FRENCH BANKING ACT

24 JANUARY 1984

FINANCIAL ACTIVITY MODERNIZATION ACT

2 JULY 1996

Updated 1 September 1999

CRBF

Comité de la réglementation bancaire et financière

1. GENERAL ORGANIZATION ACTS

1.1. - BANKING ACT

ACT 84-46 OF 24 JANUARY 1984

TITLE I CREDIT INSTITUTIONS: DEFINITION AND OPERATING CONDITIONS

CHAPTER I DEFINITION OF A CREDIT INSTITUTION AND OF BANKING OPERATIONS

Credit institutions are legal persons carrying out banking operations as their regular business.

Banking operations comprise the receipt of funds from the public, credit operations and making available to customers or administering means of payment.

Article 2

Funds received from the public shall be understood to be funds which a person accepts from a third party, especially in the form of deposits, with the right to make use of them for his own account, but subject to an obligation to repay them. The following shall not however be regarded as funds received from the public:

1. funds received or left in an account by unlimited or limited liability partners in a partnership, by associates or shareholders holding at least 5% of the capital, or by directors (administrateurs), members of the managing board (directoire) and supervisory board (conseil de surveillance) or gérants1, and funds deriving from participating loans (prêts participatifs);

2. funds which an undertaking receives from its employees provided that they do not amount to more than 10% of its capital resources. For the purposes of determining this threshold, funds received from employees by virtue of specific legislative provisions shall be excluded.

Article 3

For the purposes of the present Act, a credit operation shall be understood to mean any act by which a person, for valuable consideration, places or promises to place funds at the disposal of another person or assumes a commitment in favour of the latter in the form of commitments under signature, guarantees or the like.

Leasing and, in general, any rental operation with a purchase option shall be treated as a credit operation.

Article 4

Means of payment shall be understood to comprise all instruments which, irrespective of the medium or technical procedure used, enable any person to transfer funds.

1 Persons appointed by the shareholders of sociétés à responsabilité limitée (private limited companies) or sociétés de personnes (partnerships) to manage and represent them.

1

Selected French Banking and Financial Regulations - Extract - September 1999

Article 5

Credit institutions may also carry out operations related to their business such as:

1. foreign-exchange operations;

2. operations in gold, precious metals and coins;

3. the placement, subscription, purchase, management, custody and sale of securities and any financial product;

4. advice and assistance in the management of assets;

5. advice and assistance in financial management, financial engineering and, generally, all services designed to facilitate the setting-up and development of undertakings, subject to the legislative provisions relating to the illegal exercise of certain professions;

6. operations involving the simple rental of movable or immovable property, in the case of institutions authorized to effect leasing operations.

The performance of the related operations and the activity of safekeeping shall be subject to the prior authorization prescribed by Article 11 of the Financial Activity Modernization Act 96-597 of 2 July 1996 when such performance constitutes investment services as defined in Article 4 of that Act.

Article 6

Credit institutions may also, subject to the conditions laid down by the Comité de la Réglementation Bancaire et Financière referred to in Article 29, take and hold equity holdings in existing or new undertakings.

Article 7

Credit institutions may only regularly carry on activities other than those referred to in Articles 1 to 6 subject to the conditions laid down by the Comité de la Réglementation Bancaire et Financière.

Such operations must in any case remain of limited importance in relation to the institution's normal business as a whole and must not hinder, restrict or distort competition on the market concerned.

Article 8

The following shall not be subject to the present Act: the Treasury, the Banque de France, the financial services of the Post Office, the Institut d'Émission des Départements d'Outre-Mer, the Institut d'Émission d'Outre-Mer and the Caisse des Dépôts et Consignations.

These institutions and services may carry out the banking operations specified in the laws and regulations governing them.

The regulations of the Comité de la Réglementation Bancaire et Financière as well as the regulations of the Comité de la Réglementation Comptable may, mutates mutandis and subject to the conditions fixed by a decree of the Conseil d'État, be extended to the financial services of the Post Office, the Caisse des Dépôts et Consignations and the Treasury accountants providing deposit services for private individuals.

2

Selected French Banking and Financial Regulations - Extract - September 1999

Article 9

When credit institutions with their headquarters abroad open information, liaison or representative offices, the opening of such offices must be notified in advance to the Comité des Établissements de Crédit et des Entreprises d'Investissement referred to in Article 29.

Such offices may use the business name of the credit institution they represent.

Article 9-1

For the purposes of the present Act:

1. The term "subsidiary" means an undertaking over which the Commission Bancaire records that sole control is exercised within the meaning of Article 357-1 of Act 66-537 of 24 July 1966 on commercial enterprises;

2. - The term "financial group" means a group formed by the direct or indirect subsidiaries of a credit institution, investment firm or financial holding company, and by undertakings of a financial nature over which the parent undertaking exercises joint control within the meaning of Article 357-1 of Act 66-537 of 24 July 1966.

The Comité de la Réglementation Bancaire et Financière shall define undertakings of a financial nature as referred to in the preceding paragraph;

3. - The term "mixed group" means a group formed by the direct or indirect subsidiaries of parent undertaking that is not a financial holding company, credit institution or investment but at least one of whose subsidiaries is a credit institution or investment firm.

CHAPTER II PROHIBITIONS

It shall be prohibited for any person other than a credit institution to carry out banking operations on a regular basis.

It shall also be prohibited for any undertaking other than a credit institution to receive funds from the public at sight or less than two years' term.

Article 11

Without prejudice to the particular provisions applicable to them, the prohibitions laid down in Article 10 above shall not apply to the persons and services listed in Article 8 or to undertakings governed by the Insurance Code, reinsurance companies, stockbrokers (investment service providers) or bodies collecting contributions paid by employers to finance construction programmes defined by the Construction and Housing Code or securitization vehicles.

The prohibition on credit operations shall not apply to:

1. non-profit-making bodies which, in fulfilment of their objects and for welfare reasons, grant loans from their capital resources on preferential terms to certain persons within their sphere of action;

Selected French Banking and Financial Regulations - Extract - September 1999 3

2. bodies which, in the case of the operations defined in Article L. 411-1 of the Construction and

Housing Code, and purely as an adjunct to their activity as a builder or supplier of services, grant natural persons acquiring property deferred payment of the price of the housing being purchased or subscribed to by them;

3. undertakings which grant salary advances or loans of an exceptional nature to their employees for welfare reasons.

4. to risky unincorporated mutual funds (fonds communs de placement) which, according to the terms set forth in Article 22 of Act 88-1201 of 23 December 1988 relating to Undertakings for Collective Investment in Transferable Securities (UCITS) and creating securitization vehicles (fonds communs de créances), grant overdrafts to the companies in which they have an equity interest.

Article 12

The prohibitions laid down in Article 10 of the present Act shall not prevent an undertaking, of whatever nature, from:

1. allowing its contracting partners deferred or advance payment facilities in the course of its business;

2. concluding contracts for the leasing of housing;

3. carrying out treasury operations with companies which, directly or indirectly, have capital links with it that confer on one of the linked undertakings effective control over the others;

4. issuing securities and negotiable debt securities defined in Article 19-I of Act 91-716 of 26 July

1991 containing various economic and financial provisions;

5. issuing vouchers and cards for the purchase of a particular article or service from it;

6. remitting cash as collateral for lending of securities pursuant to Article 31.c of Act 87-416 of

17 June 1987 relating to savings;

7. buying or selling securities, debt securities that are negotiable on a regulated French or foreign market or government securities as part of a repurchase agreement.

