AMF s answer in relation to the European Commission s call for evidence on substitute investment products

Transcription

1 AMF s answer in relation to the European Commission s call for evidence on substitute investment By way of introduction, the AMF would like to emphasize that the European consultation on substitute is timely considering the need to ensure a coherent approach to investor protection and to avoid any misselling possibilities as regards different regimes applicable to different kinds of and intermediaries at national and European level. From a general standpoint, the AMF welcomes and shares the analysis made by the Commission in a context where continuing innovation in the structuring of retail investment has led retail investors and institutions who originate investment to be able to choose between a variety of product ranges which the retail investors needs. The Commission has conducted an extensive analysis of some distortions and has obviously identified many cases for action. If the competition between is undeniably a positive development for retail investors as a way to enhance the development of the EU market, the transformation of financial systems and product offerings (banking disintermediation, development of unit-linked life insurance ) has contributed to a transfer of risk and responsibility to retail investors. This trend has led to increase demand for information and advice from financial intermediaries which has been taken into account at a European level by the recent European directives on insurance mediation and markets in financial instruments and at national level by European financial regulators. However discrepancies prejudicial to investors remain. In the AMF s opinion, any financial instrument should be subject to the same rules as far as its sale is concerned, whether it is sold directly or within a wrapper (e.g., a structured note, a unit-linked life insurance contract). Where different rules are needed due to the specificities of some, wrappers or tax regime, this should not impact the level of protection of investors. In other words, different rules might remain only if they ensure in practice comparable levels of protection. Moreover, it appears that the analysis must not be limited to potential different regulatory treatment applicable to different, taking into account the fact that for a same type of different rules may apply depending on the distribution channel, the situation where the investment product is sold or the status of the intermediary. These requirements should be equally applied not only to all savings (direct investments in equities, UCITS mutual funds, units or shares in real estate companies or life insurance policies), but also to all types of producers and distributors (members of salaried networks or independent distributors) and all distribution channels (face-to-face or distance selling) to prevent or remedy competitive distortions. When distortions are identified, corrective action should be envisaged at a European level when it is not possible for national authorities to supplement them at a national level. Finally it is worthy of note that under French law, banking and services and life insurance contracts do not fall under the scope of supervision of the AMF. Therefore the contribution of the AMF in the following answers could only relate to items falling into its scope of competence. Question 1: Do you see that different regulatory treatment of substitute gives rise to significant problems? Please explain why you consider this to be the case. Yes. Different regulatory treatment of substitute can indeed give rise in certain cases to significant distortions, leading to regulatory arbitrage detrimental to UCITS, which are the most secured vehicle, and in the end detrimental to the level of protection granted to investors. Many of these distortions have been adequately captured by the excellent background paper provided by the Commission: 1. The discrepancies in the definition, the standardisation and the adaptation to the retail investor needs of the pre-contractual documents is a cause of concern and must be envisaged at a European level when it can not be solved at a national level (see answer to question 5).

