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As part of the strengthening of international cooperation practices between market regulators, the US market regulator, the Securities and Exchange Commission (the “SEC”), is tending to request the assistance of the French Financial Markets Authority (the Autorité des marchés financiers or “AMF”) more and more frequently and in ever-increasing areas, to obtain information relating to either French companies or foreign companies where the information sought is held by individuals or legal entities governed by French law. The scope of these requests has undoubtedly increased since the Administrative Agreement on such assistance that was signed between the French Stock Exchange Committee (the COB, formerly the AMF) and the SEC on 14 December, 1989. The Agreement provides that the regulators will assist each other as much as possible to successfully conclude their investigations. However, its implementation has posed some problems given the various areas of responsibility these two regulators have and the  confidentiality of the documents sought from the companies affected. A victim of its own success, this procedure thus allows the SEC to sweep aside legal obstacles to the transmission of information which goes way beyond stock exchange matters alone.

1. Basis for and nature of requests made by the SEC

The Agreement of 14 December 1989 referred to above allows the SEC to ask the AMF to use “all its powers and means according to procedures provided under the law of the requested State…in order to comply with any request for assistance relating to issuers, investors…as well as any person likely to have information in connection with the facts contemplated by the request“. For that reason, the requests for assistance sent by the SEC to the AMF pursuant to the 1989 Agreement go beyond information relating to companies whose securities are listed on a stock exchange in the United States or sold toUS investors. They may also extend to the French subsidiaries of any foreign group, where the securities of the parent are listed in the US, if information held by the French entity could be connected to the procedure being followed in the US. First of all these requests may be particularly difficult for a company which is not used to this kind of investigation to deal with it. While the SEC has to tell the AMF what information it is looking for and provide a general description of the alleged facts and the legal basis for the request, it does not have to justify the relevance of an excessively broad question or a long list of persons who are thought to hold the information. A second worrying factor for a French company is that the SEC’s area of responsibility is much wider than the AMF’s. While the AMF’s investigative powers are limited to the lawfulness of transactions relating to publicly traded securities in France and compliance with professional duties by players on these markets (as listed in Article L.621-9 II of the French Monetary and Finance Code), the SEC has, in addition to this area of responsibility, the power to investigate, facts in breach of the regulations applicable to corruption or unlawful payments to government representatives (the “Foreign Corrupt Practices Act”). Thus the French subsidiary of a Chinese or South American company listed in the US may be forced to provide the AMF with documents sought as part of an investigation into corruption that is started by the SEC. It matters little that these alleged acts were committed in France or by French residents, and the information on them can be sought if it is held by employees of a French company or stored on the server of a French company or an identified individual. It is therefore surprising that the principle of mutual international cooperation between administrative authorities is de facto under attack as clearly the AMF cannot ask for the SEC’s assistance in the US in any area other than stock exchange law. However, the legal basis the AMF relies on to obtain the requisite information also raises questions regarding the powers it has. Indeed, to respond to requests for assistance from foreign regulators, the AMF generally opens a separate investigation by its own services.