Article 13

No one may be a member of a board of directors or supervisory board of a credit institution nor, directly or through an intermediary, direct, manage or run a credit institution in any capacity, nor be authorized to sign on behalf of such an institution:

1. if he has been convicted:

a) of a crime,

b) of violating the provisions of Articles 150, 151, 151-1, 177, l78, 179, 419 or 420 of the Penal

Code*,

c) of theft, fraud or breach of trust,

d) of an offence which is punishable, under special Acts, by penalties laid down in Articles 405,

406 and 410 of the Penal Code*,

e) of misappropriation when acting as a public depository, extortion of funds or securities, criminal bankruptcy, injury to the credit of the State or breach of exchange control regulations,

* These articles from the former Penal Code were repealed by Act 92-1336 of 16 December 1992. See the correlation tables published in the circular of

14 May 1993 for the corresponding references and provisions in the new Penal Code.

4

Selected French Banking and Financial Regulations - Extract - September 1999

f) under the provisions of Title II of Act 66-537 of 24 July 1966 on commercial companies,

Articles 6 (consumer Code, Art L 313-5) and 15 of Act 66-1010 of 28 December 1966 relating to usury, money loans and certain canvassing and advertising operations, Article 10 of Act 72-6 of 3 January 1972 relating to canvassing for financial business and investment and insurance operations or Article 40 of Act 83-1 of 3 January 1983 on the promotion of investment and protection of savings,

g) of receiving items obtained in consequence of such offences,

h) under the provisions of either Article L.627 of the Public Health Code or Article 415 of the

Customs Code,

i) or under the terms of Articles 75 and 77 to 84 of the present Act;

2. if he has been sentenced to a period of imprisonment in excess of two months under Article 66 of the amended decree of 30 October 1935 unifying the Act on cheques;

3. if he has been the subject of a conviction by a foreign court of law that is res judicata, constituting under French law a conviction for one of the crimes or offences listed in the present Article . The criminal court of the convicted person's domicile shall, at the request of the State Prosecutor's Office, evaluate the regularity and legality of the decision and give a ruling in chambers on the application of the prohibition in France, the person concerned having been duly summoned to attend;

4. if a personal bankruptcy or prohibition order as laid down in Article 108 of Act 67-563 of

13 July 1967 on receivership, liquidation of assets, personal bankruptcy and criminal bankruptcies has been pronounced against him or if he has been adjudged bankrupt by a foreign court of law when the adjudication in bankruptcy has been declared enforceable in France and if he has not been discharged;

5. if he has been relieved of his duties as a law official by virtue of a court ruling.

Article 14

No undertaking other than a credit institution may make use of a business name, advertising or in general any expression implying that it is an authorized credit institution or creating confusion on the subject.

No credit institution may imply that it belongs to a category other than that in which it has been authorized or create confusion on the subject.

CHAPTER III AUTHORIZATION

Before starting business, credit institutions must obtain authorization from the Comité des Établissements de Crédit et des Entreprises d'Investissement referred to in Article 29.

The Comité des Établissements de Crédit et des Entreprises d'Investissement shall verify whether the applicant undertaking meets the requirements laid down in Articles 16 and 17 of the present Act and the appropriateness of the undertaking's legal form to the activity of a credit institution. It shall take into account the programme of operations of the undertaking, its proposed technical and financial resources and the suitability of the persons investing capital and, where applicable, their guarantors.

Selected French Banking and Financial Regulations - Extract - September 1999 5

The Committee shall also assess the applicant undertaking's capacity to achieve its development objectives in a manner that is compatible with the smooth working of the banking system and offers sufficient safety for its customers.

The Committee may limit the authorization it delivers to the exercise of certain operations defined by the applicant's corporate purpose. (Act 99-532 of 25 June 1999, Article 34)

The Committee may withhold authorization when it is likely to be hindered in the exercise of its supervision of the applicant undertaking either by the existence of equity links or links of direct or indirect control between the undertaking and other natural or legal persons, or by the existence of laws or regulations of a State that is not a party to the agreement on the European Economic Area when one or more of the above-mentioned persons are governed by such laws or regulations.

The Committee may also refuse authorization if the persons referred to in Article 17 lack the necessary integrity and adequate experience for their duties.

The Committee shall reach a decision within twelve months of receiving the application. Any refusal of authorization shall be notified to the applicant.

The Comité des Établissements de Crédit et des Entreprises d'Investissement shall prepare and keep up-to-date a list of credit institutions which shall be published in the Journal Officiel de la République Française.

Article 15 -1

When an undertaking subject to the law of a State other than a member of the European Communities requests, pursuant to point 1) of Article 33 below, permission to acquire an equity holding in a credit institution or an investment firm such that either of the latter would become its subsidiary, or when a direct or indirect subsidiary of such an undertaking applies to the Comité des Établissements de Crédit et des Entreprises d'Investissement for authorization, the Comité des Établissements de Crédit et des Entreprises d'Investissement shall limit or suspend its decision, at the request of the Council or Commission of the European Communities, if these authorities so request upon finding that credit institutions or investment firms having their headquarters in a Member State do not enjoy access to the market of the said third country or do not enjoy the same treatment as credit institutions or investment firms having their headquarters there.

When the Committee limits or suspends its decision under the provisions set out in the preceding paragraph, the authorization granted by the competent authority of a State that is a party to the agreement on the European Economic Area and not a member of the European Community shall have no legal effect on the territory of the French Republic during the period of the limitation or suspension and, in particular, the provisions set forth in Title IV bis of the present Act shall not apply to the institutions concerned.

Article 16

Credit institutions must have paid-up capital or a paid capital endowment at least equal to a sum fixed by the Comité de la Réglementation Bancaire et Financière.

6

Selected French Banking and Financial Regulations - Extract - September 1999

All credit institutions must be in a position at any time to prove that their assets effectively exceed their liabilities to third parties by an amount at least equal to the minimum capital.

However, the Comité de la Réglementation Bancaire et Financière shall lay down the conditions in which institutions approved by the Comité des Établissements de Crédit prior to 31 December 1992, or resulting from the merger of two or more credit institutions and which do not satisfy the provisions of the foregoing paragraph, may continue to carry on their business.

Article 17

The headquarters of any credit institution subject to the present authorization must be located on the same national territory as its registered office.

At least two people must be responsible for the effective direction of a credit institution's business policy.

Credit institutions with their headquarters abroad shall appoint at least two persons to be entrusted with the effective direction of the activities of their branch in France.

Article 18

Credit institutions shall be authorized as banks, mutual or co-operative banks, savings and provident institutions, municipal credit banks, financial companies (sociétés financières) or specialized financial institutions (institutions financières spécialisées).

1. Only the following institutions shall be generally entitled to receive funds from the public at sight or at less than two years' term: banks, mutual or co-operative banks, savings and provident institutions and municipal credit banks.

Banks may carry out all banking operations.

Mutual or co-operative banks, savings and provident institutions and municipal credit banks may carry out all banking operations subject to the restrictions arising under the laws and regulations governing them.

2. Unless authorized to do so by way of a secondary activity in accordance with the conditions laid down by the Comité de la Réglementation Bancaire et Financière, financial companies and specialized financial institutions may not receive funds from the public at sight or at less than two years' term.

Financial companies may carry out only such banking operations as are covered by the decision authorizing them to operate or by the laws and regulations applying to them.

Securities houses are financial companies whose principal business is to manage securities portfolios on their customers' behalf, receiving funds together with a management authority for this purpose, or to assist on a del credere basis in the placement of such securities. (This paragraph shall be repealed effective 1 January 1998 - Act n° 96-397 of 2 July 1996, articles 20 and 97-IV).

Specialized financial institutions are credit institutions carrying out a permanent public-interest task assigned to them by the State. They may not carry out banking operations other than those relating to this task, except as a secondary activity.

Article 19

I - The Comité des Établissements de Crédit et des Entreprises d'Investissement shall revoke the authorization of a credit institution either at the request of the institution or ex officio when the institution no longer fulfils the conditions to which the authorization is subject, when it has not

Selected French Banking and Financial Regulations - Extract - September 1999 7

made use of its authorization within 12 months or when it has ceased carrying on its business for six months or longer.

II - The revocation of authorization takes effect at the end of a period specified by the Comité des Établissements de Crédit et des Entreprises d'Investissement.

III - During such period:

- the credit institution remains subject to the supervision of the Commission Bancaire and, where appropriate, the Conseil des Marchés Financiers. The Commission Bancaire may impose the disciplinary sanctions prescribed by Article 45, including striking the institution off the list of authorized institutions."

- the institution may engage only in the banking operations and provide only the investment services strictly necessary for the winding-up of its business and must limit the other activities mentioned in Articles 5 through 7;

- it may not refer to its status as a credit institution without making it clear that its authorization is being revoked.

IV - The funds received from the public mentioned in Article 2, insofar as they may be accepted on a professional basis only by a credit institution, and the securities issued by such institution which are not traded on a regulated market, shall be refunded and redeemed by the institution at maturity or, if such maturity is subsequent to the period mentioned in II above, on the date specified by the Comité des Établissements de Crédit et des Entreprises d'Investissement. At the end of said period, the institution shall no longer be a credit institution and must change its name. The banking operations other than acceptance of public funds (Funds received from the public) in which the institution engaged or agreed to engage before the revocation of its authorization may be completed.

V - A credit institution which decides to dissolve before the end of the period mentioned in II above remains subject, until completion of its liquidation, to the supervision of the Commission Bancaire, which may impose the disciplinary sanctions prescribed in Article 45, including striking off. It may not refer to its status as a credit institution without making it clear that it is in liquidation.

