The financial investment adviser (FIA) is a key player for many savers and investors. Their role, governed by strict regulations, is to provide personalised advice to guide financial decisions that are often complex and involving. Anyone wishing to entrust part of their assets to a professional needs to have a clear understanding of the FIA's status, remit and, above all, obligations. The purpose of this article is to provide you with a clear and concise overview of this status, covering the key aspects that are developed in greater detail in our dedicated publications. If you have any specific questions, our firm, which has a strong practice in banking and finance lawis at your disposal.
What is a financial investment adviser (FIA)?
The status of financial investment adviser is a relatively recent regulatory construct, designed to professionalise advice and protect investors. Its definition and scope have evolved with national and European reforms to arrive at the framework we know today. To find out more about conditions for obtaining the status of financial investment adviserFor more information, see our dedicated article.
Genesis and historical development of the status (financial security law, mif directive)
Prior to 2003, there was no specific legal framework for investment advice. Anyone could improvise themselves as an adviser, with no guarantee of competence or good repute for investors. The Financial Security Act of 1 August 2003 marked a turning point by creating the status of FIA. The aim was clear: to clean up the sector and offer investors better protection in the face of increasingly complex financial products. Later, the European Markets in Financial Instruments Directive (MiFID), transposed in 2007, strengthened this framework by making investment advice a fully-fledged investment service.
Current legal definition (article l. 541-1 of the Monetary and Financial Code)
Article L. 541-1 of the French Monetary and Financial Code defines an FIA as a person who provides investment advice on a regular basis. This advice may cover a wide range of products and services, including :
- Financial instruments (shares, bonds, UCITS units, etc.).
- The provision of investment services (such as portfolio management).
- Carrying out operations on various assets.
This definition places the FIA at the heart of his customer's wealth strategy, with a scope of intervention clearly defined by law.
Personalised recommendations: a key criterion in investment advice
What fundamentally distinguishes investment advice from simple financial information is the concept of "personalised recommendation". This is not general advice, but a recommendation formulated specifically for a given client. This recommendation must be based on an in-depth examination of the client's personal situation, objectives, financial knowledge and risk aversion. Any proposal that is not adapted to the client's profile would constitute a serious breach of the FIA's obligations.
Investment advice, a fully-fledged investment service (authorisation, passport, rules of conduct)
The European regulation's qualification as an "investment service" is not neutral. It subjects the FIA to a set of restrictive rules, similar to those applicable to other investment services providers (ISPs). This implies the need to obtain authorisation to operate, compliance with strict rules of good conduct (loyalty, transparency, diligence) and supervision by the market authorities. In return, this status may, under certain conditions, entitle ISPs to a "European passport", enabling them to offer their services throughout the European Union. For a detailed analysis, see our article on bank liability as an investment services provider (ips).
The CIF's activities: areas of intervention and specific features
The scope of an FIA's work is broad, covering most of the investment decisions that an individual or company may have to make. Its activities are carried out on several fronts, sometimes supplemented by ancillary tasks.
Advice on financial instruments
This is the FIA's core business. They advise clients on whether to buy, sell or hold financial instruments. This includes shares in listed or unlisted companies, government or corporate bonds, units or shares in collective investment schemes (UCITS, FIA), as well as more complex instruments such as derivatives, provided that the client's profile permits.
Advice on investment services
FIAs don't just advise on products; they also steer their clients towards the most appropriate services. For example, they may recommend taking out a portfolio management mandate with a specialist company, or using the services of an online broker to place stock market orders. Their role is to explain the advantages and disadvantages of each option.
Advice on miscellaneous property transactions
This category, defined by article L. 550-1 of the French Monetary and Financial Code, covers atypical investments offered to the public, in which the purchaser does not manage the asset itself. These investments may be in a variety of fields, such as works of art, manuscripts, solar panels or forests. The FIA is obliged to analyse the suitability and risks of such investments for his client. For more information, read our article on the legal framework and responsibilities of FIAs in relation to miscellaneous assets.
Ancillary and complementary activities (reception-transmission of rto orders, canvassing)
In addition to their main activity of providing advice, FIAs may be authorised to carry out complementary activities. In particular, they may provide the service of receiving and transmitting orders (RTO) on behalf of their clients, i.e. transmitting to a financial intermediary an order to buy or sell a product that they have recommended. They may also carry out banking or financial canvassing on behalf of financial institutions, a practice that is itself subject to strict controls. Find out more with our guide to the legal framework and specific obligations of banking and financial canvassing.
The FIA's fundamental obligations towards its clients
The regulations impose a set of strict obligations on FIAs, aimed at ensuring a relationship of trust and protecting the customer's interests at every stage of their collaboration. Failure to comply with these obligations may result in civil or even disciplinary liability.
The obligation to use best endeavours and the duty to educate
The FIA is not bound by an obligation of result - he cannot guarantee the performance of an investment - but by a reinforced obligation of means. They must take all the care of an informed professional to provide relevant and appropriate advice. In addition, they have a duty to educate: they must ensure that their recommendations, and the associated risks, are fully understood by their clients, by adapting their language to their level of knowledge.
Mandatory pre-contractual information (information document, significant links)
Even before entering into a contract, the FIA must provide the prospect with an introductory document. This document must set out the FIA's status, registration number and the professional association to which it belongs, as well as - and this is an essential point - mention any significant capital or commercial links it may have with product promoters (banks, management companies, insurers). This transparency is essential so that customers can assess their degree of independence.
