France's Autorité des Marchés Financiers (AMF) is making the obligations of discretionary portfolio management with respect to retail clients more onerous.

The market regulator's aim is to protect investors from sharp practice and improve the conduct of asset managers with respect to discretionary portfolio management for retail clients. The changes made to position-recommendation DOC-2007-21 concern something it calls "the resumption of certain principles already applied to collective investment and the addition of items to allow enhanced supervision of mandates invested in unlisted securities."

The AMF recommends the following.

• Presenting the risk-return profile in the form of a composite indicator ranging from 1 to 7 before the mandate is signed.
• Improving the readability of the risk profile (for example by using the "profil prudent" (conservative profile) label in a suitable manner).
• Improving investors' understanding of performance (in particular by introducing the automatic comparison of the mandate's performance against the benchmark indicator).
• Supervising outperformance commissions by subjecting these commissions to a number of conditions.

For the year 2014 the AMF has noted an increase in the number of offers of mandates invested in unlisted securities that appear as a means of financing small-to-medium enterprises in exchange for advantageous tax reductions. Also, in order to allow retail investors to appreciate the process in more detail, the AMF will now be supervising this type of mandate, in particular regarding:

• fees;
• conflict-of-interest situations;
• the valuation of the financial instruments being held; and
• information from mandate-holders about the effect of investment on preference shares.