Friday December 2 2016

News Source: Fund Regulation

Focus: Other

Type: General

Country: France




The possibility of providing for redemption gate mechanisms, currently available to hedge funds, professional general purpose funds and specialised profession funds, is to be extended by a provision of a new Bill. The French Financial Markets Authority (AMF) will determine the circumstances and conditions under which fund management companies will use these mechanisms. The AMF has launched a public consultation until 30 December 2016 on proposals for amendments to its General Regulations and its doctrine.

UCITS, general-purpose investment funds (FIVG), private equity funds (FCPR, FCPI and FIP), private equity funds and professional employee savings funds, will have the facility to cap redemptions temporarily in exceptional circumstances and where it is in the interests of the unitholders. The AMF is consulting on the conditions under which management companies will use these mechanisms.

The General Regulation proposes:

  • specific situations that allow the activation of the mechanism;
  • imposing the principle of capping redemption requests in the same proportions for all unitholders;
  • requiring management companies that decide to activate the gate to inform the AMF;
  • defining the criteria and calculations of elements of the relevant threshold for triggering the gate;
  • requiring management companies to determine a prior maximum duration of use of the gate.

In addition, the AMF consultation sets out the content of a new instruction on practical arrangements for implementation of these redemptions cap mechanisms in the same fund.

These new rules will not apply to the cap mechanisms already used by hedge funds (FFA), professional general purpose funds (FPVG) and specialised professional funds (SPF).

The AMF proposes to enrich the guidance on the applicability of gates in OPCIs marketed to retail investors by imposing, under normal circumstances, a minimum threshold for redemption gates.

Click on the above link to view the Consultation (French).