What are the relevant statutes and which government authorities are responsible for investigating and enforcing them?
The main regulations in France are:
- European Union regulations and directives (such as the EU Market Abuse Regulation and Regulation (EU) No. 600/2014); and
- the French Monetary and Financial Code.
The primary securities enforcement authority in France is the Financial Markets Authority (AMF). Created by Law No. 2003-706 of 1 August 2003 on financial security, the AMF is an independent public body with a remit to: safeguard investments in financial products; ensure that investors receive material information; and maintain orderly financial markets. It regulates financial markets and market infrastructures, listed companies, financial intermediaries authorised to provide investment services and financial products.
To fulfil its remit, the AMF is granted with a normative power, the right to conduct investigations and inspections, and enforcement powers enabling it to impose financial and disciplinary sanctions.
Therefore, the AMF’s investigators have been granted with various investigatory powers enabling them to request any documents, interview anyone who may be useful to the investigation, enter business premises and, in the course of investigations only, carry out house searches and seize documents based on a reasoned order from a judge with territorial jurisdiction.
The AMF can take disciplinary sanctions against professionals acting under its supervision, but it also has the power to bring administrative proceedings against natural and legal persons.
With regard to market abuse (which can be considered both an administrative and a criminal offence), the National Financial Prosecutor (PNF) – created by Law No. 2013-1117 of 6 December 2013 on combating major economic and financial crimes – and consequently the investigating magistrates of the financial division of the Paris High Court have the exclusive jurisdiction to investigate and prosecute market abuse that constitutes a criminal offence. For nearly 30 years, a person committing market abuse could be sentenced both by the AMF’s Enforcement Committee and by a criminal court under French law.
However, French Law No. 2016-819 of 21 June 2016 prohibited duplicate proceedings in instances of market abuse and created a process of case referral in light of: (1) the Grande Stevens case, in which the European Court of Human Rights stated, on the grounds of the ne bis in idem principle, that the double repression of securities law violations was forbidden; and (2) a decision handed down by the Constitutional Council, which deemed this double-jeopardy system to be contrary to the Constitution.
Article L465-3-6 of the Monetary and Financial Code now states that if the AMF or the PNF intends to bring proceedings against a person for market abuse, it must inform the other authority of its intent and the latter shall have two months to contest it. In the case of disagreement between the two authorities, the Paris Court of Appeal’s Attorney General is empowered to decide which authority will handle the case. If not provided by law, it appears that the PNF will handle the most serious market abuse cases.
When market abuse is considered a criminal offence, the PNF carries out all the necessary actions to determine the truth, such as searches, seizure of documents and witness interviews. Furthermore, where market abuse is committed by an ‘organised gang’, the PNF may take advantage of measures such as surveillance, infiltration, wiretapping, recording conversations and filming certain premises or vehicles.
Under French law, only the AMF’s Secretary General or their delegate has the power to decide to open an investigation. They usually do so after an alert has been brought to the authority’s attention. Such an alert often comes from the AMF’s Market Surveillance Directorate, which monitors transactions on a daily basis. An investigation may also be opened following a complaint or an alert sent by a third party, notably a whistleblower or a report of suspicious transaction from investment services providers. Moreover, the AMF can open an investigation based on a request to do so by a foreign authority.
There is no written standard concerning what level of suspicion of wrongdoing is required to open an investigation, and it is not possible to deduce one from the practice of the AMF. The decision of the AMF’s Secretary General to open an investigation is discretionary. However, it could reasonably be argued that they will make such a decision only if the alert is sufficiently serious.
The PNF, on the other hand, does not monitor the markets as the AMF does, which means it can be less reactive. This partly explains why most market abuse cases are handled by the AMF.
What conduct is most commonly the subject of securities enforcement?
The AMF can carry out inspections and investigations and has the investigatory powers to do so.
Inspections are focused on ensuring that professionals under the AMF’s supervision, and individuals acting on their behalf, comply with their professional obligations as set out in the Monetary and Financial Code or in the AMF General Regulation. A wide range of legal issues can be detected in the course of inspections.