Article 19-1

A credit institution may be struck off the list of authorized credit institutions by the Commission Bancaire as a disciplinary sanction.

The striking off shall entail liquidation of the legal person, if its registered office is in France. In the case of a branch of an institution with its registered office outside the European Economic Area, such striking off shall entail liquidation of the branch's balance-sheet and off-balance-sheet assets and liabilities. To protect customers' interests, the Commission Bancaire may defer the liquidation for a period that it determines.

An institution struck off the list remains subject to the supervision of the Commission Bancaire until completion of the liquidation. It may engage only in the operations strictly necessary for the

8

Selected French Banking and Financial Regulations - Extract - September 1999

winding-up of its business. It may not refer to its status as a credit institution without making it clear that it has been struck off the list of authorized institutions.

Article 19-2

The Comité de la Réglementation Bancaire et Financière shall set the conditions for implementing Articles 19 and 19-1. In particular it shall specify the procedures for:

- publicizing the decisions concerning the revocation of authorization and striking-off ;

- in addition to the possibility of taking advantage of other legal options for assignment and enforceability vis-à-vis third parties, the assignment of claims arising from the credit operations mentioned in Article 3 may be made binding on third parties by the debtor's written consent or else by decision of the Commission Bancaire;

- transferring housing savings plans and accounts, business savings passbook accounts, people's savings plans and passbook accounts, personal equity plans and uncollateralized commitments to one or more other credit institutions without prejudice to the rights of the holders or beneficiaries;

- transferring financial instruments held on account with the institution to another investment service provider or to the legal person issuer of the instruments;

- limitation of the operations referred to in Articles 5 through 7 of this Act."

CHAPTER IV CENTRAL BODIES

For the purposes of the present Act, the following shall be regarded as central bodies: the Caisse Nationale de Crédit Agricole, the Chambre Syndicale des Banques Populaires, the Confédération Nationale du Crédit Mutuel, the Caisse Centrale de Crédit Coopératif, the Fédération Centrale du Crédit Mutuel Agricole et Rural, the Centre National des Caisses d'Epargne et de Prévoyance and the Chambre Syndicale des Sociétés Anonymes de Crédit Immobilier.

Article 21

The central bodies shall represent their member credit institutions in relations with the Banque de France, the Comité des Etablissements de Crédit et des Entreprises d'Investissement and, subject to the rules applying to disciplinary procedure, the Commission Bancaire.

They shall be responsible for ensuring cohesion within their network and the smooth functioning of their member institutions. To this end, they shall take all necessary measures, in particular to safeguard the liquidity and solvency of each of these institutions and of the network as a whole.

They may also decide to prohibit or limit the payment of a dividend to the shareholders of credit institutions or of investment firms affiliated to them.

They shall ensure that the laws and regulations applying to these institutions are implemented and exercise administrative, technical and financial supervision over their organization and management. On-site supervision by central bodies may be extended to their direct or indirect subsidiaries and to those of affiliated institutions.

Selected French Banking and Financial Regulations - Extract - September 1999 9

Within the scope of these powers, they may take disciplinary action as provided for under the laws and regulations applying to them.

Loss of membership status must be notified by the central body to the Comité des Etablissements de Crédit et des Entreprises d'Investissement, which shall take a decision on the authorization of the institution in question.

After informing the Commission Bancaire, and without prejudice to the powers of the Comité des Etablissements de Crédit et des Entreprises d'Investissement, central bodies may, when the financial situation of the institutions concerned warrants such action, and notwithstanding all provisions or stipulations to the contrary, decide the merger of two or more legal persons affiliated to them, the total or partial transfer of their business and their dissolution. The central bodies must previously consult the managing bodies of the legal persons concerned. The central bodies are responsible for the liquidation of credit institutions affiliated to them or for the total or partial transfer of their business.

Article 22

Without prejudice to the powers conferred on the Commission Bancaire to exercise supervision by off-site monitoring and on-site supervision of their member institutions, the central bodies shall, each in its respective area, assist in implementing the laws and regulations governing the credit institutions.

As part of these responsibilities, they shall bring any infringements of such provisions to the notice of the Commission Bancaire.

CHAPTER V ORGANIZATION OF THE PROFESSION

All credit institutions shall be required to belong to a professional body or central body affiliated to the Association Française des Établissements de Crédit et des Entreprises d'Investissement.

Nevertheless, the Minister for Economic Affairs and Finance may authorize certain specialized financial institutions to belong to the Association directly.

The objects of the Association Française des Établissements de Crédit et des Entreprises d'Investissement shall be to represent the collective interests of the credit institutions and investment firms, particularly in relations with the public authorities, provide its members and the public with information, carry out research into any questions of mutual interest and draft recommendations thereon with a view, where appropriate, to promoting inter-network co-operation and organizing and managing services of mutual interest.

The Association Française des Etablissements de Crédit et des Entreprises d'Investissement may also engage in discussions with trade union organizations representing the sector concerning issues of a general nature relating to credit institutions and investment firms as a whole.

Its statutes shall be submitted for the approval of the minister.

10

Selected French Banking and Financial Regulations - Extract - September 1999

TITLE II

FORMULATION AND IMPLEMENTATION OF THE RULES APPLYING TO CREDIT

INSTITUTIONS

CHAPTER I CONSEIL NATIONAL DU CREDIT ET DU TITRE

A national credit and securities council - the Conseil National du Crédit et du Titre - is hereby established.

The Conseil National du Crédit et du Titre shall study the working of the banking and financial system, particularly as regards customer relations and the administering of means of payment. It may issue opinions in these areas. It may also, in these areas, commission any research it deems necessary subject to the conditions laid down in Article 28.

It may be asked by the Minister for Economic Affairs and Finance to give an opinion on bills and draft decrees falling within its competence, and may be consulted in connection with the drafting of the National Plan.

Each year, the Conseil National du Crédit et du Titre shall send the President of the Republic and Parliament a report on the working of the banking and financial system. This report shall be published in the Journal Officiel.

Article 25

The Conseil National du Crédit et du Titre shall be chaired by the Minister for Economic Affairs and Finance. The Governor of the Banque de France shall be its deputy-chairman.

The other members shall be appointed by a decree of the Minister for Economic Affairs and Finance in accordance with the following distribution:

1. four representatives of the State, including the Head of the Treasury;

2. two deputies and two senators;

3. one member of the Conseil Économique et Social;

4. three elected representatives of the regions and overseas departments and territories;

5. ten representatives of the sectors of economic activity;

6. ten representatives of national trade unions, including representatives of the trade unions representing the staff of credit institutions and investment firms;

7. thirteen representatives of the credit institutions and investment firms, including one representative of the Association Française des Établissements de Crédit et des Entreprises d'Investissement and one representative of investment firms.

8. six prominent persons chosen for their competence in economic and financial matters.

Members of the Conseil National du Crédit et du Titre may not be represented by an alternate.

Selected French Banking and Financial Regulations - Extract - September 1999 11

The arrangements for the appointment of members of the Conseil National du Crédit et du Titre shall be laid down by decree.

Article 26

The Conseil National du Crédit et du Titre shall meet when convened by its chairman.

The Conseil National du Crédit et du Titre shall also meet whenever a majority of its members think it necessary.

The proceedings of the Conseil National du Crédit et du Titre shall only be valid when a majority of its members are present.

Publication of the opinions mentioned in the second and third paragraphs of Article 24 and of the research referred to in the second paragraph of the same Article shall be a matter for decision by a majority of the members of the Conseil National du Crédit et du Titre.

Article 27

The Conseil National du Crédit et du Titre shall be provided with its own financial resources for its operational requirements.

The Secretary General of the Conseil National du Crédit et du Titre shall be appointed by the Minister for Economic Affairs and Finance from a list of at least three names drawn up by the Conseil.

Article 28

The Conseil National du Crédit et du Titre may give some of its members particular assignments and set up working parties or study groups within its organization.

The Conseil National du Crédit et du Titre may ask the Banque de France or the competent authorities to provide it, subject to the obligation of professional secrecy, with the information needed to discharge its functions.

CHAPTER II COMITÉ DE LA RÉGLEMENTATION BANCAIRE ET FINANCIÈRE AND COMITÉ DES ÉTABLISSEMENTS DE CRÉDIT ET DES ENTREPRISES D'INVESTISSEMENT Article 29

A banking regulatory committee - the Comité de la Réglementation Bancaire et Financière- and a credit institutions committee - the Comité des Établissements de Crédit et des Entreprises d'Investissement- are hereby established, members of which shall be chosen from within the Conseil National du Crédit et du Titre and which shall report annually to that body.

