Introduction
The “Projet de loi relatif à l’industrie verte” (green and sustainable industry draft law, hereinafter the “Bill”) was approved on 17 May 2023 by the French “Conseil des Ministres”, a weekly meeting of French government members that proposes draft laws for adoption by the French Parliament. The Bill has now been submitted to the French parliamentary voting procedure.
This Bill has three main objectives:
1) promoting the establishment of industrial sites in France;
2) financing green industrial projects; and
3) enabling greener public procurement.
To achieve the objective referenced in item two above, the Bill will amend certain provisions of existing French legislation to prepare for the direct application of Regulation (EU) 2023/606 amending the original ELTIF Regulation1 (so called “ELTIF 2.0”) from 10 January 2024. Therefore, the Bill has a provisional application date of 10 January 2024.
Measures of the Bill related to ELTIF 2.0
Below is a summary of the draft first amendments proposed to prepare for the application of ELTIF 2.0 under French law:
- French AIFs set-up as organismes de financement spécialisés should now be eligible as units-linked products alongside units or shares of fonds professionnels spécialisés (“FPS”) or “fonds professionnel de capital investissement” that were already eligible since Law n°2019-486 of 22 May 2019.
- Broader flexibility is envisaged in the French insurance code for European long-term investment funds (“ELTIFs”) to be structured as units-linked products eligible to French life insurance contracts. To date, the strict investment constraints set out under the original ELTIF Regulation apply to French life insurance contracts (i.e., minimum of investment set at EUR 10,000 and diversification limit applying to a single life insurance contract not to exceed 10% of UC representing ELTIFs). The Bill proposes to empower the French government to legislate by means of order (“ordonnance”) to remove these constraints and ensure consistency with the provisions of ELTIF 2.0. The only constraints applicable to ELTIF units-linked products would normally be the investment/diversification rules set forth under the ELTIF 2.0.
- The same amendments described above are proposed with respect to the French retirement saving plans’ (“plan d’épargne retraite”) regime to align it with ELTIF 2.0.
Giving existing “fonds commun de placement à risques” (“FCPRs”) and retail “organisme de placement collectif immobilier” (“OPCIs”) the option to elect a particular regime under which they would be exempt from most of the applicable investment diversification requirements that retail funds are normally subject to. This would enable such existing FCPRs and retail OPCIs to benefit from the same flexibility as funds structured as FPS, provided that:
(i) they are already authorized and established by 1 January 2024
(ii) they maintain a core investment strategy in line with their initial regulatory status (i.e., primarily investing in private equity or private debt assets for FCPR and in real estate assets for retail OPCIs); and
(iii) existing investors in such FCPRs / retail OPCIs should be offered a right to exit the fund, free of charge, in accordance with rules to be further specified in the AMF General Regulation.
To make it easier to obtain an ELTIF label, existing FCPR/OPCI would be able to opt for this regime within 24 months of the entry into force of the Bill (i.e., they should be able to opt in until 10 January 2026).
Timetable for the implementation of the Bill
The French government has been empowered to legislate by means of order (“ordonnance”), meaning it is able to amend the French Monetary and Financial Code and Insurance Code in order to align relevant provisions with ELTIF 2.0.
However, please note that the measures contemplated by the Bill are likely to be amended over the course of the French parliamentary voting procedure. Professional associations (such as France Invest and the AFG) are reviewing the provisions of the Bill, and their comments will certainly have an impact on the Bill’s final form. The Bill is expected to be finalized and passed in Q4 2023 at the latest.
Other regulatory changes to come related to retail investments in Europe
In addition to the Bill, the ELTIF 2.0 regulatory framework is currently being finalized at a European level. Notably, on 23 May 2023, ESMA published a consultation paper2 on draft regulatory technical standards (“RTS”) under ELTIF 2.0 (including requirements applicable to the redemption policy and the use of liquidity management tools to structure semi-liquid ELTIFs (Article 18 of ELTIF 2.0), matching mechanism (Article 19 of ELTIF 2.0) and cost disclosures (Article 25 of ELTIF 2.0 regulation)). The consultation paper is open to comments until 24 August 2023.
Several changes are also anticipated in the context of the European Commission’s Retail Investment Strategy3 (“RIS”), announced on 24 May 2023, which proposes, amongst other things, amendments to MiFID4, AIFMD5, UCITS6 and PRIIPS7. As part of the RIS, on 24 May 2023, the European Commission published an omnibus directive to implement the RIS, which seeks to improve access for retail investors to financial markets while ensuring their protection. Among other things, the RIS package includes provisions related to new best-interest tests to promote the recommendation of most cost-effective financial product to retail clients as well as new costs and charges management and disclosure requirements.
Footnotes
1. Regulation (EU) 2015/760 as regards the requirements pertaining to the investment policies and operating conditions of European long-term investment funds (ELTIF Regulation).
2. The consultation paper on the draft RTS for ELTIF 2.0 is available here.
3. Related materials, including the legislative proposals, FAQs, a factsheet and impact assessment are available on the Commission's retail investments package webpage.
4. Directive 2014/65/EU of the European Parliament and of Council of 15 May 2014 on markets in financial instruments.
5. Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers.
6. Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS).
7. Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs).