2 The presentation features of structured notes governed by the Prospectus Directive are not adapted to the needs and understanding of retail investors while specific features apply for UCITS (being granted that these features are now under scrutiny in order to make them more effective). The European framework does not ensure that appropriate information is delivered to investors in UCITS wrapped in a Life insurance contract. 2. Investors in wrapped within Life insurance contracts or employee saving schemes do not benefit from the protective provisions of MiFiD as regards advice or best execution (see answer to questions 6 and 7). 3. As regards eligible assets, investment governed by the Prospectus Directive (especially listed-closed end funds and structured notes) are not subject to the same investment restrictions as UCITS. 4. Investment governed by the Prospectus Directive may be distributed to retail investors through indirect channels and without falling under the scope of public offering regime, which increases the transfer of risk and responsibility to retail investors without any efficient oversight. 5. Based on that experience, the Commission should bear in mind, when assessing the need for a private placement for non-harmonised funds, that this option could potentially grant to these funds a wider access than expected to the retail public of some Member States. In such a case, UCITS, still having to comply with specific requirements, would soon become outperformed and obsolete. 6. Discrepancies to be considered not only concern different financial, but also different distribution channels. As a first conclusion: -This situation is clearly not satisfactory and the AMF definitely identifies cases for action in the abovementioned examples. Where different rules are needed due to the specificities of some, wrappers or tax regime, this is perfectly understandable but should not impact the level of protection to investors. Any financial instrument and distribution channel should be subject to the same rules as far as its sale is concerned, whether it is sold directly or within a wrapper (e.g., a structured note, a unit-linked life insurance contract). -Where distortions are identified, corrective action should be envisaged at a European level when it is not possible for national authorities to supplement them at a national level (see answer to question 9). As indicated points 1 and 2 are more thoroughly discussed in the answers to the next questions. Points 3 and 4 may be supported by the arguments below: - On point 3: o governed by the Prospectus Directive (such as listed closed end funds, structured etc.) do not have to comply with the same investment rules as (coordinated) UCITS. In particularly they can invest in certain type of assets which are not eligible to UCITS. Therefore, there is a risk that that they might be used in order to circumvent stricter investment rules applicable to UCITS. Real-life examples of designed for that purpose have been encountered by the AMF. Such might offer exposure to risks that would not be allowed within a UCITS, for instance the risk of single hedge funds, gold or commodities. In the latest examples, a structured note offered a pay-off at maturity that was determined according to the result of a strategy describe as active, which is normally expected to be offered within a collective investment scheme. - On point 4: o Issuers with their headquarters in one Member State may offer their to investors in the host State when authorized by the home State regulator (principle of the single European passport), subject to the simple requirement of notifying the host regulator. However, when the product is listed on a regulated market in another Member State and proposed to investors through indirect channels such as a UCITS or units of account in life insurance policies. Because insurers (legally the owners of unit-linked ) and UCITS investment funds have the status of institutional investors, the in question do not fall under the scope of a public offering and the host State regulator is not even notified of their distribution to investors on its market. As a result, there is a transfer of risk and responsibility to retail investors and the host State regulator cannot exercise efficient and timely oversight over these. 2

3 Additionnally, the AMF notes that as regards independent oversight, UCITS must appoint an independent depositary which must ensure a first level of external control of the legitimacy of the UCITS's decisions and the fulfilment of its obligation to act in the best interest of the client, and which implies additional costs for UCITS. As a matter of fact, there is no equivalent requirement for the others investment. Question 2: Do you regard the perceived concerns relating to different levels of product transparency and intermediary regulation as a significant threat to the further development of EU markets for retail investment? x strongly agree somewhat agree no opinion somewhat disagree strongly disagree The fragmented landscape is undoubtedly an obstacle to the optimal development of EU markets for retail investment : Indeed different levels of product transparency and intermediary regulation increase the risk of having unacceptably high variations in the level of product disclosure and investor protection. Of course, cmpetition between must be seen as a positive and healthy factor of development of one single European market. Yet innovation in the structuring of retail investment and packaging of such investments propositions should not lead to circumvent inconvenient disclosure and regulatory requirements for the product originator or intermediary. If this turns out to be the case, the development of a fair competition between would be hampered, with a premium granted to the ones offering the lowest level of investor protection. This would obviously reduce the overall benefit for stakeholders, and increase the risk of a major loss of confidence in financial, which would durably jeopardize the development of the market. Question 3: Is it appropriate to regard different retail investment as substitutable - regardless of the legal form in which they are placed on the market? Which of the listed below should be considered as substitute investment? - UCITS funds x yes no - nationally regulated retail funds x yes no - exchange traded or listed funds x yes no - unit-linked life insurance (especially which mortality risk level is small or nil) x yes no - retail tranches of structured notes x yes no - some annuities; x yes no - some bank term deposits (e.g. with embedded optionality or structured deposits) x yes no - others (please list and describe) x yes (closed end funds) no What are the features/functionalities (holding period, exposure to financial/other risk, capital protection, diversification) that lead you to regard them as interchangeable? Have you encountered any legal or other definition which would encompass the range of 'substitute investment '? On the basis of the AMF experience all the abovementioned retail investment are to some extent substitutable, because of comparable features as regards risk, diversification or holding period. 3