Article 30

Within the framework of guidelines laid down by the Government and subject to the powers of the Comité de la Réglementation Comptable, the Comité de la Réglementation Bancaire et Financière shall fix the general regulations applicable to credit institutions and to investment firms in accordance with the conditions laid down in Chapter III of the present title.

12

Selected French Banking and Financial Regulations - Extract - September 1999

It shall comprise the Minister for Economic Affairs and Finance or his representative as chairman, the Governor of the Banque de France, acting as chairman of the Commission Bancaire, or his representative on this Commission, and five other members or their alternates appointed by Order of the Minister for Economic Affairs and Finance for a three-year term : one member of the Conseil d'État, one representative of the Association Française des Établissements de Crédit et des Entreprises d'Investissement, one representative of trade unions representing employees of credit institutions and investment firms other than those referred to in Article 15 (of Act 96-597 of 2 July

1996), and two prominent persons chosen for their competence.

When it considers general provisions affecting the activity of investment service providers, the Comité de la Réglementation Bancaire et Financière also includes the chairman of the Commission des Opérations de Bourse or its representative, the chairman of the Conseil des Marchés Financiers or its representative and a representative of the investment firms.

Decisions shall be taken by a majority vote of the members present. In the event of a tie, the chairman shall have the casting vote.

Article 31

The Comité des Etablissements de Crédit et des Entreprises d'Investissement shall be responsible for taking the decisions and granting the individual authorizations or exemptions provided for in the laws and regulations applying to credit institutions and to investment firms, with the exception of those within the competence of the Commission Bancaire.

It shall be chaired by the Governor of the Banque de France, acting as chairman of the Commission Bancaire, or his representative on this Commission. Its other members shall be the Head of the Treasury or his representative, the chairman or chairmen of the authorities which approved the programme of operations of the person whose application for authorization the Comité is considering or their representative, the chairman of the managing board of the guarantee fund mentioned in Article 52-1 et seq. or a member of the managing board representing him, and six members or their alternates appointed by Order of the Minister for Economic Affairs and Finance for a three-year term : one member of the Conseil d'État, one senior manager of a credit institution and one senior manager of an investment firm representing the Association Française des Établissements de Crédit et des Entreprises d'Investissement, one representative of trade unions representing employees of the firms and institutions subject to authorization by the Comité, and two prominent persons chosen for their competence.

In the case of a tie, the Chairman shall have the casting vote.

In the event of an emergency ascertained by its chairman, the Comité may take a decision by way of a written consultation on a decision proposal, according to a procedure laid down in a decree of the Conseil d'Etat. The Comité may delegate the power to take decisions or grant permits or individual dispensations to its chairman, except as regards authorization, the revocation of authorization or effective change of control of a subject institution, with the exception of the provisions set forth at the last paragraph of Article 21 and at Article 46-1.

The Head of the Treasury may request postponement of any decision of the Committee. In this case the Chairman shall in due course arrange for further discussion of the matter.

Selected French Banking and Financial Regulations - Extract - September 1999 13

Article 31-1

All persons participating or having participated in the discussions or activities of the Comité des Établissements de Crédit et des Entreprises d'Investissement shall be bound by the obligation of professional secrecy subject to the penalties laid down in Article 378 of the Penal Code. This secrecy may not serve as grounds for non-disclosure of information to a court engaged either in a court-ordered liquidation procedure concerning a credit institution, investment firm or financial holding company, or in criminal proceedings.

Notwithstanding the provisions of Act 68-678 of 26 July 1968 relating to the disclosure of documents and information of an economic, commercial, industrial, financial or technical nature to natural and legal persons, the Comité des Établissements de Crédit et des Entreprises d'Investissement may transmit information to the authorities of other States responsible for the authorization or supervision of credit institutions and financial institutions, subject to reciprocity and provided the said authorities are themselves bound by an obligation of professional secrecy subject to the same guarantees as in France. The Commission of the European Communities may also receive such information subject to what is necessary to the performance of the tasks entrusted to it and provided that persons receiving such information are bound by an obligation of professional secrecy subject to the same guarantees as in France.

Article 32

Appeals against the regulations of the Comité de la Réglementation Bancaire et Financière or the decisions of the Comité des Établissements de Crédit et des Entreprises d'Investissement, which must state the grounds for its decisions, shall lie to the administrative courts.

The regulations shall be published in the Journal Officiel de la République Française, after confirmation by the Minister for Economic Affairs and Finance.

CHAPTER III REGULATION OF CREDIT INSTITUTIONS

The Comité de la Réglementation Bancaire et Financière shall establish the regulations governing in particular:

1. the amount of credit institutions' capital and the conditions for taking, increasing or disposing of direct or indirect equity holdings in these institutions as well as in financial institutions as defined under Article 71-1 of this Act directly or indirectly holding effective power of control over one or more credit institutions;

2. the conditions for the establishment of networks;

3. the conditions under which these institutions may take equity holdings;

4. the conditions of the operations that may be carried out by credit institutions, particularly in their relations with customers, and the conditions of competition;

5. the organization of joint services;

6. the management standards to be observed by credit institutions, with a view in particular to safeguarding their liquidity and solvency and the equilibrium of their financial structure;

14

Selected French Banking and Financial Regulations - Extract - September 1999

7. the information intended for the competent authorities;

8. subject to the tasks conferred upon the European System of Central Banks by paragraph 2 of

Article 105 of the Treaty establishing the European Community, the instruments and rules of credit policy;

9. the rules relating to depositor protection referred to in Article 52-1;

10. the rules applicable to accounting organization, data processing supervision and security mechanisms and internal control procedures.

In case of failure to comply with the requirements laid down by the Comité de la Réglementation Bancaire et Financière in regard to application of point 1 of this Article , and without prejudice to Article 356-4 of Act 66-537 of 24 July 1966 on commercial companies, the State Prosecutor, the Commission Bancaire or the Comité des Établissements de Crédit et des Entreprises d'Investissement or any shareholder may apply to the courts to suspend the exercise of the voting rights attached to irregularly held direct or indirect shares or equity interests in credit institutions or financial institutions until such time as the situation has been rectified.

Article 33-1

After consulting the Conseil des Marchés Financiers and subject to the powers of the Commission des Opérations de Bourse as regards portfolio management companies defined in the Financial Activity Modernization Act 96-597 of 2 July 1996, the Comité de la Réglementation Bancaire et Financière also issues, with regard to the investment service providers defined in Article 6 of that Act, regulations concerning:

1. the amount of the capital requirement in light of the services which the investment service provider plans to provide ;

2. the standards defined in 5 to 7, 10 and, if applicable, 8 of Article 33.

Article 34

The following shall be excluded from the responsibilities of the Comité de la Réglementation Bancaire et Financière:

1. as regards the mutual or co-operative banks, definition of the conditions for membership and the resulting restrictions on their field of activity;

2. definition of the powers of the specialized financial institutions, savings and provident institutions and municipal credit banks;

3. the principles applying to banking operations benefiting from government aid;

4. the rules applicable to the provision of investment services by investment firms and credit institutions.

Article 35

The Comité de la Réglementation Bancaire et Financière regulations as well as the Comité de la Réglementation Comptable regulations may differ depending on the legal status of the credit institutions or investment firms, the extent of their networks or the characteristics of their business.

They may, if necessary, set out the conditions for the granting of individual exemptions of an exceptional and temporary nature.

Selected French Banking and Financial Regulations - Extract - September 1999 15

Article 36

The Chairman of the Comité de la Réglementation Bancaire et Financière shall determine the terms and conditions on which the regulations issued by the Comité de la Réglementation Bancaire et Financière shall be implemented.

TITLE III

SUPERVISION OF CREDIT INSTITUTIONS

CHAPTER I COMMISSION BANCAIRE

A banking commission - the Commission Bancaire - is hereby established to monitor the credit institutions' observance of the laws and regulations applying to them and take disciplinary action against any contravention.

It shall examine the way in which they operate and monitor the soundness of their financial situation.

It shall ensure that the rules of sound banking practice are observed.

Article 37-1

The Commission Bancaire shall also monitor the compliance of investment service providers other than portfolio management companies, members of regulated markets and members of clearing houses with the laws and regulations that are provided for in this Act or that expressly provide for supervision by the Commission Bancaire. It shall punish any violations thereof under the conditions set forth at Article 45.

It shall examine the conditions under which they operate and monitor the soundness of their financial situation.

This supervision shall be exercised without prejudice to the powers of the Conseil des Marchés Financiers and the Commission des Opérations de Bourse concerning supervision of rules of conduct.

