Stéphane JANIN Director, Head of International Affairs Division

1. Inducements in France: no ban but transparency « Il disincentivo agli incentivi nella disciplina sui servizi d’investimento: tendenze europee e nazionali a confronto » Il Salone Del Risparmio Milano, 18 Aprile 2013 Stéphane JANIN Director, Head of International Affairs Division AFG (French Asset Management Association)

2. Current industry landscape in France regarding fund distribution and mandates What is the current regulatory framework in France for inducements (investment advice + mandates)? AFG’s position Agenda

3. Regarding fund distribution, as in many Continental EU countries, the main distribution channels are banks and insurance companies: Independent Financial Advisers (IFAs) play a minor role, as compared to the UK: Banks + insurance companies = 85% of fund distribution IFAs = 10% of fund distribution Platforms/internet = 5% of fund distribution Regarding mandates (« discretionary portfolio management »), many asset management companies managing mandates make use of external investment funds to widen their choice and improve the performance for the investors 1. Current industry landscape in France regarding fund distribution and mandates

4. Both for investment advice and mandates (discretionary portfolio management), MiFID 1 (Art. 26 MiFID Level 2) was transposed by Art. 314-76 of AMF General Regulation: Either the commission is paid or provided to or by the client Or it consists of proper fees that enable or are necessary for the provision of collective or discretionary porftolio management (e.g. custody costs, regulatory levies or legal fees) and which cannot give rise to conflicts of interest with the duty to act honestly, fairly anf professionnally in the best interests of the clients Or the commission can be paid to third parties if two conditions are satisfied: The client is clearly informed of the existence, nature and amount of the fee. However, service providers may disclose the essential terms of the arrangements in summary form, provided that they disclose further details at the request of the client, and The commission must be designed to enhance the quality of the service to the client and not impair compliance with the duty to act in the bestinterests of the client. 2. What is the current regulatory framework in France for inducements (investment advice + mandates)?

5. For fundsubscriptionsthroughinvestmentadvice: The Continental EU model isverydifferentfrom the UK Retailinvestors go to theirbank or insurancecompany, and subscribe the funds of the group. It isnatural (as for car dealers with car makers: a Renault dealer proposes Renault cars): suchdistributors are not expected to offer a large range of fund managers (contrary to IFAs) Investors are not ready to pay for advice: only 28% of French wealthyinvestorswouldbeready to pay, vs. 51% in favour of commissions (pan-Europeanstudy, Cerullisurvey, September 2012) There was no marketfailureidentified in France For mandates: Inducementscreate an incentive for mandate asset managers to make use of externalinvestmentfunds, whichallows a widerchoice of investments, and therefore the best performance for the investors It isalso a way to keep and to develop an open architecture, to the benefit of fund managers (in particular the ‘boutiques’: there are more than 600 asset management companies in France, whichare a permanent stimulus for innovation and competition vis-à-vis the largestasset management companies) Transparency on the existence of inducementsisenough,and iscurrentlydone (including in mandate contracts) 3. AFG’s position (1/2)

6. 3. AFG’s position (2/2) • If a general ban of inducementswere to bedecidedat EU level: • For investmentadvice, itwould lead to: • Direct payment of distribution costs by the investor: hewould refuse and wouldthensubscribeonlybankingproducts(whichmaybelessperforming and withhiddencosts) • Rotation of portfolios (‘churning’) by distributors, to compensate the loss of retrocessions by more fees on the buying and selling of investmentfunds => It wouldbedetrimental for investors • For mandates, itwould lead to: • As for advice, a refusal for investors to payfor fundselection • A narrowerchoice of investmentfundsto be put in portfolio, potentiallyleading to a loweroverall return for investors • It wouldbedetrimental for investors, in particularthe less affluent investors, which are not ready to payhigherfees and wouldbepushed out of the market • It wouldbedetrimental for the development of open architecture • Compromise solution at EU level: EuropeanParliament: ban ofinducementsonly for independentinvestmentadvice andindependent mandate management?

7. Stéphane Janin, s.janin@afg.asso.fr, +33 1 44 94 94 04. Thanks!