4 That being said, some specificities of the French market are listed below: Although it seems that bank term deposits and more generally bank savings offered on the French market could be considered as easier to understand by retail investors, and are not distributed in the same circumstances as the other investments (they are bought and not sold ); they are now increasingly competing with cash funds and more aggressively promoted. As regards annuities, the AMF would like to mention that on the French market, employee saving schemes regulated at a national level are widespread and can be also used as wrappers for UCITS, as well as unit-linked life insurance. This kind of investment into UCITS competes with direct investment in comparable. It does not exist under French law any definition of what is a substitute investment. The AMF shares the view of the Commission as regards the main feature/functionalities for all these. As regards formula funds and structured notes, financial innovation has indeed considerably expanded the possible use of notes. At the beginning, notes were used by companies as a means of financing, whereas today notes can be issued by banks as structured investment derived from or based on single security, a basket of securities, an index, a commodity, a debt issuance and/or a foreign currency. In theory, closed-end funds should not be considered as substitutes for the other mentioned, since they do not offer the same redemption possibilities and thus do not answer the same investment needs. Yet in practice, it is sometimes difficult to draw a line between closed-end and open-ended funds to that extent. Closed-end funds might offer liquidity on a secondary market, or offer opportunities to redeem their shares from time to time; conversely, non-coordinated open-ended funds may set stringent conditions for the redemption of shares, and UCITS may be sold within tax wrappers that require long holding periods to prove effective. These blurring boundaries lead the AMF to consider that closed-end funds should also be taken into account in the Commission s approach, even if closed-ended funds are not yet widespread within the French market. Finally, there is no definition under French law of what is a substitute investment. As regards this definition, the AMF shares the view of the Commission that all these share the objectives of saving money for the retail investor on a medium-to-long term basis and maximising the potential return through a direct or indirect exposure to financial markets. 4

5 Question 4: Which factors in your opinion drive the promotion and sales of particular investment? Please use the table below to rank these factors in terms of importance (very significant; significant; no opinion; insignificant) for each of the different. In addition to completing the table, we would welcome further explanation of your view as to which factors are particularly important for each product. UCITS Nonharmonised funds Unitlinked life insurance Retail structured Annuities (Structured) Term deposits Others *(employee Taxation * saving schemes) Financial innovation * Cultural preferences * Distribution models Regulatory treatment * * Others Due to the specificities of the French national market, it seems difficult for the AMF to adopt the systematic schedule s ranking approach proposed by the Commission. It is proposed to indicate in the table above where we think that some get a competitive advantage compared to others. In other words: Regulatory treatment is clearly in favour of structured notes compared to UCITS, and in favour of unitlinked wrappers compared to direct investment. There is a strong tax incentive in favour of employee saving schemes and life insurance in comparison with UCITS and other. Cultural preferences towards life-insurance contract is very strong in France. There are no significant differences in the regulatory regime applicable to UCITS and French non harmonized funds. The regulatory regime do not differ as regards obligations at point of sale and information requirements, though they might differ as regards the eligible assets, targeted investors (including any applicable subscription threshold). Structured might more easily offer innovative strategies, sonce they are not bound by some stringent rules applicable to Ucits. There is no clear influence of distribution models. However, it seems that the EU requirements as regards solvency ratios lead banks to propose financial rather than bank saving and insurance life companies to propose unit-linked life insurance rather than traditional life insurance policies or (for which for the latter, the risk is born by the insurer). 5

6 Question 5: Product disclosures: Do pre-contractual product disclosures provide enough information to help investors understand the cost and possible outcomes of the proposed investment? Please use the attached tables to provide your evaluation of the adequacy of the information provided with regard to the following items for each category of investment product. Nature information provided of UCITS Nonharmonised funds Unit-linked life insurance Retail structured Annuities (Structured) term deposits Others Product features Direct costs Indirect costs (or foregone performance) Risks Capital guarantee Likely performance Conflicts interest of Compensation or fee retrocession The AMF shares the analysis made by the Commission as regards the existence of different levels of product disclosure applying to competing at a European level.the AMF identifies a need for action in this field. While MiFID has set up a common framework for ensuring a coherent approach to disclosure and point of sale regulation for some of the competing considered, it is not clear at this early stage of implementation how this framework will be applied in practice for structured notes in an efficient manner: as regards the quality of information that must be provided to retail investors for all the investment, there is no comparable standard to the simplified prospectus or key information document required for UCITS. As regards life insurance, existing discrepancies with other seem to be best mitigated at a national level. i) The AMF shares the analysis made by the Commission as regards the different levels of product disclosure concerning competing, yet it is once again difficult to systematically fill in the proposed table as not all boxes would be relevant for consideration on the French market. Taking the example of cost disclosure, the Commission has rightly identified discrepancies with respect to cost disclosure between UCITS, unit-linked life insurance and structured whereby: - a detailed cost structure to be disclosed to unit-holders is provided under the UCITS Directive; - no specific cost disclosure requirements are provided under the Life Insurance Directive; - high level cost disclosure requirements are provided for structured under the Prospectus Directive. 6