2. Separate investigations and limits on areas of responsibility

Although the AMF could require the French companies or the persons covered by a request to provide the information sought (in order to implement the request for cooperation on the simple basis of assisting a foreign regulator), it generally opens its own investigation. The AMF’s argument to justify this approach is to avoid the companies in question from relying on Act No. 68-678 of 26 July 1968, as amended by Act No. 80-538 of 16 July 1980 (the “Blocking Act”), which permits restrictions to be imposed on the sending of documents and information as part of legal proceedings abroad. Indeed, the purpose of the Blocking Act is to protect French companies against broad investigations such as the US-style “discovery” investigations and seeing their sensitive economic, commercial, industrial, financial or technical documents or information sent abroad. It is regrettable that the AMF wants to neutralise it even though this Act can sometimes be legitimately applied as part of a request for assistance, given how wide the relevant fields of investigation and the documents covered by the SEC’s investigations can be. While one can understand that the legislature expressly provided for an exemption from the Blocking Act in the case of investigations carried out within the framework of a request for cooperation with a Member State of the European Union or a state that is a party to the Agreement on the European Economic Area, this safeguard deserves to be kept in place or removed with caution for requests from countries outside the EU. Yet, within the framework of a request from the SEC, the AMF generally decides (on the basis of Articles L.621-9 and R.621-31 to 621-36 of the French Monetary and Finance Code) to start its own investigation precisely to make the Blocking Act ineffective. This option is indeed open to it, a decision of 4 February 2003 having acknowledged that “the provisions allowing it to send information and to provide assistance to foreign regulators (the SEC, in this case) did not deprive it of its power to investigate and potentially impose penalties if, as part of this cooperation, facts materialise that could constitute breaches of its rules”. By using this procedure, the AMF can therefore gather an extremely wide range of information, held in France by individuals or legal entities, in connection with the request for assistance. However, the scope of the powers it can exercise on this subject is limited by Article L. 621-9 of the French Monetary and Finance Code which provides that the AMF may carry out inquiries and investigations only in the area which is under its control. As the AMF’s authority is limited, as described above, to stock exchange matters, this raises questions as to the validity of a separate investigation opened by the AMF into alleged acts of corruption committed abroad where certain evidence relating to such acts may be held by a French company which does not carry on any financial or trading activities. Likewise, it is surprising that the periods covered by these investigations and which adopt the periods covered by the request for cooperation from the SEC often exceed three years even though this corresponds to the limitation period for administrative matters in France. The existence of both the investigative procedures resulting from the initial request for assistance from the SEC, and the opening of a separate investigation by the AMF to respond to it, therefore raises the issue of lawfulness if the alleged facts fall outside the AMF’s area of responsibility both as regards stock exchange law and the effective circumventing of the Blocking Act. However, does this allow a company, on the basis of these arguments, to block the AMF’s inquiries by refusing to provide the information requested or by sending, for example, the documents sought directly to the SEC? This reaction would be problematic. On the one hand, once the investigation has been opened, hindering the AMF by refusing to provide the information sought as part of this could constitute a separate breach of administrative law comparable to perverting the course of an investigation, punishable by fines of up to €15m for individuals and €100m for legal entities, as laid down by Article L.621-15 II of the French Monetary and Finance Code. On the other hand, the AMF justifies its request on the basis that it wishes to check the relevance of the documents sent in light of the initial request from the requesting authority and therefore that it needs to ensure the 1989 Agreement is better implemented. Thus, even if they are sent directly to the competent regulators, the AMF will insist to receive all the documents covered by its own request to check their contents. On this basis, the company or person in question may ask the AMF to inform it, once this check has been carried out, of the date the information was sent to the SEC. Does this procedure present a risk for the companies in question? On the face of it, the information provided does not relate to facts that are punishable in France or that come within the scope of French law if the investigation is conducted within the framework of a request for international assistance. However, the fact remains that the AMF, with access to sensitive information, will in turn be obliged to send such information to the relevant French administrative authorities or the French public prosecutor’s department (as the case may be), if it discovers facts that could constitute a potential breach of a provision that is punishable under French criminal law. There is therefore an element of risk for groups who are not fully in control of their governance and internal control procedures. As the volume and detail of the information can sometimes be very extensive, it is possible that the AMF, in examining the relevance of this information in light of the SEC’s request, discovers contentious facts of which the parent company was unaware. A question could also be asked about the relationship between requests by the AMF and the SEC and the principles of Act No. 78-17 of 6 January 1978 governing the protection of personal data that the information provided to authorities will inevitably include. In particular, what are the guarantees that this data will be secure when it is sent to an authority located in a country (in this case, the US) that is considered by European regulations as offering inadequate protection? Yet it is for the company, as the party responsible for the processing of the personal data sent, to account to the persons affected regarding the conditions under which their data is sent to third parties. French as well as foreign groups that are the subject of an SEC investigation, with subsidiaries or other companies established in France, are therefore advised to assess with their management teams, before the AMF receives a request for assistance, all the details that could affect this investigation to be more in control, when the request comes in, of all the details that could be sent to the AMF as part of an investigation and to check the significance of such details with their advisers.


Raphaële François-Poncet is a partner in Baker & McKenzie's Paris office. She handles international and domestic M&A transactions, including tender and exchange offers. Ms. François-Poncet also advises clients on securities law, IPOs and market regulation. She worked in the M&A and Securities Law department of HSD Ernst & Young in Paris before joining Baker & McKenzie SCP, and has previous experience working for Klein Goddard & Associés and Shearman & Sterling.

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