The Autorité des Marchés Financiers (AMF), France’s financial markets watchdog, announced on Thursday that it has started conducting a consultation on the 'end of life' of retail investors-focused private equity funds.
The independent public authority said it had observed that a significant number of the funds often exceed their announced lifespan for various reasons.
It noted that compliance with this rule is the job of the asset management companies behind the funds.
“This results in diverse impacts for their investors, from the perspective of both the information provided at the outset and during the life of the fund, and the problems of all kinds caused by liquidation procedures that are excessively lengthy,” AMF explained in a statement.
The market regulator said the consultation is based on 19 proposals from a working group created based on the initiative of its Board.
It noted that one of its Board members, Mrs Muriel Faure, chaired the group.
The working group also hosted representatives of retail investors, private equity investment companies, depositories and adulting and legal professionals.
AMF said the group worked with its staff members “on various legislative, regulatory and operational proposals designed to improve the protection of retail investors investing in these products.”
Moreover, the watchdog disclosed that it will be taking contributions for the proposals until October 14, 2022.
Is 10 Year Maximum Duration Appropriate?
AMF said it has been receiving “a significant flow of claims” from retail investors affected by the action of asset management companies that exceeded the announced life of their private equity funds.
It pointed out that the funds concerned are innovation venture capital funds (FCPIs), local investment funds (FIPs) and venture capital funds (FCPRs).
According to the market supervisor, one of the issues to be addressed through the consultation is whether the current maximum theoretical 10-year duration of private equity funds is appropriate for the cycle of value creation in certain sectors of the economy.
On top of that, the regulator is consulting on the issue of measures to remove obstacles to liquidation that may exist at a fund’s design state.
AMF wants to also strengthen its regulatory framework of fund liquidation operations by clarifying the powers of fund liquidators.
Furthermore, it wants to make provision available for what happens when an asset management company is not able to perform its liquidation operations itself, among other issues.