7 ii) MiFID which came into force on the 1 st November 2007 has set up a common framework for ensuring a coherent approach to disclosure and point of sale regulation for all MiFiD-regulated financial instruments, including all funds and structured notes. Thus, investment services providers are subject to general requirements regarding information to clients and potential clients, according to which they must notably: o ensure that all information, including marketing communications, addressed by them to clients or potential clients is fair, clear and not misleading; o provide appropriate information, in a comprehensible form to clients or potential clients about: the intermediary and its services; financial instruments and proposed investment strategies; this should include appropriate guidance on and warnings of the risks associated with investments in those instruments or in respect of particular investment strategies; execution venues, and costs and associated charges. However, it is not clear at this early stage of implementation how these requirements will be applied in an efficient manner for structured notes and closed-end funds, whereas for UCITS and other collective investment schemes the information has to be provided in the simplified prospectus in a framework that is meant to be adapted to retail investors needs. o In particular, the current legal framework applicable to structured notes (which may be comparable to formula funds) under the Prospectus Directive is based on the characteristics of the issuer, and does not require presentation features adapted to the needs and understanding of retail investors. As a result, a plain-language description of the formula, of its advantages and drawbacks, as well as a specific display of scenarios, can be required in the simplified prospectus for formula funds, not for structured notes. This distortion de facto leads to regulatory arbitrages experienced in real cases by the AMF. o Due to passporting mechanisms, such distortion can not be solved at a national level and requires Community measures. iii) The European framework does not make sure that the simplified prospectus is delivered to investors subscribing through insurance contracts: o Under the Life Insurance Directive, the information related to unit-linked policies is limited to both the definition of the units to which the benefits are linked, and the indications of the nature of the underlying assets. o There is therefore a clear shortcoming of the Directive in that respect compared with the information duties applicable to UCITS. o However the Life Insurance Directive gives the right to Member States to require to provide additional information if it is necessary for a proper understanding by the policy holder of the essential elements of the commitment. o Therefore Members States have the power to act at a national level in order to supplement such distorsions. In France, it will take the form of the remittance of a simplified prospectus or equivalent information and more particularly the key investor information related to the product. Some flexibility has thus been granted in France in the case of UCITS sold within a life insurance contract, which might be reconsidered primarily at national level. 7

8 Question 6: Conduct of business rules: Do differences in conduct of business regulation result in tangible differences in the level of care that different types of intermediary (bank, insurance broker, investment advisor/firm) offer to their clients? For which conduct of business rules (know-yourcustomer, suitability, information/risk warnings) are differences the most pronounced and most likely to result in investor detriment? UCITS Nonharmonised funds Unitlinked life insurance Retail structured Annuities (Structured) Term deposits Others Know customer your Suitability or appropriateness Risk warnings Examples - information Others The AMF shares the analysis made by the Commission that some distortions exist as regards the conduct of business rules. They vary according to the status of the intermediary, the product or the situation where the investment product is sold. In that respect, in the AMF s opinion, while MiFID has provided at a European level a harmonized framework of conduct of business rules for firms authorized to provide investment services which will normally apply equally to funds and structured notes, some discrepancies may still remain, notably as regards the optional exemptions provided by MiFID for the financial advisers. At this stage there are no equivalent provisions for life insurance at European level, which might be mitigated at national level though. i) The AMF shares the analysis made by the Commission that some distortions exist as regards the conduct of business rules. They vary according to the status of the intermediary or the situation where the investment product is sold. More particularly, the Commission has rightly identified gaps in rules for distribution, depending on the product or the status of the intermediary whereby: - MiFID requires intermediaries to discharge certain duties (e.g appropriateness and suitability tests) and includes rules on inducements ; - whereas as regards unit-linked policies, the Insurance Mediation directive provisions are not as detailed as MiFID rules. Again, MiFID has provided at a European level a harmonized framework of conduct of business rules for firms authorized to provide investment services. It will normally apply equally to funds and structured notes: - however, MiFID itself has expressly provided to Members States optional exemptions subject to certain conditions as regards the service of reception and transmission of orders in transferable securities and units in UCITS, and investment advice which creates a risk that for a same type of service and product the conduct of business rules would be different depending on the status of the intermediary. As far as the AMF is concerned, the choice was made at a national level to update the regulation applicable to financial advisers and entities receiving subscription and redemption of UCITS to maintain a level playing field between all entities providing a same service. 8

