Securities operations (OST) are events that affect the characteristics or the number of securities held by investors. These may include, for example, dividends, mergers, demergers, capital increases, etc. These operations have consequences on the value of securities and the risk of loss for holders. For example, a merger operation may lead to an increase in the value of the merged security, but also to a dilution of shareholders’ voting power. A demerger operation may, on the contrary, reduce the value of the split security, but also diversify shareholders’ sources of income. Investors must therefore pay close attention to securities operations affecting their portfolios and assess their financial and strategic impact.
It should be noted that the legislature intended to impose a particular responsibility on investment services providers insofar as they » act in an honest, fair and professional manner that promotes the integrity of the market » (Art. L.533-1 of the French Monetary and Financial Code).
In their relationships with their investor clients, investment services providers are bound by certain obligations regarding the information they provide to them, as stipulated in particular by Article L. 533-12 of the French Monetary and Financial Code.
This article provides:
» All information, including promotional communications, sent by an investment services provider to clients, including potential clients, shall present accurate, clear and non-misleading content. Promotional communications shall be clearly identifiable as such. »
II — Investment services providers shall communicate in a timely manner to their clients, including potential clients, appropriate information concerning the investment services provider and its services, the financial instruments and investment strategies proposed, the places of execution and all related costs and charges « .
These provisions are restated and further specified in Articles 314-10 et seq. of the General Regulation of the French Financial Markets Authority (RGAMF). Whether the client is a professional or not, Article 314-18 of the RGAMF sets out the list of minimum information that must be communicated. This information covers the provider and its services, the financial instruments and their associated risks, the execution systems, and the costs.
More specifically, account keepers and custodians are bound by obligations towards their clients under the RGAMF.
Article 322-12 II of the RGAMF provides that:
» […] The account keeper-custodian shall transmit without delay to each securities account holder the following information:
1. Information relating to securities operations requiring a response from the holder, which it receives individually from the issuers of financial securities;
2. Information relating to other securities operations that result in a change to the assets recorded in the client’s account, which it receives individually from the issuers of financial securities; […] «
However, when the investment services provider fails to relay information regarding OST to the investor in a timely manner, the latter may find themselves in an extremely difficult situation and suffer very significant losses (for example: deactivation of securities, sharp decline in the security’s price).
It should be noted that in the case of securities deactivation and their redemption, the redemption transaction does not allow the holder to have it treated as a capital loss for tax purposes (Article 150-0 D of the French General Tax Code), which may considerably worsen the harm suffered by the investor.
In such a situation, it is advisable to consult a lawyer to assess the chances of success of legal action against the investment services provider. Maitre Le Bot is at your side to advise you and defend your rights against your investment services provider in order to obtain compensation for your losses.