Investigations, on the other hand, aim to detect a breach of obligations that could undermine orderly market activity, whether it is committed by a listed company, an individual, an institutional investor or a market professional. Investigations undertaken by the AMF mainly concern market abuse (i.e., insider dealing, price manipulation and dissemination of false information, which are prohibited by Articles 7 and 12 et seq. of the EU Market Abuse Regulation) and listed companies that do not fulfil their informational duties. As highlighted in the AMF’s 2021 Annual Report, more than half of investigations (56 per cent) deal with cases of insider dealing and 16 per cent deal with market manipulation.
The PNF’s investigations mainly concern market abuse that is considered a criminal offence, which is prohibited by Article L.465-1 et seq. of the Monetary and Financial Code.
Pursuant to Article L621-15 of the Monetary and Financial Code, the AMF can investigate and sanction:
- financial intermediaries and market infrastructures, and the individuals under their authority or acting on their behalf, for any breach of their professional obligations established by laws and regulations;
- listed companies and their representatives for any breach of their legal obligations regarding the dissemination of regulated information; and
- any natural or legal person that has engaged in or attempted to engage in market abuse.
Criminal authorities, on the other hand, can investigate and sanction any person – natural or legal – that has engaged in or attempted to engage in market abuse.
What legal issues commonly arise in enforcement investigations?
A number of issues may arise in securities law enforcement investigations, including: the statute of limitations; document production, seizure and privilege; international cooperation; witness interviews; and protection of whistleblowers.
Statute of limitations
In France, Law No. 2017-242 of 27 February 2017 on criminal offences and Law No. 2019-486 of 22 May 2019 on administrative offences increased the limitation period for charges for security and related violations from three years to six years following the day the act is committed, subject to what follows.
The starting point of the limitation period varies according to the nature of the offence. For an instantaneous offence (such as insider dealing), it begins when the violation is committed. For continuous offences (such as breach of a professional obligation that would remain through the time), it is deferred to the date of the last illegal action taken by the individual.
After the aforementioned laws entered into force, the starting point of the limitation period was delayed for secret and concealed securities laws violations to the date on which they could be discovered under circumstances enabling prosecution. However, to avoid the risk of offences being imprescriptible, the French legislature specified that prosecutions against criminal and administrative offences would, in any event, be time-barred for 12 years following the day on which the offence was committed. With respect to criminal matters, this new rule enshrined in legislation the ruling of the Court of Cassation of 10 December 1925, which was rendered on the principle that the limitation period shall not run against those who are not in a position to take action (contra non valentem agere non currit praescriptio).
However, there seems to be an evolution happening with regard to administrative offences. In an important case where investors who had invested in a hedge fund many years prior realised that they had not been provided with all legal information pertaining to their investment, the Enforcement Committee refused to report the limitation period’s starting point on the grounds that it was up to the AMF to detect securities laws violations in due course.
In light of the above, we can reasonably expect that the AMF’s Enforcement Committee will have a strict appreciation of what can be deemed a secret or concealed offence.
Moreover, French law distinguishes between the suspension of the limitation period and its interruption. For the latter, a new limitation period will start running when the cause of interruption ends. With regard to the suspension of the limitation period, Article L621-19 of the Monetary and Financial Code states that if a settlement occurs, the limitation period will be suspended and, in cases where an approved agreement is not reached, the limitation period resumes from the time the procedure failed.
As the law is silent on causes of interruption, the AMF’s Enforcement Committee devised its own approach. For example, the Secretary General’s decision to open an investigation will interrupt the statute of limitations, as will the act of summoning a witness to an interview. With regard to criminal offences, the limitation period is interrupted by any act performed by the prosecutor, a law enforcement officer or an investigating magistrate. It is also interrupted by any decision handed down by a court.
There is no rule on how long a securities or related investigation will typically take – it can vary from a few months to more than a year. However, pursuant to the AMF’s investigation and inspection guides, investigators are committed to closing their investigations as soon as possible.
