As from January 1, 2027, asset management companies will no longer be allowed to receive transaction fees from clients when providing discretionary management services (i.e. portfolio management on behalf of third parties).
This development follows the bans made in 2022 on these same transaction fees, regarding collective investment management, and in 2023 for arbitration mandates in unit-linked life insurance contracts.
Transaction fees refer to charges, in addition to brokerage expenses, received by the management company or linked parties during purchase or sale transactions related to a collective investment portfolio or a management mandate. For some asset management companies, this aspect is sensitive because transaction fees can make up a significant portion of their total revenue.
| Summary of the Timetable for Implementing Bans on Transaction Fees | |
| Activity | Date of Entry into Application of the Ban |
| Collective Management (French-law UCITS and AIFs, subject to exceptions related to real estate vehicles and private equity) |
|
| Arbitration Mandates in Unit-Linked Life Insurance |
|
| Discretionary Management | |
This ban fully aligns with ongoing considerations initiated by the regulator for several years.
In January 2020, the AMF College notably pronounced a prohibition for managers to receive entry fees for transactions made on funds managed by the manager’s group. This was motivated by the desire to prevent conflicts of interest linked to such fees, which are difficult to characterize. This reflection was particularly bolstered by national and European work on fee supervision, as well as by the proposed law to strengthen “savings protection,” which was filed in the French Senate on March 28, 2022.
Risks associated with transaction fees, due notably to the observation of a very high asset turnover rate in portfolios devoid of any economic and/or financial basis, have led to several sanctions procedures before the AMF’s Enforcement Committee. Among these is the committee’s decision of December 20, 2019 – SAN-2019-18 – regarding GSD Gestion and Messrs. Thierry and Jacques Gautier.
It is worth noting that receiving transaction fees will remain possible in the case of providing custody services, as long as this remuneration does not impair the provider’s obligation to act honestly, fairly, and professionally in the best interest of the client.
The regulator has emphasized that, in the context of the upcoming update of its doctrine to account for this new prohibition, it will ensure that this evolution does not result in an “edge effect” (transferring the occurrence of situations of conflict of interest to other services provided to the principal client).
