FRANCE: Decree setting out characteristics of securitisation vehicles subject to the (AIFMD) regime published

Tuesday November 25 2014

Decree no. 2014-1366, dated 14 November 2014, setting out the characteristics of securitisation vehicles subject to the Alternative Investment Fund Managers Directives (AIFMD) regime has been published in the Journal Officiel.

Pursuant to article L. 214-167-I of the French Code monétaire et financier (the Financial Code), as a general rule, securitisation vehicles, even though characterised as alternative investment funds (AIFs), are exempted from the regime applicable to AIFs, which is laid down in articles L. 214-24-1 et seq. of the Financial Code, implementing into French law the Alternative Investment Fund Managers Directive. However, in order to prevent recourse to securitisation structures to circumvent the AIFMD regime, article L. 214-167-II provides that, by way of derogation, securitisation vehicles having certain characteristics to be specified by decree are subject to the AIFMD regime. This is the purpose of decree no. 2014-1366.

In accordance with the provisions of the decree, a securitisation vehicle is subject to the AIFMD regime if it is exposed, by more than 50% of its assets (to be calculated in accordance with the methodology provided in the decree), to risks either through (i) financial instruments or (ii) any other asset that does not represent an exposure to an insurance or credit risk, to the extent that such instruments or assets are managed by the management company on a ‘discretionary basis’. Pursuant to the decree, management would be deemed not to be carried out on a ‘discretionary basis’ if the management company takes any decision to, amongst other things, buy or sell a financial instrument or to enter into, manage or terminate a financial contract: in accordance with the limiting conditions specified in the relevant securitisation vehicle’s articles of incorporation/regulations, and for the purposes of complying with the underlying assets’ eligibility criteria set out therein; or due to new circumstances and provided the decision is not exclusively aimed at, with respect to (i) financial instruments or the assets referred to above, generating gains over the initial purchase price and (ii) financial contracts, obtaining the payment of the outstanding amount to the benefit of the securitisation vehicle.

Notwithstanding the above, certain securitisation vehicles, which are listed in the decree, are subject to the securitisation vehicles’ common regime, even though having the characteristics described above (e.g. French fonds de prêt à l’économie).

The decree applies to (i) new securitisation vehicles as from its entry into force and (ii) existing securitisation vehicles as soon as the latter’s articles of incorporation/regulations are revised in order to substantially amend their investment strategy.

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