Document production, seizure and privilege
Unlike law enforcement officers – who can carry out dawn raids and seize documents both in private and business premises in the conditions set forth by Articles 56 et seq. and 76 et seq. of the Code of Criminal Procedure without any judicial prior authorisation (subject to the authorisation of the searched party under Article 76) – the AMF’s investigators have the power to enter business premises but are not allowed to conduct dawn raids on their own initiative or to seize documents. They will enter business premises in nearly all cases, irrespective of the seriousness of the allegations.
However, pursuant to Article L621-12 of the Monetary and Financial Code, when an investigation has been opened for market abuse or acts that may constitute property crime and be sanctioned by the AMF’s Enforcement Committee, the AMF’s Secretary General is entitled to file a request before the liberty and custody judge of the regional court in whose jurisdiction the premises to be searched are located to obtain an order authorising the AMF’s investigators to carry out dawn raids, in any place, and to seize documents. This request must contain all the information in the AMF’s possession that justifies such a search. During the inquiry, a law enforcement officer will ensure that due process is followed and inform the judge of their progress.
As investigators have no coercive power in investigations, it is up to the person concerned to accept or refuse to produce a document. Thus, the production of documents plays a crucial role.
Nevertheless, Article L642-2 of the Monetary and Financial Code states that anyone who obstructs an inspection or investigation of the AMF or who provides it with inaccurate information shall incur a penalty of two years’ imprisonment and a fine of up to €300,000. In practice, this provision has led to very few sanctions being imposed, which tend to be in extreme cases. For example, in the Prologue Software case, where two individuals erased crucial information with correction fluid, both individuals were sanctioned with a €10,000 fine.
Law No. 2013-672 of 26 July 2013 created a new administrative sanction for obstruction. Article L621-15, II of the Monetary and Financial Code prohibits and sanctions refusal to: give access to a document; communicate information; comply with a summons; or grant access to business premises. For example, in 2018, the AMF’s Enforcement Committee imposed a €150,000 fine on an individual because he had ‘cleaned’ his mailbox of more than 38,000 emails before transferring the mailbox to investigators.
In a decision of 28 January 2022, the French Constitutional Council ruled that the accumulation of administrative and criminal sanctions for obstruction was unconstitutional (after having rendered a similar decision in the field of competition law); therefore, Articles L621-15 and L642-2 will soon have to be reformed.
With regard to the enforcement authorities’ ability to request production of materials protected by secrecy, as a principle professional secrecy does not affect the AMF’s right to ask for the communication of documents, whether to the person under investigation or to a third party. Nonetheless, Article L621-9-3 of the Monetary and Financial Code provides that ‘officers of the law’, including lawyers, bailiffs and court officers, can withhold documents from the AMF on the grounds of professional secrecy.
As provided for by the AMF Investigation Guide, investigators cannot attach privileged documents to the investigation file. In practice, however, investigators usually request a copy of the whole mailbox, whether it contains privileged documents or not, and seal it, then subsequently return the privileged documents if there are any (which is problematic as it means the investigators are in a position to review the documents). In addition, under Article 66-5 of Law No. 71-1130 of 31 December 1971, client–attorney privilege only protects the bilateral correspondence between the lawyer and their client. If a third party is added as a recipient of the correspondence, the information is no longer privileged.
As stated above, information may not be withheld from the AMF on the grounds of professional secrecy. However, on the grounds of the right to privacy, the Constitutional Council has held that the ‘fadets’ procedure, which authorised the AMF’s investigators to obtain data relating to telephone calls made by a person from telecommunications operators, did not offer proper guarantees to ensure a balance between the right to privacy and protection against breaches of public policy. Since Law No. 2018-898 of 23 October 2018 on the fight against fraud entered into force, Article L621-10-2 of the Monetary and Financial Code provides that, to obtain data from telecommunications operators, investigators must be authorised to do so by the ‘connection data’s request controller’.
With regard to outside jurisdictions, Law No. 68-678 of 26 July 1968 on the disclosure of documents and information of an economic, commercial, industrial, financial or technical nature to foreign individuals or legal entities aims, inter alia, to protect French companies that may be required to produce these documents in connection with foreign administrative or judicial proceedings by punishing any person who attempts to obtain, or who collects, information and documents outside the channels provided for this purpose by the international treaties and conventions on mutual legal assistance. However, Articles L632-1 and L632-2 of the Monetary and Financial Code provide that, as an exception to the provisions of Law No. 68-678, the AMF can cooperate with foreign authorities. Therefore, if a foreign authority is seeking documents located in France, it will have to comply with the relevant cooperation agreement provisions, which will generally mean having to request the AMF’s cooperation.
