French Monetary and Financial Code
In forceI. - The eligible financial securities mentioned in 1° of I of article L. 214-24-55 meet the following conditions:
1° The potential loss to which the general-purpose investment fund is exposed as a result of holding them is limited to the amount it paid to acquire them;
2° Their liquidity does not compromise the ability of the general-purpose investment fund to comply with the provisions of Articles L. 214-24-29 and L. 214-24-34;
3° A reliable valuation of them is available, in the following form:
a) In the case of financial securities covered by 1° to 4° of I of Article R. 214-32-18, in the form of accurate, reliable and regularly established prices, which are either market prices or prices provided by valuation systems independent of the issuers;
b) In the case of financial securities covered by II of Article R. 214-32-18, in the form of a valuation established periodically on the basis of information from the issuer or from a financial analysis service mentioned in Article L. 544-1 ;
4° Appropriate information concerning them is available, in the following form:
a) In the case of financial securities covered by 1° to 4° of I of Article R. 214-32-18, in the form of accurate, complete and regular information provided to the market on the financial security concerned or, where applicable, on the assets underlying this instrument ;
b) In the case of financial securities covered by II of Article R. 214-32-18, in the form of accurate and regular information provided to the general-purpose investment fund on the financial instrument concerned or, where applicable, on the assets underlying this instrument;
5° They are negotiable;
6° Their acquisition is compatible with the management objectives or investment policy of the general purpose investment fund, as set out in the information documents intended for investors;
7° The risks they entail are taken into account in an appropriate manner by the risk management process of the general-purpose investment fund.
For the application of 2° and 5° of this I, financial instruments covered by 1° to 3° of I of Article R. 214-32-18 are presumed not to compromise the ability of the general-purpose investment fund to comply with the provisions of Articles L. 214-24-29 and L. 214-24-34. They are also presumed to be negotiable, unless the general-purpose investment fund has information leading to different conclusions.
II. - Units or shares in collective investment schemes governed by French law, UCITS governed by foreign law, FIAs established in other Member States of the European Union or closed-end investment funds governed by foreign law that comply with the following rules are treated as eligible financial securities:
1° These units or shares comply with the conditions set out in I ;
2° If the collective investment scheme or investment fund is incorporated as a company, it is subject to the corporate governance mechanisms applied to companies;
3° Where financial management is carried out by another entity on behalf of the collective investment or investment fund, this entity is subject to national regulations designed to ensure investor protection.
III. - Financial instruments which comply with the following rules are treated as eligible financial securities:
1° They comply with the conditions set out in I;
2° They are backed by other assets or linked to the performance of other assets, which may be different from those mentioned in article L. 214-24-55.
