Listing a FCIMT’s Shares

In theory a FCIMT’s shares can be listed on the Paris stock exchange but so far the decree needed to set out the conditions with which an application must comply has not been issued.

Advertising and the FCIMT

The rules on advertising FCIMTs are particularly strict. Article 23 of the 1988 law specifically prohibits advertising of any kind designed to raise subscriptions for shares in a FCIMT which invests in futures and options.

Financial canvassing, as defined in Law 72-6 of 3 January 1972, is also forbidden. The term includes going to visit people at their homes, businesses or in a public place on a regular basis to recommend, that they subscribe, purchase, exchange or sell shares or take part in share transactions. Writing or telephoning them or sending them circulars is also forbidden.

There is no distinction between institutional or private investors, nor between public or private offerings under these restrictions. However, one is allowed to advertise FCIMTs and their investment advantages in a general way. Guidelines for general advertising are provided in the COB’s Monthly Bulletin 131 of November 1980.

The COB has also indicated that it is acceptable for a fund manager, banker or stockbroker to advise its clients on particular FCIMTs for whom it conducts discretionary investment management services.

Selling Offshore Managed Futures Funds

The consent of the French Ministry of Finance and of the COB is required in order to market an overseas fund to the public in France and this is rarely, if ever, granted. ‘Private placements’ of foreign funds incorporated in an EC Member State are permitted (that is without Ministry of Finance approval or registration with the COB) provided:

1. marketing is limited to institutional investors who purchase for their own account, as long as the total number of potential investors contacted is under 300 (this exception allows contact by telephone or circulars);
2. no form of advertising (as defined below) is used;

3. any intermediaries in France do not have the power to conclude contracts on behalf of the overseas fund.

If marketing is conducted (whether directly or through intermediaries) which results in more than 300 investors being contacted, this constitutes a public offering. Further, there should be no solicitation of other funds since any investment by another fund may result in the French authorities deeming that there had been a public offering (that is, indirectly to the investors in such a fund).

Solicitation (for example, the making of telephone calls or sending circulars) is generally prohibited. However, calls and mailings to a limited number of financial institutions and sophisticated non-financial institutions are permitted. Also, French banks and certain other financial institutions including stockbrokers and portfolio managers can recommend investments to existing clients without being considered in breach of the solicitation rules if they notify the authorities and make the relevant filings. Otherwise, their communication must be strictly limited to informing their clients of the existence of a new product.

Any specific form of advertising is likely to constitute a public offering. `Advertising‘ includes advertising by any medium and includes the distribution of prospectuses or circulars. This means no public announcements or advertisements. Prospectuses, sales memoranda and other information should not be generally available. It is possible, however, to make a general announcement informing the public of the existence of a new product (without naming the specific fund), indicating the name of the person to contact for further information.

Legislation

The Capital Investment Companies Act of 1957 regulates domestic investment funds in Germany and this Act imposes a number of restrictions on the investment scope of such funds.

Investment in futures and options is limited very strictly to hedging purposes only. The only route to selling a managed futures fund in Germany is to use the offshore route.

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Regulation of Managed Futures Funds in Europe Part 6

• Regulation of Managed Futures Funds in the US and Japan
• Regulation of Managed Futures Funds in the Principal European Offshore Centers (continue...)
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• Regulation of Managed Futures Funds in the US and Japan
• Regulation of Managed Futures Funds in the Principal European Offshore Centers
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