Article 38

The Commission Bancaire shall comprise the Governor of the Banque de France or his representative, as chairman, the Head of the Treasury or his representative and four members or their alternates appointed by an Order of the Minister for Economic Affairs and Finance for a period of six years:

1. a member of the Conseil d'État proposed by the deputy chairman of the Conseil d'État;

2. a judge of the Cour de Cassation proposed by the First Chief Justice of the Cour de Cassation;

3. two members chosen for their competence in banking and financial matters.

16

Selected French Banking and Financial Regulations - Extract - September 1999

In the case of a tie, the chairman shall have the casting vote.

Article 38 - 1

The Commission Bancaire shall hear the chairman of the managing board of the guarantee fund for any matter concerning an institution in respect of which it envisages seeking the intervention of the guarantee fund or proposing to the guarantee fund that it should take preventive action.

The Commission Bancaire shall also hear the chairman of the managing board at his request.

Article 39

The General Secretariat of the Commission Bancaire shall carry out off-site monitoring and on-site supervision as instructed by the Commission. The Commission shall periodically fix the programme of on-site supervision.

The Banque de France shall provide the General Secretariat of the Commission Bancaire with the staff and resources required to carry out the supervisory duties mentioned in the paragraph above, in accordance with terms and conditions to be specified by formal agreement. The General Secretariat of the Commission Bancaire may also call on any competent persons to assist it in its supervisory duties within the framework of formal agreements to be concluded to that end.

Article 40

The Commission Bancaire shall draw up a list of the documents and data to be submitted to it and determine their form and the deadlines for filing.

In addition, it may require credit institutions and investment firms to provide any information, document, clarification or proof necessary to the exercise of its functions.

It may ask to be sent the auditors' reports and, in general, all accounting documents (and, when necessary, for them to be certified), as well as all relevant information and data.

Article 41

The findings of on-site supervision shall be forwarded either to the board of directors or to the managing and supervisory boards, or other similar decision-making body, of the credit institution or investment firm in question. They shall also be given to the statutory auditors.

On-site supervision may be extended to the subsidiaries of a credit institution or investment firm, to the legal persons directly or indirectly controlling it within the meaning of Article 355-1 of the Commercial Companies Act 66-537 of 24 July 1966, and to their subsidiaries.

Article 41-1

When the authorities of a State party to the agreement on the European Economic Area with competence to supervise a credit institution or investment firm wish, in specific cases, to verify information concerning one of the legal persons referred to at the second paragraph of Article 41 whose registered office is situated in France, the Commission Bancaire must, by way of an exception to the provisions of Act 68-678 of 26 July 1968 on the disclosure of documents and information of an economic, commercial, industrial, financial or technical nature to foreign natural or legal persons, respond to their request either by carrying out the verification itself or by allowing the representatives of such authorities to do so.

Selected French Banking and Financial Regulations - Extract - September 1999 17

On-site supervision by the Commission Bancaire may be extended to the legal persons referred to in the second paragraph of Article 41 whose registered office is situated in another State party to the agreement on the European Economic Area. The Commission shall ask the competent authorities of the other State party to the agreement on the European Economic Area to carry out such verification. With the authorization of such authorities, it may appoint representatives to carry out controls.

In order to ensure the supervision of an institution subject to its control, the Commission Bancaire may require branches established in another State party to the agreement on the European Economic Area to disclose all information relevant to the exercise of such supervision and, after informing the authority of the State concerned with competence for the supervision of credit institutions or investment firms, cause its representatives to carry out an on-site inspection of the branches of the institution concerned.

By way of an exception to the provisions of the above-mentioned Act 68-678 of 26 July 1968, the Commission Bancaire may in addition exchange all information relevant to the exercise of their duties with the authorities of other States party to the agreement on the European Economic Area responsible for the supervision of credit institutions, investment firms, other financial institutions and insurance companies.

Article . 41-2

The Commission Bancaire may, by way of an exception to the provisions of the above-mentioned Act 68-678 of 26 July 1968, conclude bilateral agreements with the authorities of a State not party to the agreement on the European Economic Area entrusted with duties similar to those entrusted in France to the Commission Bancaire, provided that such authorities are themselves bound by a professional secrecy obligation, such bilateral agreements having as their purpose, cumulatively or otherwise:

- the extension of on-site inspections to the branches or subsidiaries established in a foreign country of a credit institution, investment firm or financial holding company governed by French law;

- the conduct by the Commission Bancaire, at the request of such foreign authorities, of on-site inspections of institutions subject to supervision in France that are branches or subsidiaries of institutions subject to the supervision of such authorities. Such inspections may be carried out jointly with such foreign authorities;

- the definition of the conditions under which the Commission Bancaire may transmit, receive or exchange information relevant to the exercise of its powers and those of foreign authorities responsible for the supervision of credit institutions, investment firms, other financial institutions, insurance companies or financial markets.

Article . 41-3

Controls carried out under Articles 41-1 and 41-2 by the representatives of a foreign authority with competence for the supervision of credit institutions may only concern compliance with the prudential management standards of the State concerned in order to permit a control of the financial situation of banking or financial groups. They must be the subject of a report to the Commission Bancaire, which alone may order sanctions with regard to the subsidiary or branch controlled in France.

18

Selected French Banking and Financial Regulations - Extract - September 1999

In order to allow exercise of the controls set forth at Articles 41-1 and 41-2, and by way of an exception to the provisions of the above-mentioned Act 68-678 of 26 July 1968, persons taking part in the strategic or operational management of the credit institutions referred to in the previous paragraph or employed by such a credit institution must comply with the requests of representatives of foreign banking supervisory authorities and may not assert a professional secrecy obligation as grounds for non-disclosure to them.

The Commission Bancaire shall refuse a request for assistance from a foreign authority when complying with the request is likely to prejudice French sovereignty, security, essential economic interests or public policy or when criminal proceedings of whatever nature have already been initiated in France on the basis of the same facts and against the same persons, or when final judgment has already been delivered against those persons for the same facts.

Without prejudice to the prerogatives of the Conseil des Marchés Financiers and the Commission des Opérations de Bourse, the provisions of this article and of Articles 41-1 and 41-2 shall apply to investment firms and to the investment services business of credit institutions.

Article 42

When a credit institution is in breach of the rules of sound banking practice the Commission Bancaire may, after having given its management an opportunity to put forward their explanations, issue a warning to them.

Article 43

The Commission Bancaire may issue a recommendation to a credit institution calling upon it to take appropriate steps to restore or strengthen its financial situation, improve its management methods or ensure that its organization matches its activities or development objectives. The institution concerned is required to respond within two months, giving details of measures taken following the recommendation.

Independently of the provisions set forth in the previous paragraph, the Commission Bancaire may issue an injunction to any credit institution, undertaking or person subject to its supervision pursuant to Article 37-1 calling upon it, inter alia, to take all necessary measures within a given period to restore or strengthen its financial situation, improve its management methods or ensure that its organization matches its activities or development objectives.

Article 44

The Commission Bancaire may appoint a provisional administrator, to whom will be transferred all the powers for administering, managing and representing the legal person.

This appointment may be made either at the request of the management, if they feel themselves no longer able to carry out their duties normally or on the Commission's initiative when the credit institution can no longer be run on a normal basis or when one of the sanctions referred to in Article 45(4) and (5) has been imposed.

Selected French Banking and Financial Regulations - Extract - September 1999 19

Article 45

If a credit institution or investment firm has contravened a law or regulation relating to its business, has not responded to a recommendation, or has not heeded a cautionary notice, or has not fulfilled commitments given on the occasion of an application for authorization or a permit or dispensation provided for by the laws and regulations that apply to credit institutions and investment firms, the Commission Bancaire, subject to the powers of the Conseil des Marchés Financiers, may impose one of the following disciplinary sanctions:

1. warning;

2. reprimand;

3. prohibition on the execution of certain operations and any other limitations on the carrying on of business;

4. temporary suspension of one or more of the persons referred to in Article 17 of the present Act or in Article 12 of the Financial Activity Modernization Act 96-597 of 2 July 1996 with or without appointment of a provisional administrator;

5. compulsory resignation of one or more of such persons with or without appointment of a provisional administrator;

6. striking the investment firm or credit institution off the list of authorized credit institutions and investment firms with or without appointment of a liquidator.

The same applies if it has failed to comply with an injunction as set forth at Article 43.

The Commission Bancaire may also impose, instead of or in addition to said sanctions, a pecuniary sanction not exceeding the minimum capital which the credit institution or investment firm must have. The corresponding sums shall be collected by the Treasury and paid into the State budget.

The Commission Bancaire may also decide, either in place of or in addition to such sanctions, to prohibit or limit the payment of a dividend to the shareholders of the credit institution or investment firm.