International and bilateral cooperation
According to Article L632-1 of the Monetary and Financial Code, during an investigation the AMF can cooperate and exchange information with equivalent authorities of the other EU Member States or of the other states in the European Economic Area.
The AMF can also conclude international bilateral agreements directly with foreign authorities for cooperation purposes. The AMF is notably one of the signatories of the 2002 International Organization of Securities Commissions Multilateral Memorandum of Understanding concerning consultation and cooperation and the exchange of information.
According to the AMF’s 2021 Annual Report, the AMF sent 362 requests for assistance in 2021 to approximately 50 foreign regulators, of which more than 18 per cent were addressed to the United Kingdom’s Financial Conduct Authority (compared with 20 per cent in 2020 and 40 per cent in 2019, which is likely to be an effect of Brexit). The AMF itself received 162 requests for assistance from foreign counterparts in 2021. In this regard, among the 44 new investigations opened in 2021, 24 have been opened at the request of a foreign authority.
Findings by other law enforcement authorities are usually taken into account by the French authority.
In principle, unless otherwise specified by the concerned authorities, investigations are conducted in accordance with the requested authority’s laws and regulations. Therefore, the legality of investigations conducted by the requested authority can only be assessed in the light of the laws and regulations of that requested authority. The possible disregard for the laws of the requesting authority is not taken into account. However, the procedure followed by the foreign authority must comply with some of France’s fundamental principles, including the right to remain silent and to avoid self-incrimination, which are protected by the French Constitution and the European Convention on Human Rights.
In the Ubisoft case, for example, the AMF’s Enforcement Committee set aside the hearings conducted by the Financial Market Authority of Quebec on the grounds that the authority infringed Article 6 of the European Convention on Human Rights because the interviewee had to take a binding oath to tell the truth.
According to Article L621-10 of the Monetary and Financial Code, investigators are able to summon and to take statements from any person likely to provide them with information about an ongoing investigation. They can also gather explanations on-site. Article R621-35 of the Code imposes that the witness be summoned at least eight days in advance for them to have enough time to prepare their interview. This obligation also needs to be complied with when investigators gather explanations on-site, unless the interviewee has waived their rights.
During witness interviews, investigators must take minutes that mention the nature, date and location of their observations and that must be signed by the interviewee. However, during inspections, investigators are not obliged to take any minutes. The interviews will not be made public as investigators are bound by professional secrecy. However, decisions handed down by the AMF’s Enforcement Committee, which are public, may quote some parts of interviews.
Regarding the right to remain silent, the AMF’s Enforcement Committee considered that the ‘right not to be compelled to contribute to one’s own incrimination [should] be respected in the context of the investigation that precedes the referral to the Enforcement Committee’.
The French Council of State and the Paris Court of Appeal disagreed and considered that the rights of the defence, including the right to silence, apply only to sanction proceedings and exclude the preliminary investigation phase.
This state of the law was challenged in a judgment of the Court of Justice of the European Union of 2 February 2021, which recognised the right of individuals to remain silent from the investigation stage of market abuse investigations.
However, in its Investigation Guide, the AMF has specified that ‘the right to remain silent cannot justify any failure to cooperate with the competent authorities, such as a refusal to attend a hearing scheduled by them or dilatory manoeuvres aimed at postponing the hearing’.
When summoned for an interview by the AMF’s investigators, any person has the right to be assisted by the counsel of their choice, and investigators must inform the person of this right. This counsel does not have to be a lawyer.
Protection of whistleblowers
Since Law No. 2016-1691 of 9 December 2016 on transparency, the fight against corruption and the modernisation of the economy, also known as the Sapin II Law, entered into force, a specific plan of action has been put in place to allow the AMF to receive and process alerts raised by whistleblowers.
