2023, to [email protected].
• Monitor developments: Track AMF/ACPR follow-ups, including smart contract certification discussions.
• Conduct internal assessments: Analyze DeFi exposures using IOSCO criteria—identify responsible persons, risks (operational, AML/CTF), interconnections with TradFi, and ensure disclosures/conflict management.
• Enhance compliance programs: Prepare for proportionate rules on governance, cybersecurity, solvency, transparency; align with "same risk, same regulation" for DeFi-like activities.
• Engage stakeholders: Participate in AMF ecosystem dialogues at French/EU/international levels.

What changed

• This is a discussion paper and consultation, not binding legislation, so no immediate regulatory changes or requirements are imposed. Key discussion points include:
• Defining DeFi based on decentralization criteria (e.g., automation, network architecture, governance, lack of single points of failure).
• Distinguishing permissioned vs. permissionless protocols and public vs. private blockchains.
• Regulatory approaches to smart contracts (e.g., certification, varying responsibilities), open-source code, and governance.
• Adopting IOSCO recommendations: identify responsible persons (developers, DAOs), enforce risk management, disclosures, conflict-of-interest mitigation, and applicable laws.