When it imposes any of the foregoing disciplinary sanctions on an investment service provider, the Commission Bancaire shall so inform the Conseil des Marchés Financiers.

The Commission Bancaire may decide that the sanctions imposed under the terms of the present Article shall be published at the expense of the credit institution or investment firm in such journals or publications as it may decide.

Article 46

The Commission Bancaire may appoint a liquidator to credit institutions having been struck off and undertakings improperly carrying on the business defined in Article 1 or infringing one of the prohibitions specified in Article 10. All powers to administer, manage and represent the legal person are transferred to the liquidator.

Article 46-1

When a provisional administrator or liquidator has been appointed to a credit institution under Articles 44 and 46, the Commission Bancaire may, after seeking the opinion of the guarantee fund under Article 52-2, make a referral to the Tribunal de Grande Instance so that, when the Commission considers such action to be justified in the interests of depositors, the court may order

20

Selected French Banking and Financial Regulations - Extract - September 1999

the sale of the shares held by one or more of the institution's managers, de jure or de facto, remunerated or not. The sale price shall be determined after assessment by a court-appointed expert. The shares shall be valued according to the methods used for transfers of assets with the weightings appropriate to each case, according to the value of the assets, the profit record, the existence of subsidiaries and the business outlook and, for companies whose shares are admitted to trading on a regulated market, the stock market value. The suit shall be brought by way of a summons served on the shareholders concerned. The competent court is the one in whose venue the credit institution has its registered office.

Under the same conditions, the court may decide that the voting rights attached to the shares or voting certificates held by one or more of the managers, de jure or de facto, remunerated or not, shall be exercised for a period that it shall determine by an administrator appointed by the court for the purpose.

Under the same conditions, the court may also order the sale of all the shares in the institution, or of the shares that have not been sold under the terms set forth in the first paragraph of this Article . When the shares are admitted to trading on a regulated market, the terms and conditions of sale are determined by the general regulations of the Conseil des Marchés Financiers.

The amount of compensation payable to non-identified holders shall be held on deposit.

Article . 46-2

By way of an exception to the provisions of Article 3 of Act 85-98 of 25 January 1985 on business reorganization and bankruptcy, credit institutions that are unable to make their payments immediately or in the short term are deemed to be insolvent.

Credit institutions that have been struck off on the orders of the Commission Bancaire and whose liabilities vis-à-vis third parties, with the exception of debts that are repayable only after unsecured creditors have been paid off in full, are greater than its net assets minus provisions to be constituted may be placed in court-ordered liquidation.

Article . 46-3

The business reorganization and court-ordered liquidation procedures instituted by the abovementioned Act 85-98 of 25 January 1985 may be initiated with regard to a credit institution or investment firm only after an opinion from the Commission Bancaire.

An application for initiation of the procedure for seeking an arrangement with creditors instituted by Act 84-148 of 1 March 1984 on the prevention and amicable settlement of business difficulties with regard to a credit institution or investment firm may be submitted to the President of the court only after an opinion from the Commission Bancaire.

The procedures for issuing the opinions referred to in the first and second paragraph above shall be laid down in a decree of the Conseil d'Etat.

Article . 46-4

When the Commission Bancaire has appointed a provisional administrator under the terms of Article 44, the court may only instruct the bankruptcy trustee to monitor management operations, as set forth at point 1 of Article 31 of the above-mentioned Act 85-98 of 25 January 1985.

Selected French Banking and Financial Regulations - Extract - September 1999 21

Article . 46-5

If a liquidation procedure with regard to a credit institution or investment firm is initiated or ordered by the court, the Commission Bancaire shall appoint a liquidator who shall draw up an inventory of assets, carry out liquidation operations and lay off staff under the terms and conditions set forth at Title III of the above-mentioned Act 85-98 of 25 January 1985.

Under the terms of Articles 148-1 or 148-4 of the same Act, the liquidator appointed by the court shall carry out the operations set forth respectively at the first two paragraphs of Article 148-3 or the third paragraph of Article 148-4, except for the inventory of the company's assets and liquidation operations.

Article . 46-6

If a court-ordered reorganization or liquidation procedure is initiated with regard to a credit institution or investment firm, the guarantee fund and depositors are exempt from the declaration set forth at Article 50 of the above-mentioned Act 85-98 of 25 January 1985, the latter for their claims falling wholly or partly within the scope of the fund's intervention.

The fund shall inform depositors of the amount of claims excluded from the scope of intervention and shall indicate how such claims are to be declared to the creditors' representative.

The creditors' representative shall draw up statements of all claims. Such statements must be certified by the bankruptcy judge, filed with the Commercial Court registry and published in an appropriate notice. In the event of an objection, depositors should bring action before the court within two months following the publication of notice, failing which they shall be out of time.

A decree of the Conseil d'Etat shall lay down the procedures for implementing the present Article .

Article 47

When the Commission Bancaire decides that on-site supervision should be made at an institution belonging to a central body, it shall inform the central body thereof.

It shall send the central body the findings of the supervision and the warnings and injunctions addressed by it to the member institution.

In addition, the central body may ask the Commission Bancaire to take the initiative in appointing a provisional administrator to a member institution under the terms of Article 44.

Article 48

I. When the Commission Bancaire reaches a decision under Article 45, it is an administrative court.

II. When special circumstances warrant it, the Commission can take the measures provided for in Articles 44 and 46 without hearing both sides.

The measures referred to in the preceding paragraph are withdrawn or upheld by the Commission after hearing both sides within a time limit fixed by a decree of the Conseil d'État.

22

Selected French Banking and Financial Regulations - Extract - September 1999

III. The proceedings of the Commission shall be valid when an absolute majority of its members are present or represented. Furthermore, except in emergencies, its proceedings as an administrative court shall only be valid when all of its members are present or represented.

Article 49

Any person who participates or has participated in the supervision of credit institutions or investment firms, as provided in the present Chapter, shall be bound by the obligation of professional secrecy subject to the penalties laid down in Article 378 of the Penal Code. This secrecy may not serve as grounds for non-disclosure of information to a court engaged either in a court-ordered liquidation procedure initiated with regard to a credit institution, investment firm or financial holding company, or in criminal proceedings.

Such professional secrecy obligation may not serve as grounds for non-disclosure vis-à-vis administrative courts to which a dispute relating to the activity of the Commission Bancaire has been referred.

Notwithstanding the provisions of Act 80-538 of 16 July 1980, the Commission Bancaire may transmit information to the authorities responsible for supervising credit institutions or investment firms in foreign countries, provided that there is reciprocity and that the authorities in question are themselves bound by an obligation of professional secrecy subject to the same guarantees as in France.

CHAPTER II GOVERNMENT COMMISSIONERS

The Minister for Economic Affairs shall appoint a Government Commissioner to any central body mentioned at Article 20 or to any credit institution to which the State has assigned prerogatives of public power or a public interest task.

A legislative decree shall lay down the procedures for implementing the present Article . It shall define in particular the conditions under which the Government Commissioner may oppose resolutions adopted by the decision-making body of the central body or credit institution regarding the exercise of the prerogatives conferred on it in virtue of its public-authority status or the publicinterest task it performs.

Selected French Banking and Financial Regulations - Extract - September 1999 23

TITLE IV

PROTECTION OF DEPOSITORS AND BORROWERS

CHAPTER I THE LIQUIDITY AND SOLVENCY OF CREDIT INSTITUTIONS

Credit institutions shall be required, subject to conditions laid down by the Comité de la Réglementation Bancaire et Financière, to observe management standards designed to safeguard their liquidity and solvency in relation to depositors and, more generally, third parties, and the equilibrium of their financial structure.

They must in particular observe risk-asset and risk-diversification ratios.

Credit institutions must also have a suitable system of internal controls enabling them inter alia to measure the risks and profitability of their activity. When supervision is exercised on the basis of a consolidated financial situation, financial groups must adopt internal control procedures suitable for the production of information relevant to the exercise of such supervision. A regulation of the Comité de la Réglementation Bancaire et Financière shall define the conditions for implementing the provisions set forth in this paragraph.

Failure to comply with the obligations established under the present Article shall lead to implementation of the procedure described in Article 45.

Article 52

Where such action appears justified by a credit institution's situation, the Governor of the Banque de France, as chairman of the Commission Bancaire, shall call upon the shareholders or members of the institution, after seeking the opinion of the Commission Bancaire, except in an emergency, après avoir, sauf en cas d'urgence, pris l'avis de la Commission bancaireto provide the latter with the support it needs.