The system aims to ensure the protection of the author of the alert and is governed by Articles L634-1 to L634-4 of the Monetary and Financial Code.
Since this reform, whistleblowers are becoming a more important source of information for these investigations. Pursuant to the AMF’s 2017 Annual Report, the authority investigated more than 90 alerts received from whistleblowers in 2017.
What remedies and sanctions are available to government authorities?
Before closing an investigation, the investigators will provide the person whose conduct is in question with a ‘detailed letter’ setting out their analysis of the factual and legal information gathered during the investigation. The recipient has one month to respond. This period provides an opportunity to shed some light on the investigators’ suspicions and try to convince the AMF’s board that there is no basis for bringing sanction proceedings or that a settlement procedure would be preferable. It can also be used to explain the corrective measures that might have been taken since the investigation.
However, at this stage, the respondent does not have access to the whole file but is only provided with the key evidence selected by the investigators on a discretionary basis. It is advisable to be very careful with the explanations provided in response as they could be disproved by evidence the respondent is not aware of.
The AMF’s board is the prosecutorial body of the authority and, therefore, is entitled to instigate sanction proceedings and select charges based on the investigation report.
If the investigation does not reveal any violation of securities laws, the AMF’s board may issue a letter of observation reminding the person under investigation of their legal obligations or close the case. In the latter instance, the person being investigated will obtain confirmation that the investigation is closed following the board’s decision.
If the board deems that the investigation has revealed a violation of securities laws, it will have the choice of: opening sanction proceedings by notifying a statement of objections to the respondent, together with the AMF’s Enforcement Committee; or issuing a statement of objections and proposing a settlement. In the first instance, the respondent has two months to submit observations to the Enforcement Committee in response to the statement of objections.
The board will decide the charges on a discretionary basis and will do so whenever it deems that the evidence is sufficient to constitute a violation of securities laws.
When confronted with a securities law violation, the AMF’s Enforcement Committee has the power to issue a financial penalty or a disciplinary sanction, or both, the severity of which is assessed at its sole discretion. However, the French legislature has set out a non-exhaustive list of factors that can be considered when assessing the severity of the penalty to be imposed, namely:
- the seriousness and duration of the breach;
- the status and extent of involvement of the person concerned;
- the financial position and capacity of the person concerned, notably in light of annual income (for a natural person) or total turnover (for a legal person);
- the importance of the profits generated, or of any losses or costs avoided by the violation, insofar as they can determined;
- any losses incurred by third parties as a result of the violation, insofar as they can be determined; and
- the cooperation of the respondent with the AMF.
Pursuant to Article L621-15 of the Monetary and Financial Code, financial intermediaries acting under the AMF’s supervision can be fined up to €100 million or 10 times the amount of gains generated. The same sanction can be issued for any other person (issuer, executive, individual) who commits market abuse. For individuals acting under the authority or on behalf of a financial intermediary, the maximum financial sanction is €15 million or 10 times the amount of the profit earned.
Even if not provided by law, in market abuse cases the sanctions pronounced by the AMF’s Enforcement Committee generally represent two or three times the profits earned.
According to the AMF’s 2021 Annual Report, the Enforcement Committee imposed financial penalties ranging from €20,000 to €25 million, and totalling €61.11 million, in 2021. In 2020, the total was €29,655,000; in 2019, it was €32.3 million; and in 2018, it was €7.18 million. The 2018 total was very low compared with previous years – for example, in 2017, the Enforcement Committee imposed a penalty of €35 million against a French bank in a single decision, which was ultimately reduced by the Council of State to €20 million.
Pursuant to Article L621-15, III ter of the Monetary and Financial Code, ‘the extent to which the person concerned has cooperated with the financial markets authorities’ can be taken into account by the AMF’s Enforcement Committee when assessing the penalty amount. Moreover, a settlement procedure is more likely if there is cooperation during the investigation. The AMF Investigation Guide explains what behaviour is expected of persons who are asked to cooperate with an investigation. In accordance with the Guide, the person concerned should answer the investigator’s questions fairly; supply documents, files and explanations within a reasonable time frame; and remain impartial, professional and courteous throughout the investigation.
