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DEVLHON Consulting Decodes the Distribution of Actively Managed Certificates (AMC)
The distribution of Actively Managed Certificates (AMCs), complex financial instruments, is gaining traction. These products are attracting interest from various financial players—from private banks to investment advisors—looking to diversify their offerings to retail clients. However, the French Financial Markets Authority (AMF) highlights recommendations to regulate this distribution, as AMCs carry unique characteristics and specific risks.
Understanding AMCs: Complex Instruments
AMCs are structured debt securities or financial instruments issued under foreign laws. Their distinctiveness lies in the discretionary management of the underlying asset basket, which can be modified during the instrument’s lifecycle without the investor’s consent. This complexity makes them unsuitable for less experienced investors, requiring specific recommendations to protect retail clients.
Stringent Product Governance Requirements
Regulations require professionals to precisely define the target market for AMCs, identifying the client profiles for whom these products are appropriate. The AMF emphasizes the importance of thorough evaluation and alignment between the target market and the distribution strategy. Professionals are thus urged to limit AMCs to clients with a high level of financial knowledge and experience.
Transparency and Client Information
The AMF mandates that professionals provide clear, accurate, and up-to-date information on AMCs. Before investing, clients should be informed of the underlying asset composition and associated costs, especially those related to the regular adjustments in the asset basket. This transparency includes an estimation of rebalancing costs, calculated based on underlying assets and anticipated transaction volumes.
Enhanced Suitability Assessment Requirement
Assessing each investor’s profile is crucial to determine the suitability of AMCs for their financial objectives. Given the complexity of AMCs, professionals must ensure that clients fully understand the product’s functionality and inherent risks. The AMF discourages self-assessment methods, instead recommending more rigorous checks to ensure clients’ comprehension.
Regulation of Solicitation and Public Offerings
AMCs cannot be marketed through financial solicitation, and their distribution is subject to strict rules to ensure greater investor protection. Professionals looking to include AMCs in their offerings must comply with the AMF’s transparency and governance obligations.
Conclusion
For DEVLHON Consulting, this AMF recommendation underscores the importance of a cautious and responsible approach to AMC distribution. By following these guidelines, professionals can optimize their practices while strengthening investor trust.