Article 52-1

Credit institutions authorized in France shall belong to a deposit guarantee fund whose purpose is to compensate depositors if their deposits or other repaid funds are unavailable.

The deposits or other funds of credit institutions, insurance companies, collective investment undertakings, pension organizations, investment firms and persons mentioned at Article 8 or point 1 of Article 2 are excluded from such compensation. Deposits or other funds may be excluded from compensation under the conditions set forth in a regulation of the Comité de la Réglementation Bancaire et Financière, either because of information concerning the situation of the undertaking or special advantages that the depositor in question may have enjoyed, or because of the specific nature of certain funds or deposits, or because of the illicit origin of the funds concerned.

24

Selected French Banking and Financial Regulations - Extract - September 1999

Article 52-2

The guarantee fund shall intervene at the request of the Commission Bancaire as soon as it finds that one of the institutions mentioned at Article 52-1 is no longer able, immediately or in the short term, to repay funds received from the public according to the legal, regulatory and contractual conditions governing their repayment. If the guarantee fund intervenes, the institution concerned shall be struck off the list of authorized credit institutions.

On a proposal from the Commission Bancaire, the guarantee fund may also intervene in a preventive capacity vis-à-vis a credit institution whose situation gives rise to fears that deposits or other repaid funds may become unavailable at some point in the future, taking into consideration the support from which the institution may otherwise benefit. When the guarantee fund agrees to take preventive action with regard to an institution, it shall define the terms and conditions of its intervention after seeking an opinion from the Commission Bancaire. It may in particular make its intervention conditional on the total or partial sale of the credit institution or the extinction of its activity, including by the sale of its business.

In order to implement the present provisions the guarantee fund may, at the request of a central body mentioned in Article 20, take part in the action of such central body by assuming part of the cost of measures intended to guarantee the solvency of a credit institution affiliated to such central body.

In order to implement the provisions of the previous two paragraphs, the guarantee fund may acquire the shares of a credit institution, with the consent of the central body concerned where relevant.

Appeals against decisions of the guarantee fund taken under the terms of the present Article shall lie to the administrative courts.

Article 52-3

The guarantee fund is subrogated in the rights of the beneficiaries of its intervention in the amount of the sums it has paid.

Article 52-4

The guarantee fund may take all action in liability against the de jure or de facto managers of the institutions on whose behalf it intervenes in order to obtain reimbursement of all or part of the sums it has paid. It shall inform the Commission Bancaire of any such action.

Article 52-5

The member institutions of the guarantee fund shall provide it with the financial resources it needs to carry out its tasks, under conditions laid down by the Comité de la Réglementation Bancaire et Financière. In addition, the guarantee fund may issue nominative and non-negotiable certificates of association subscribed by member undertakings when they join.

When the losses suffered by the guarantee fund cannot be covered by subscriptions already called up, the certificates of association mentioned in the previous paragraph may no longer be remunerated. In such case, the par value of each such certificate is reduced in the proportion necessary to absorb the losses. Certificates of association are repayable only if a member's authorization is revoked under conditions laid down by the Comité de la Réglementation Bancaire

Selected French Banking and Financial Regulations - Extract - September 1999 25

et Financière. If a member institution is struck off, its certificate of association is cancelled and the sums paid in revert to the guarantee fund.

Subscriptions due from credit institutions affiliated to one of the central bodies mentioned at Article 20 shall be paid directly to the guarantee fund by the central body concerned.

The guarantee fund may borrow from its members. To that end, it may constitute the contractually required guarantees or ask its members to constitute them on its behalf.

Article 52-6

Any member that fails to pay its called-up subscription to the guarantee fund shall be liable to the sanctions set forth at Article 45 and to penalties paid directly to the guarantee fund under the terms and conditions laid down in its rules of procedure.

Article 52-7

The deposit guarantee fund shall be a private law corporation. It shall be managed by a managing board under the control of a supervisory board. The members of the managing board and supervisory board must meet the conditions set forth at Article 13.

Article 52-8

The supervisory board shall monitor the management of the deposit guarantee fund. It shall draw up the guarantee fund's rules of procedure and rules for the use of its funds, which shall be confirmed by an Order of the Minister for Economic Affairs after they have been approved by the Comité de la Réglementation Bancaire et Financière. It shall elect a chairman from among its members.

The supervisory board shall approve the accounts and appoint the auditors. At the end of each accounting period, a copy of the accounts as approved shall be furnished to the Minister for Economic Affairs. The guarantee fund shall be subject to control by the Inspection Générale des Finances.The supervisory body shall have twelve members, each representing one or more members of the guarantee fund, as follows:

- four members representing respectively the four credit institutions or groups of credit institutions affiliated to the same central body that are the largest contributors, ex officio; - two representatives of institutions having a central body defined at Article 20, not ex officio; - six members representing the other categories of credit institution, not ex officio.

Article 52-9

The supervisory board shall take decisions by a simple majority. Each member of the supervisory board shall have a number of votes that depends on its total financial contribution to the guarantee fund and the contributions of the institutions that have appointed that member to represent them. In the event of a tie, the chairman shall have the casting vote.

For implementation of Article 52-8 and the present Article , the amount of the payment made by the central body on behalf of the institutions affiliated to it is taken into account.

26

Selected French Banking and Financial Regulations - Extract - September 1999

Article 52-10

The managing board shall comprise three members appointed by the supervisory board, which shall also appoint one of them as chairman. The members of the managing board may not at the same time carry out duties in or receive remuneration from institutions or companies that are members of the guarantee fund. The chairman may carry out his duties only with the approval of the Minister for Economic Affairs.

Article 52-11

The Minister for Economic Affairs, the Governor of the Banque de France, acting as chairman of the Commission Bancaire, and the chairman of the Conseil des Marchés Financiers or their representative may, at their request, be heard by the supervisory board and the managing board.

Article 52-12

The members of the managing board and supervisory board and any person who, in the course of his duties, has access to documents and information in the possession of the guarantee fund are bound by an obligation of professional secrecy under the conditions and subject to the penalties laid down in Article 226-13 of the Penal Code. Such professional secrecy obligation may not serve as grounds for non-disclosure vis-à-vis judicial authorities acting in the context of criminal proceedings or administrative or civil courts hearing an appeal against a decision of the deposit guarantee fund or the Commission Bancaire.

Article 52-13

The members of the managing board of the guarantee fund shall have access to all accounting and financial documents and to the reports of the auditors of the institution on whose behalf the Commission Bancaire has sought the guarantee fund's intervention under the terms of Article 52-2.

Article 52-14

A regulation of the Comité de la Réglementation Bancaire et Financière shall lay down:

- the compensation ceiling per depositor, the compensation procedures and time limits and rules regarding customer information; - the characteristics of certificates of association and the conditions for their remuneration and for their reimbursement should the subscriber's authorization be revoked, after deduction of any losses suffered by the fund where applicable; - the total amount of annual subscriptions payable by members; - the conditions under which an institution may be dispensed from paying part of such contributions in return for the constitution of appropriate guarantees; - the amount of the minimum subscription of each credit institution that is a member of the guarantee fund; - the rules for the apportionment of annual subscriptions, the basis for the calculation of which is the amount of deposits and other repaid funds weighted by subscriptions already paid and by indicators of the financial situation of each credit institution concerned, including in particular the amount of own funds and commitments and the European solvency ratio, reflecting the objective risks to which the member exposes the fund; - the conditions and procedures for appointing the members of the supervisory board and the length of their term of office.

Selected French Banking and Financial Regulations - Extract - September 1999 27

This regulation may be amended only after seeking the opinion of the chairman of the managing board of the deposit guarantee fund.

Article 52-15

A guarantee mechanism is hereby established with the purpose, if a credit institution should fail, of honouring the guarantee obligations required by laws or regulations given by such institutions in favour of private law natural or legal persons. Credit institutions whose authorization in France enables them to issue such guarantees shall join the system.

The deposit guarantee fund shall manage the guarantee mechanism described in the previous paragraph. Articles 52-2 and 52-13 of this Act shall apply to the above-mentioned guarantee mechanism. In addition, the deposit guarantee fund is subrogated in the rights and obligations arising from the commitments given by the credit institution and honoured by the fund for the amount of the sums it has paid in connection therewith.

The guarantee mechanism shall intervene at the request of the Commission Bancaire as soon as the Commission finds that a credit institution is no longer able to honour, immediately or in the short term, the guarantee commitments mentioned in the first paragraph that it has given. Where relevant, the guarantee mechanism shall intervene jointly with the deposit guarantee fund when the fund is called on under the terms of the first paragraph of Article 52-2.