9 - It is also worthy of note that UCITS can benefit from the execution only regime, whereas structured notes which might be considered as complex under MiFID could not. Thus might create an advantage in favour of the distribution of UCITS compared with structured notes. iii) At this stage there are no equivalent provisions for life insurance at European level, which could be considered as prejudicial for the retail investor. Of course, adjustements could be made at a national level, and have to some extent been made in the case of France where intermediaries have to justify their recommendation to subscribe. Question 7: Conflicts of interest: Are there effective rules in place to ensure effective management/disclosure of conflicts of interest (and/or compensation arrangements) by the different categories of product originators and/or intermediaries for the different types of investment product? For which type of product do you see a regulatory gap in terms of the coverage of conflict of interest rules? Please explain. In the AMF s opinion conflicts of interests can occur at two different levels: Between the distributor of the financial product (or the investment service) and the client: as regards investment services providers, MiFID provides a detailed and harmonised set of provisions with respect to inducements and conflict of interest for the relevant financial instruments. For unit-inked life insurance contracts, it seems that Members States have the possibility to make the necessary adjustments at a national level. Between the product originator and the client: there is a distortion between UCITS and structured notes which requires clarification from the Commission. In the AMF s opinion conflicts of interests can occur at two different levels: - between the distributor of the financial product (or the investment service) and the client: o as regards investment services providers, MiFID provides a detailed and harmonised set of provisions with respect to inducements and conflict of interest. o as regards unit linked life insurance contracts : it does not exist such detailed equivalent set of provisions. However, Members States have the possibility to make the necessary adjustments at a national level if they wish to do so. - between the product originator and the client : Generally speaking, funds are governed by the high-level principle that they should be managed in the client s own interest which are different from those applicable to structured governed by the Prospectus Directive: As regards UCITS, the AMF's position is that the fact that asset management company must act in the best interest of the client means that when structuring formula funds, the management company will have to obtain the best prices for its clients. As regards best execution provided by MiFID and its application to structured notes and other falling under the scope of the Prospectus Directive, sold by the bank that originates the product, the AMF refers to the answer by the Commission to CESR on the scope of best execution: best execution would be owed in situations where the client could legitimately be considered as relying on the dealer to protect his/her interests in relation to the pricing or other elements of any structured product. The AMF would like to express the following concerns: Due to the flexibility of the answers provided by the Commission, some stakeholders still pretend that no best execution is due for most structured, and more generally for issued on the primary market. As far as the level playing field between formula funds and comparable structured is concerned, the AMF is worried about both the necessity and difficulty to require from issuers a "fair price", in line with usual market practices as regards profit margins. 9

10 Based on previous rationale of the Commission, it could be argued that it is expected that one of the stakeholders along the value chain should be in charge of obtaining the "best service ". When this is not achievable by the producer itself, this could be expected from the distributor. Question 8: unfair marketing / misleading advertising: Is the risk of unfair marketing / misleading advertising more pronounced for some product types than for others? If so, why? Can you point to concrete examples of the mis-selling of the different types of investment product resulting from unfair marketing / misleading advertising?" -Experience of the AMF shows that incidents of miselling in the recent past have resulted from errors in precontractual information, and advertising, lack of advice and of targeting,clients concerning financial, which will partly be mitigated by MiFiD implementation. -However the AMF is concerned by some market participants claiming that these rules would not apply to product issued on the primary market. -The marketing of unit-linked insurance contracts is not subject to such stringent rules, yet adjustements could be primarily made at a national level. i) Experience of the AMF shows that incidents of miselling in the recent past have resulted from errors in precontractual information and advertising, lack of advice and of targeting clients concerning financial. Misselling cases have been mainly reported for funds (especially for formula funds UCITS - sold directly or within life insurance contracts), but this is essentially because in the past structured notes have not been widely sold to retail investors. The most prevalent have concerned promoting sales by invoking the most recent past performances of the product (or, in the cases of new, of their underlying market), and underemphasizing drawbacks such as cases where a guarantee of capital would not apply or luring to attract investor emphasizing the liquidity of that in reality would offer a satisfactory risk return ratio only if held for a sufficiently long period. ii) MiFID has contributed to give retail investors the same level of protection, whatever the type of MiFID regulated financial UCITS, non-harmonised funds, closed-end funds or structured, especially as regards excessive focus on past performance or unbalanced presentation of advantages and drawbacks. However, some market participants claim that these rules would not apply to product issued on the primary market (which is the case for structured notes or IPO s). It would be helpful if the Commission could clarify that these rules also apply in such a case, which is the interpretation of the AMF. iii) As regards unit-linked insurance, once again they do not benefit from the recent progress brought by MiFiD, nor from any common European legislation to that extent. Indeed, they are currently subject to less stringent rules on the French market. It seems though that adjustements could be primarily made at a national level since this is allowed by European legislation. Question 9: Is a horizontal approach to product disclosures and/or to regulation of sale and distribution appropriate and proportionate to address the problems that you have identified? Can you specify how this objective of coherence between different frameworks would address the problems? What are the potential drawbacks of such an approach? Considering the evidences gathered by the Commission and the AMF s own experience, there is clearly a case for a horizontal approach, following the same logic that led to the abovementioned MiFiD provisions bringing some level playing field between some competing, substitute financial instruments. Yet the AMF is aware of the specificities of the various areas involved, such as bank term deposits or life insurance.the AMF acknowledges that different rules may be needed due to the specificities of some, wrappers, distribution channels or tax regime, yet this should not materially impact the level of protection of investors. In other words, different rules might remain only if they ensure in practice comparable levels of protection. If such flexibility is granted, there should not be any major drawback to this approach. The specific characteristics of the shall not prevent the application of the same rules whether the UCITS are distributed directly or within a wrapper. In practice, where a commitment at European level is needed, it is of course up to the Commission to decide whether this might better be achieved by widening the scope of the rules applicable to bank term deposits and unit-linked life insurance contracts or simply by bringing these provisions closer to MiFiD rules. 10

