THE FRENCH STOCK EXCHANGE
& RELATED FINANCIALMARKETS
How they operate
and how they are regulated

Since the middle of the twentieth century the increase in the number of joint-stock companies and the trend for savers to speculate have made legislation in the area of solicited brokerage and financial advertising essential. Both methods are used by economic agents to contact potential investors with a view to finding funds from public savings. When there is such confrontation between the supply and demand for savings abusive practices have been used, even more so because small investors are often involved. All kinds of solicitation involve some commercial element because the agent advises people on applying for, buying, selling and exchanging securities. Therefore the people entitled to carry out this kind of activity and how they operate have to be regulated.

The main substantive laws on the matter are the law of January 3 1972 and the decree of August 22 1972. They prohibit and regulate different operations with a view to protecting the public solicited.

A distinction must be made between "colportage" and "démarchage". In both cases savers are approached with an offer to sell or buy securities, "colportage" goes a step further because securities are transferred and paid for, either partially or totally, on-the-spot. Whereas "démarchage" consists of advising clients on possible future transactions.

However current regulations controlling these activities are soon to be completely reformed in the wake of implementing the European Investment Services Directive in France. The Minister of Finance, Jean Arthuis, announced that a bill would be presented before Parliament in Autumn 1996.

I - On-the-spot securities transactions

A - Prohibition of on-the-spot transactions

B - The offence

1 - Factors constituting the offence

- the facts of the case
- the moral factor

2 - The sanction for the offence

II - Soliciting for transferables

A - The definition of soliciting

B - Prohibited soliciting operations

C - Regulations pertaining to authorised operations

1 - Recourse to soliciting

2 - The agent's card

3 - Information about proposed securities

D - Sanctions for illegal soliciting

IV - Future reforms in regulations

D.M.

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