French Monetary and Financial Code
In forceI. - The eligible financial securities referred to in 1° of I of article L. 214-20 meet the following conditions:
1° The potential loss to which the UCITS 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 UCITS' ability to comply with the provisions of Articles L. 214-7 and L. 214-8;
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. 214-11, 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. 214-11, in the form of a valuation established periodically, based on 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. 214-11, 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. 214-11, in the form of accurate and regular information provided to the UCITS 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 UCITS, as set out in the information documents intended for subscribers.
7° The risks they entail are taken into account in an appropriate manner by the UCITS' risk management process.
For the application of 2° and 5° of this I, financial instruments covered by 1° to 3° of the I of article R. 214-11 are presumed not to compromise the UCITS' ability to comply with the provisions of articles L. 214-7 and L. 214-8 and are presumed to be negotiable, unless the UCITS has information leading to different conclusions.
II. - Units or shares in undertakings for collective investment governed by French law, UCITS governed by foreign law, FIAs established in other Member States of the European Union or in other States party to the Agreement on the European Economic Area, as well as closed-end investment funds governed by foreign law which meet the following criteria are treated as eligible financial securities:
1° These units or shares comply with the conditions set out in I ;
2° The undertaking for collective investment, UCITS, FIA or investment fund is subject to the corporate governance mechanisms applied to companies;
3° Where financial management is carried out by another entity on behalf of the undertaking for collective investment, UCITS, AIF or investment fund, that entity is subject to national regulations designed to ensure investor protection;
III. - Financial instruments that meet the following criteria 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. 214-20.