11 Question 10: Can market forces solve the problems that you identified (fully/partially)? Are there examples of successful self-regulatory initiatives in respect of investment disclosures or point of sale regulations? Are there any constraints to their effectiveness and/or enforceability? Are you aware of effective national approaches to tackle the issues identified in this call for evidence? Should it be left to national authorities to determine the best approach to tackling this problem in their jurisdiction? Is there a case for EU level involvement? Please explain. Although a self regulatory approach would be welcome and should not be rejected in principle, it is obvious that market forces have not been until today able to solve such issues and do not give any clue that this might change. National approaches to bring consistency have been many amongst various Member States. As far as France is concerned, a comprehensive diagnosis and a set of proposals were made end of 2005 by Mr.Delmas-Marsalet which had been commissioned by the French Minister of Finance for that purpose. Implementation has been achieved partly through national measures, partly through implementation of MiFiD, and is to some extent still pending. Yet, generally speaking, and to sum up previously expressed opinions: As regards discrepancies between life-insurance and the other investment, it may be more feasible to first grant Members States the possibility to mitigate them first at a national level. The need for action at a European level, would only arise in case of a failure of national approaches or of major discrepancies between them. It could be then assessed again on the medium-term. The Commission could monitor actions taken by the Members States at a national level for that purpose. As regards distorsions between structured governed by the Prospectus Directive and formula funds, (or closed-end funds that would be indeed competing with UCITS) the only way to solve them is to take implementation measures at a European level. Summary in the form of tables: UCITS vs. Structured notes closed end funds: Prospectus Investment Regulatory rules documents UCITS Structured notes Suggested level of action Standardised format, meant to be adapted to the characteristics of the product Format of the issuing documents not really adapted to structured notes Conflicts interests of Mandatory rules Specific rules + MiFiD rules Marketing advertising and Obligations harmonised by the MiFID directive Nothing specific MiFID rules Obligations harmonised by the MiFID directive EU (1) EU (2) EU (3) No distorsions (1) Please see answer to question 1 (2) Please see the detailed answer on point 3 to question 1. (3) Please see answer to question 7 11

12 UCITS and structured notes sold directly vs. wrapped in unit-linked life insurance contracts: UCITS and structured notes sold directly UCITS and structured notes wrapped in unit linked insurance Suggested level of action Prospectus Regulatory documents Standardised format, adapted to the characteristics of the product «equivalent information» can be delivered to the policy holder Marketing and advertising Obligations harmonised by the MiFID directive Specific obligations applicable to life insurance contract Passport National National EU / National No «private placement» for UCITS. Notification to AMF for passported structured notes sold to retail investors. Possibility of «private placement» for governed by the Prospectus Directive subscribed by the insurance company and sold to retail investors wrapped as unit-linked life insurance product, without information of the AMF 12