Amendments to the regulations governing unit trusts / common fiunds and investment funds

Sovereign Order no. 10.281 of 20 December 2023 (JDM n° 8674 of 22 December 2023) amended Sovereign Order no. 1.285 of 10 September 2007 implementing Law no. 1.339 of 7 September 2007 relating to unit trusts / common funds ("fonds communs de placement") and investment funds ("fonds d'investissement"), as amended (amendment of Articles 4, 36, 37, 37-1, 40, 44; new Articles 34-1 and 63-5).

The amendments concern:

• the formation of fonds communs de placement (indication of the rules of a common fund in the event of recourse to a liquidity management tool);
• accounting and financial rules relating to fonds communs de placement (use of a swing pricing mechanism; distributable sums; profit and loss account of a fonds commun de placement);
• special rules relating to property investment funds.

In addition, Ministerial Decree no. 2023-753 of 20 December 2023 (JDM no. 8674 of 22 December 2023) amended Ministerial Decree no. 2013-391 of 8 August 2013 on real estate investment funds (deletion of article 21 on the distribution of a property investment fund).

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Details of the amendments to Sovereign Order no. 1.285

¤ Formation of fonds communs de placement

• Addition: the rules of a fonds commun de placement established by its founders must state "14-1°) Where a liquidity management tool such as a swing pricing mechanism is used, the general principles of the methodology followed" (art. 4).

¤ Accounting and financial rules relating to fonds communs de placement

• Addition: "In the event of recourse to a net asset value adjustment mechanism (swing pricing) making it possible to allocate to the net asset value of the fund, which serves as a reference for the settlement of net subscription and redemption flows, the costs of rearranging the portfolio induced by these flows, the management company shall establish a detailed procedure (rules followed and methodology implemented, controls carried out, potential conflicts of interest, etc.) which shall be kept up to date". (new art. 34-1);
• Addition: "The implementation of a net asset value adjustment mechanism shall give rise to prior information of unitholders by any means". (art. 36);
• Replacement: The sums available for distribution are made up of the net "income" [and no longer the "result"] plus retained earnings and plus or minus the balance of the income equalisation account relating to the financial year ended. (art. 37 and 37-1);
• Addition: "The income of a fonds commun de placement is equal to the net income for the financial year less or increased by net realised capital gains and losses and changes in net unrealised capital gains and losses, less interim payments made in respect of the financial year". (art. 40);
• Replacement: "The profit and loss account of a fonds commun de placement must show in particular : - net income, consisting of net financial income, other income and expenses and net income adjustment accounts; - net realised capital gains and losses and the related adjustment accounts; - changes in net unrealised capital gains and losses and the related adjustment accounts; - interim dividends paid in respect of the financial year." (art. 40).

¤ Rules specific to property investment funds

• Addition: "Articles 37-1 and 40 [referred to above] do not apply to property investment funds which are subject to special rules described in article 63-5 of this Order". (art. 44);
• Addition: "For the purpose of determining the distributable sums referred to in article 37 of this Order, the net income of a property investment fund is made up of income relating to the real estate assets in the portfolio, less the related costs and expenses, income and remuneration relating to the management of the other assets less the related costs and expenses and the other income of the fund less the related costs and expenses. The income statement shows, in particular, income from property activities, income from financial transactions, other income and expenses net of management fees, income from the disposal of assets (net realised capital gains and losses) and the balance of accruals for the financial year. When a property investment trust has entered the disinvestment phase with a view to liquidation, it may also distribute income from the sale of assets. Any such distribution shall be made in accordance with the conditions laid down in the fund rules and shall be mentioned in the fund's annual report referred to in article 27 of the aforementioned law no. 1.339 of 7 September 2007". (new art. 63-5).

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