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Tackling market abuse and corruption — finally

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Poisson Erwan
Erwan Poisson

Partner

Paris

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Geoffroy Pascaud

Associate

Paris

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23 March 2016

In the next few weeks, the French Minister of Finance should present to the Government a Bill which would, if adopted, reform the French regime on market abuse, create a new anti-corruption agency and impose an obligation on businesses to implement strong compliance programs. Inspired by the U.S. and UK legislation, this Bill could represent a transformational change in the French legal framework.

Since it ratified the OECD Convention on Combating Bribery of Foreign Public Officers in 2000, France has been regularly criticized for its failure to tackle corruption. In 2014, the OECD, the Council of Europe and the European Commission provided recommendations and urged France to improve its anti-corruption legal framework.1

In sharp contrast with the situation in France, the American Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act have already defined new international standards, giving an extended territorial jurisdiction to their domestic authorities. French companies recently hit the headlines for being fined by the U.S. Department of Justice for the corruption of foreign agents.2

In October 2015 the Central Service for the Prevention of Corruption (SCPC) published guidelines to help businesses develop effective policies to prevent corruption.3 However, the guidelines are not legally binding.

In July 2015 Michel Sapin, the French Minister of Finance, officially announced that he was preparing a new Bill with a comprehensive scheme to tackle corruption practices in France and reform the regime on market abuse. The Minister recently declared that the aim was “for France to reach the highest international standards”. At the end of January 2016, the French media finally had access to the draft Bill.4

Market regulation

No more double jeopardy for market abuse

On 18 March 2015, the French Constitutional Court ruled that in light of the ne bis in idem principle, the same market abuse could no longer be sanctioned under both criminal and regulatory law. As a consequence, the government has until 1 September 2016 to reform the relevant provisions of the French Monetary and Financial Code.

The Bill should certainly put an end to this much debated topic:

− the criminal prosecution of market abuse would not be possible once the AMF has served a statement of objections to the respondents;

− similarly, an administrative sanction procedure would not be possible after a criminal prosecution had been initiated;

− the AMF and the national financial prosecutor would have to coordinate their actions and allocate cases between themselves. Should they disagree on who should be in charge, the prosecutor will make the final decision.

The Government seems to have opted for a small-scale reform, which would preserve both criminal and administrative sanctions. As of now, many questions remain as to the basis on which the AMF and the financial prosecutor will allocate the cases. However, this reform would clearly remove the possibility of double jeopardy and lower the risks for financial institutions of being prosecuted for market abuse.

More administrative settlements

The new Bill should broaden the scope of the settlement procedures set out by the AMF, initially introduced in 2010. So far, such administrative settlements are restricted to cases in which market intermediaries have failed to comply with their professional obligations.5 The Bill would extend the settlement regime to market infrastructures (central securities depositaries, clearing houses and market operators), even though market abuse would still be excluded from the settlement procedures. The aim is for the AMF to quickly close minor cases and focus on the most severe misconduct.

Anti-corruption

New anti-corruption agency

The Bill would replace the SCPC with a newly created National Agency for the Prevention of Corruption, with broad powers for efficiently tackling corruption. The Agency’s aims are:

− identifying the risks, defining a multiannual plan for preventing corruption and coordinating the French position with international organisations and national authorities;

− advising public institutions on corruption matters, delivering opinions regarding the integrity of public sector contractors and issuing guidelines on the internal processes for the detection of corruption within public institutions;

− issuing guidelines regarding the new obligation to implement anti-corruption compliance programs (details below). The Agency would ensure that such guidelines are respected and will be able to verify the compliance programs implemented; and

− verifying the application of the 1968 French Blocking Statute, for foreign proceedings related to compliance matters.

The new Agency will benefit from extended powers, such as: hearing any relevant individuals (including whistleblowers); requesting any document; carrying out searches of business premises; and obtaining information on judicial decisions or on going criminal investigations.

Obligation to implement anti-corruption compliance programs

The Bill proposes a new obligation for the prevention of corruption risks, similar to the “corporate offence” set out in the UK Bribery Act. Companies employing more than 500 persons or companies which are part of a group employing more than 500 persons and whose turnover exceeds EUR 100 million would be obliged to implement effective measures to prevent and detect corruption in France and abroad, including:

− the adoption of a code of conduct;
− the creation of an alert procedure for non-compliant conduct;
− mapping the corruption risks, by geographical areas and activities;
− implementing internal procedures to ensure the integrity of customers and suppliers;
− performing regular internal audits for compliance risks;
− the organisation of regular training for the executives and the most exposed employees of the company; and
− establishing disciplinary sanctions for non-compliant employees.

Fines for non-compliance include up to EUR 200,000 for an individual and EUR 1 million for a corporate entity. Companies sanctioned for violating their new anti-corruption obligations could be ordered to implement an efficient compliance program under the Agency’s supervision, for a maximum period of three years.

New provisions for the corruption of foreign agents

Following the examples of the UK Bribery Act and the American FCPA, the Bill makes it easier to prosecute in France acts of corruption of foreign public agents when they were committed abroad. The Bill also extends the offence of influence peddling (“traffic d’influence”) to acts involving foreign public agents.

New settlement opportunities for acts of corruption

One of the much awaited provision of the Bill relates to the creation of a mechanism similar to the American and English Deferred Prosecution Agreements. The Bill would enable the prosecutor to propose to a company involved in acts of corruption (including foreign corruption offences) a settlement as an alternative to criminal proceedings. Such a settlement would include:

− the payment of an amount proportionate to the offence, but limited to a maximum of 30% of the company’s annual turnover; and
− the implementation of a compliance program under the monitoring of the new anti-corruption agency, for a period of up to three years.

The settlement would not be considered as a criminal judgment.

After being approved by a judge, the settlement would prevent further criminal proceedings against the company, although the victims of the acts of corruption would still be able to initiate civil actions against the company to recover damages.

Both the decision approving the settlement and the settlement itself would be published on the website of the anti-corruption agency.

The impact of the Bill on financial institutions

For global financial entities, the impact of the Bill is uncertain. French anti-money laundering legislation already provides for an obligation to identify the customers of financial institutions as well as an obligation to report suspicious transactions where the amounts may be related to a criminal offence, including an act of corruption. Financial institutions have therefore already had to develop reporting and risk management programs.

However, the Bill may impose on financial institutions additional obligations specifically related to the reporting of the risk of corruption or may increase their potential criminal liability for acts of corruption committed by their customers or third parties. The Bill may therefore require existing compliance programs and reporting processes to be adapted. We will be closely monitoring the Bill, and will provide further guidance on its impact when more detail is available.


1 See: OECD Working Group on Bribery, France: Phase 3 Report & Recommendations, December 2014; Council of Europe Group of States against Corruption, Evaluation Report France, 27 January 2014; European Commission, EU Anti-corruption Report, 3 February 2014.
2 Alstom - 772 M. USD paid in 2015; Technip: 338 M. USD in 2010; Alcatel Lucent: 92 M. USD in 2010.
3 Lignes directrices françaises visant à renforcer la lutte contre la corruption dans les transactions commerciales, SCPC, mars 2015.
4 Solenn Poullenec, “Le projet de loi Sapin 2 veut améliorer la lutte contre la corruption”, AGEFI Quotidien, 20 January 2016.
5 Article L621-14-1 of the French Monetary and Financial Code.