French Monetary and Financial Code
In forceI. - A UCITS may not grant loans or act as guarantor on behalf of third parties.
It may, however, acquire financial instruments referred to in article L. 214-20 which are not fully paid up.
II. - A UCITS may, in order to achieve its management objective, receive or grant the guarantees mentioned in article L. 211-38, under the conditions defined in that same article, as well as receive joint and several guarantees or first demand guarantees.
The UCITS may only receive guarantees if they are granted by an institution acting as UCITS custodian, a credit institution whose registered office is located in a Member State of the Organisation for Economic Co-operation and Development, an investment firm whose registered office is located in a Member State of the European Union or in another State party to the Agreement on the European Economic Area, or an authorised branch referred to in I of Article L. 532-48. The aforementioned authorised investment firms or branches must be authorised to provide the service referred to in 1 of Article L. 321-2 and have own funds, within the meaning of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013, of at least EUR 3.8 million, except where such guarantees are granted under the financial contracts referred to in Article R. 214-15.
Where the guarantees granted by a UCITS are securities, the instrument constituting these securities defines:
1° The nature of the assets or rights that the beneficiary of the collateral may use or dispose of. Failing this, the beneficiary may only use or dispose of deposits, cash or financial instruments mentioned in 1°, 2° or 3° of I of article L. 214-20 ;
2° The maximum amount of assets or rights that the beneficiary of the collateral may use or dispose of. This maximum amount may not exceed 100% of the beneficiary's claim on the undertaking. The General Regulation of the Autorité des marchés financiers specifies the methods for calculating the beneficiary's claim on the undertaking.
The procedures for valuing the assets or rights provided as collateral by a UCITS are defined in the instrument establishing the collateral or in an ancillary agreement between the parties. In the absence of such valuation procedures, the collateral may only be deposits, cash or financial instruments referred to in 1°, 2° or 3° of I of article L. 214-20. The General Regulation of the Autorité des marchés financiers specifies the methods for valuing the assets or rights provided as collateral by the undertaking.
Where the collateral takes the form of deposits, these must be made with a credit institution mentioned in article R. 214-14 . The other provisions of article R. 214-14 do not apply to these deposits, within the limits of the counterparty risk coverage requirements.
