Knowledge Base
Distinguish between funds open to retail investors and those open to professional investors
Which directive establishes the classification of professional and non-professional investors?
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The MiFID II directive (Markets in Financial Instruments Directive) is the legal basis that establishes the classification of investors into professional and non-professional categories. It defines the objective criteria for this distinction, which are then transposed into national law, such as Article D533-11 of the Code monétaire et financier in France.
What specific protections are offered to non-professional investors under the MiFID II directive?
Non-professional investors benefit from enhanced protections under the MiFID II directive. These include a comprehensive pre-contractual suitability test, the provision of the KIID and PRIIPs KID before subscription, detailed cost information in euros, and a fourteen-day cooling-off period. These protections aim to ensure better information and protection against financial risks.
What is the minimum subscription amount required for a non-professional wishing to invest in an FPCI?
Professional Private Equity Funds (FPCI) are reserved for professional investors, but non-professionals may access them under certain conditions. The minimum subscription for a non-professional is €100,000, which may be reduced to €30,000 under specific conditions. This information is crucial for understanding differentiated access to funds based on investor status.
What is the main criterion for a natural person to be treated as a professional investor by election?
For a natural person to be treated as a professional investor by election, they must meet at least two of the following three criteria: a financial instruments portfolio exceeding €500,000, completion of at least ten significant transactions per quarter on average over the preceding four quarters, or having held a professional position in the financial sector for at least one year requiring knowledge of the envisaged transactions. These criteria are detailed in Article D533-12 of the Code monétaire et financier.
Natural persons can be considered professional investors by nature.
According to Article D533-11 of the Code monétaire et financier, professional investors by nature include entities such as credit institutions, investment firms, etc., but explicitly exclude natural persons. Natural persons can only opt for professional status under Article D533-12, which requires a written request and an understanding of the increased risks.
Employee savings funds (FCPE, SICAVAS) are reserved exclusively for professional investors.
Employee savings funds (FCPE, SICAVAS) are accessible to employees of the relevant companies and are considered retail funds due to their level of protection suited to non-professionals. They are not reserved for professional investors.
According to the MiFID II directive, what are the criteria for a company to be considered a professional investor by nature?
The MiFID II directive defines professional investors by nature according to objective criteria. For companies, at least two of the following three criteria must be met: total assets of at least €20 million, net turnover of at least €40 million, and equity of at least €2 million. These criteria are transposed in Article D533-11 of the Code monétaire et financier.