Pre-contract assessment of the customer's situation (suitability test)
Before making any recommendations, FIAs must carry out a suitability test. This involves gathering precise information about the customer's financial and asset situation, investment experience, objectives (preparing for retirement, increasing capital, etc.) and risk tolerance. If a customer refuses to provide this information, the FIA must refrain from providing advice.
The engagement letter: an essential contractual framework
The relationship between the FIA and the customer must be formalised in an engagement letter signed by both parties. This contract is fundamental because it defines the nature and terms of the service to be provided, the duration of the assignment (one-off or ongoing), how the customer is to be informed and, of course, how the adviser is to be remunerated. It specifies whether the FIA is remunerated by direct fees, by retrocessions from product promoters, or by a combination of the two.
General rules of good conduct (transparency of remuneration, management of conflicts of interest)
FIAs are subject to strict rules of good conduct. They must act honestly, loyally and professionally, in the best interests of their clients. This implies full transparency of all remuneration, including that received from third parties. They must also identify, prevent and manage any conflict of interest that could affect the objectivity of their advice.
Who can't be a CIF? Exclusions and specificities
FIA status applies to a well-defined advisory activity. Consequently, certain advisory activities, although closely related, are excluded, as are professions that are already regulated and may provide financial advice on an ancillary basis.
Advisory services: a distinct activity
Equity capital advice, which mainly concerns mergers and acquisitions, capital strategy or industrial strategy for companies, is not considered to be a FIA activity. Since MiFID, it has been a service associated with investment services, covered by a separate framework. Professionals who carry out this activity exclusively are therefore not subject to FIA status.
Other regulated professions (lawyers, notaries, chartered accountants)
Members of regulated professions such as lawyers, notaries and chartered accountants are sometimes called upon to provide financial or wealth management advice as part of their main activity (for example, in the case of succession, business transfers or tax optimisation). They may do so within the limits of their own professional regulations, without having to adopt FIA status. Their advisory activity remains ancillary to their main service. For more details, see our article on compatibility of working as a lawyer with cif status is at your disposal.
Insurance and banking intermediaries
Similarly, an insurance broker or bank intermediary who provides advice in the strict context of an intermediation transaction is not subject to FIA status. Their advice is governed by the regulations specific to their activity. However, if this same professional were to develop an investment advice business on a regular basis, outside of his brokerage operations, he would have to comply with the obligations of FIA status.
Supervision of FIAs: role of the amf and professional associations
The reliability of the FIA status is based on a two-tier supervisory system, involving both the Autorité des marchés financiers (AMF) and approved professional associations, thus guaranteeing close control of the profession. To find out more about the amf's power to impose sanctions or on the role and control of cif professional associationsSee our articles.
Control by amf and applicable penalties
The AMF is the main supervisory authority for FIAs. It approves industry associations and ensures that they operate properly. It has direct supervisory powers over FIAs and can conduct investigations. In the event of a breach of legal, regulatory or ethical obligations, the AMF Enforcement Committee can impose penalties ranging from warnings and reprimands to fines and temporary or permanent disqualification.
The role of approved professional associations
All FIAs are required to join one of the professional associations authorised by the AMF. These associations are the first level of regulation. They are responsible for checking that their members meet the conditions for admission to the profession (competence, good repute, insurance). They draw up a code of conduct, monitor the activities of their members and have disciplinary powers (warning, suspension, expulsion). They play an essential role in representing and defending the interests of the profession.
Solent avocats: your expert in financial investment advisor law
The regulations governing financial investment advisers are dense and technical. Whether you are an investor wondering about your rights or a professional seeking to secure your practice, mastery of this legal framework is essential. Our firm puts its in-depth knowledge of financial law at your service to assist you, whether in the context of preventive advice or litigation relating to investment advice services.
The complexity of financial products and the regulatory obligations imposed on FIAs can be a source of disputes. For a personalised analysis of your situation and tailored support, contact our team of lawyers who are experts in banking and finance law.
Frequently asked questions
What is the difference between a cif and a direct seller?
The FIA provides personalised advice after analysing the customer's situation. A direct seller acts on behalf of a financial institution (principal) to actively offer its products or services. Although an FIA may also hold a direct seller's licence, the two activities are distinct and correspond to different rationales: advice for the former, marketing for the latter.
Can a lawyer give advice on financial investments?
Yes, a lawyer may provide advice on financial investments, but only as an accessory to his main legal activity (for example, in the context of asset management or the sale of a business). In this case, they act under the supervision of their own professional code of ethics and their Order, and not under FIA status.
Are my funds guaranteed with a cif?
No, a FIA does not guarantee the performance of investments, which are subject to the vagaries of the markets. Their responsibility is an obligation of means. However, investors are protected by the obligation for FIAs to take out professional indemnity insurance, which covers the financial consequences of any breaches of their duties (advisory errors, professional misconduct).
What is the suitability test?
The suitability test requires FIAs to gather information about their clients' knowledge, experience, financial situation and investment objectives. This step is mandatory before any recommendation is made, to ensure that the advice provided is well suited to the investor's profile.
Where can I find the list of approved cif centres?
Financial investment advisers must be registered with the Registre unique des intermédiaires en assurance, banque et finance (ORIAS), which can be consulted online. They must also appear on the list of members of their professional association, which is itself approved by the AMF. The list of members is available on the AMF website.
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