Pursuant to Article L621-14-1 of the Monetary and Financial Code, when the AMF’s board decides to notify a statement of objections to a respondent, it has the power to propose an administrative settlement procedure as an alternative to sanction proceedings. Since Law No. 2016-819 of 21 June 2016 entered into force, market abuse cases can be settled via this procedure.
Since the 2016 reform, 57 settlements have been reached in total, including 16 market abuse cases (between 2017 and 2021). For example, in July 2021, in a price manipulation case, the natural person concerned committed to paying a penalty of €300,000 to the French Public Treasury, while the profit generated was calculated to be €38,290. In another case, a natural person accused of insider dealing agreed to pay a penalty of €225,000, while the saving of loss was calculated to be €66,417.
One of the main advantages of the settlement procedure for the person who is the subject of an investigation is that the agreement does not involve an admission of guilt. In this regard, it is often expressly stated in the settlement that its conclusion does not constitute a sanction or an admission of wrongdoing. However, the facts that led the AMF’s board to issue a statement of objections against the respondent are usually exposed in the agreement concluded.
With regard to criminal offences, the French Judicial Public Interest Agreement, inspired by the deferred prosecution agreement in the United States, is solely available for legal entities suspected of acts of bribery, influence peddling, tax fraud, laundering of tax fraud proceeds or environmental offences. This settlement procedure is not available for market abuse.
1 Kiril Bougartchev and Emmanuel Moyne are the managing partners and Nathan Morin is an associate at Bougartchev Moyne Associés AARPI.
2 Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse.
3 Regulation (EU) No. 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No. 648/2012.
4 Article L621-1, Monetary and Financial Code.
5 id., Article L621-6.
6 id., Articles L621-10 and L621-12.
7 Article 705-1, Code of Criminal Procedure.
8 Grande Stevens and Others v. Italy, ECHR, 4 March 2014, Case No. 18640/10.
9 Article 706-1-1, Code of Criminal Procedure.
10 Articles L621-9 to L621-12, Monetary and Financial Code.
11 Referred to in id., Article L621-9II.
14 Articles L465-1 to L465-3-5, Monetary and Financial Code.
15 Financial Markets Authority (AMF), 16 March 2004, SAN-2004-01.
16 Article 8, Penal Code; Article L621-15, Monetary and Financial Code.
17 Court of Cassation (Criminal Division), 10 December 1925, Bull. 1925, No. 339.
18 AMF, 19 April 2012, SAN-2012-03.
19 AMF, 19 April 2012, SAN-2012-03.
20 AMF, 7 October 2010, SAN-2010-26.
21 Article 9-2, Penal Code.
22 Court of Appeal Paris (CA Paris), 15 January 2009.
23 AMF, 7 May 2018, SAN-2018-06.
25 Article L621-9-3, Monetary and Financial Code.
26 Constitutional Council, 21 July 2017, Case No. 2017-646/647.
27 Article L632-7, Monetary and Financial Code.
28 Court of Cassation (Commercial Chamber), 1 March 2017, Case No. 14-26.225.
29 AMF, 7 December 2016, SAN-2016-15.
30 Court of Cassation (Commercial Chamber), 24 May 2011, Case No. 10-18267.
31 Article R621-35, Monetary and Financial Code.
32 AMF, 24 November 2011, SAN-2012-02.
33 Council of State (CE), 12 June 2013, Case No. 359245.
34 CA Paris, 9 July 2020, Case No. 18/28497.
35 Court of Justice of the European Union, 2 February 2021, Case No. C-481/19.
36 Article L621-11, Monetary and Financial Code.
37 Article 144-2-1, AMF General Regulation.
38 Article L621-15, Monetary and Financial Code.
39 id., Article L621-14-1.
40 id., Article L621-15.
41 AMF, 25 July 2017, SAN-2017-07.
42 CE, 23 October 2019, Case No. 414659.
43 AMF, 7 July 2021, TRA-2021-05.
44 AMF, 22 July 2021, TRA-2021-06.
45 Article 41-1-2, Code of Criminal Procedure.