On a proposal from the Commission Bancaire, the guarantee mechanism may also intervene in a preventive capacity, independently or jointly with the deposit guarantee fund, under the conditions set forth at Article 52.2.

A decree shall list the mandatory guarantees covered by the guarantee mechanism and lay down the procedures for informing the public about the guarantee given.

Article 52-16

A regulation of the Comité de la Réglementation Bancaire and Financière shall lay down, inter alia:

- compensation procedures; - the total amount and rules for the apportionment of the annual subscriptions payable by member institutions to the mechanism, giving particular consideration to objective indicators of the financial situation of each institution concerned; - the conditions under which an institution may be dispensed from paying part of such contributions to the guarantee mechanism in return for the constitution of appropriate guarantees.

Subscriptions due from credit institutions affiliated to one of the central bodies mentioned at Article 20 of this Act shall be paid directly to the guarantee fund by the central body concerned.

28

Selected French Banking and Financial Regulations - Extract - September 1999

CHAPTER II ACCOUNTING OBLIGATIONS OF CREDIT INSTITUTIONS AGREEMENT BETWEEN A CREDIT INSTITUTION AND ITS MANAGEMENT

The provisions of Articles 340 and 341 of the above-mentioned Act 66-537 of 24 July 1966 shall apply to all credit institutions and investment firms in accordance with conditions fixed by the Comité de la Réglementation Comptable after seeking the opinion of the Comité de la Réglementation Bancaire et Financière.

Auditing shall be carried out in each credit institution or investment firm by at least two auditors from the list provided for in Article 219 of Act 66-537 of 24 July 1966 on commercial companies. The auditors shall be appointed after seeking an opinion from the Commission Bancaire under conditions laid down in a decree. The Commission Bancaire may also appoint an additional auditor when the situation justifies such action. The auditors may not represent or be members of firms having mutual links of a legal, professional, equity or organizational nature. They shall conduct their assignment under the conditions laid down in the above-mentioned Act 66-537 of 24 July 1966 and shall certify the annual accounts. They shall verify that the information intended for the public is accurate and conforms with the said accounts.

Nevertheless, where a credit institution's or an investment firm's balance-sheet total is below a threshold fixed by the Comité de la Réglementation Comptable after seeking the opinion of the Comité de la Réglementation Bancaire et Financière, the certification referred to in the preceding paragraph may be carried out by one auditor. When this condition applies and the institution is subject either to public accounting rules or to a special regime for the approval of its accounts incorporating safeguards which satisfy the Commission Bancaire, the latter may decide to lift the certification requirement referred to in the preceding paragraph.

The auditors must offer all guarantees of independence with regard to the credit institutions, investment firms or financial holding companies they audit. Articles 219 to 221-1 of the abovementioned Act 66-537 of 24 July 1966 apply to the auditors of any credit institution, investment firm or financial holding company.

Article 53-1

The Commission Bancaire may ask the auditors of credit institutions, investment firms and financial holding companies subject to this Act to supply all information on the activity and situation of the credit institution, investment firm or financial holding company being audited and on the controls they have carried out in the conduct of their assignment.

The Commission Bancaire may also transmit to the auditors of credit institutions, investment firms, financial holding companies, undertakings for collective investment in transferable securities and management companies mentioned at Article 12 of Act 88-1201 of 23 December 1988 on undertakings for collective investment in transferable securities and creating securitization vehicles the information they need to discharge their duties.

The information transmitted in this way shall be covered by a professional secrecy obligation.

Furthermore, the Commission Bancaire may transmit written observations to the auditors who shall reply in like form.

Selected French Banking and Financial Regulations - Extract - September 1999 29

The auditors are required to advise the Commission Bancaire promptly of any fact or decision concerning the credit institutions, investment firms or financial holding companies they are auditing that come to their attention in the conduct of their assignment and that may:

- constitute a breach of the laws or regulations applicable to the above-mentioned credit institutions, investment firms or financial holding companies likely to have significant effects on their financial situation, results or assets; - prejudice their status as a going concern; - cause the auditors to issue a qualified or adverse opinion.

The same obligation applies to the facts and decisions referred to above that come to the auditors' attention in the conduct of their assignment with regard to a parent or subsidiary of a credit institution, investment firm or financial holding company.

When the auditors conduct their assignment with regard to a credit institution affiliated to one of the central bodies referred to at Article 20, the facts and decisions referred to in the preceding paragraphs shall be transmitted simultaneously to the central body concerned and to the Commission Bancaire.

The auditors of a credit institution, investment firm or financial holding company shall be relieved of the professional secrecy obligation vis-à-vis the Commission Bancaire and where relevant the central bodies referred to at Article 20 as regards the obligations listed above, and they may not be held liable for any information or facts they may disclose in performance of those obligations.

Article 53-2

When a breach of the provisions of this Act committed by an auditor of a credit institution, investment firm or financial holding company comes to the notice of the Commission Bancaire, or when it considers that the conditions of independence necessary for the proper conduct of an auditor's assignment are not met, it may ask the competent court to relieve the auditor of his duties as set forth at Article 227 of the above-mentioned Act 66-537 of 24 July 1966.

The Commission Bancaire may also bring such breach to the attention of the competent disciplinary authority. To this end, the Commission Bancaire may furnish all information necessary to ensure that the authority concerned is fully informed.

Article 54

Credit institutions shall be required to draw up their accounts, in accordance with the conditions fixed by the Comité de la Réglementation Comptable after seeking the opinion of the Comité de la Réglementation Bancaire et Financière, in consolidated form.

Article 55

All credit institutions shall publish their accounts in accordance with conditions laid down by the Comité de la Réglementation Comptable after seeking the opinion of the Comité de la Réglementation Bancaire et Financière.

The Commission Bancaire shall ensure that publication as referred to in the present Article takes place in due manner. It may order the institutions concerned to publish corrections should inaccuracies or omissions be observed in the published documents.

30

Selected French Banking and Financial Regulations - Extract - September 1999

It may bring to the attention of the public any information it deems necessary.

Article 56

The provisions of Articles 101 to 106 of the above-mentioned Act 66-537 of 24 July 1966 shall apply to all credit institutions.

For the purposes of implementing Article 103 of the Act referred to in the preceding paragraph, where these credit institutions do not have a general meeting, the auditors' special report shall be submitted to the board of directors for final approval.

Where these credit institutions are exempted from the certification requirement under the terms of the third paragraph of Article 53 of the present Act, the special report shall be drawn up, as appropriate, by the public accountant or the body responsible for approving the accounts.

CHAPTER III PROFESSIONAL SECRECY

Any member of a board of directors and, where applicable, a supervisory board and any person who in any capacity participates in the direction or management of a credit institution or is employed by one shall be bound by the obligation of professional secrecy subject to the conditions and penalties laid down in Article 378 of the Penal Code.

Except as provided by the law, the obligation of professional secrecy may not be used as a ground for non-disclosure vis-a-vis the Commission Bancaire, the Banque de France or a court dealing with criminal proceedings.

Article 57-1. - For the requirements of supervision on the basis of the consolidated financial situation of one or more credit institutions or investment firms having their registered office in a State party to the agreement on the European Economic Area, undertakings established in France that are part of the financial group or mixed group to which such credit institutions or investment firms belong are required, notwithstanding all laws to the contrary, to transmit the necessary information to undertakings of the same group having their registered office in a State party to the agreement on the European Economic Area.

The recipients of such information are bound by a professional secrecy obligation under the conditions and subject to the penalties referred to in the preceding Article , applicable to all information or documents they may receive or hold in that way.

The provisions of this Article do not prevent application of Act 78-17 of 6 January 1978 on data protection.

Selected French Banking and Financial Regulations - Extract - September 1999 31

CHAPTER IV RELATIONS BETWEEN CREDIT INSTITUTIONS AND THEIR CUSTOMERS

Any natural or legal person domiciled in France who does not have a current account has the right to open such an account in the credit institution of his choosing or with the financial services of the Post Office or the Treasury.

The opening of such an account shall take place after delivery to the credit institution of a statement in which the person making the request declares on his honour that he does not have a bank account. In the event of refusal by the chosen credit institution, the person may refer to the Banque de France so that it names either a credit institution, or the financial services of the Post Office or those of the Treasury.

Credit institutions and the financial services of the Post Office or of the Treasury may only limit the services linked to the opening of a current account to basic banking in the conditions defined by decree.

In addition, the institution named by the Banque de France, limiting the use of the current account to basic banking services, shall carry out its task under the pricing conditions set by decree.

Any decision to close the account taken by the credit institution named by the Banque de France shall be notified in writing and state the reasons for the decision and be addressed to the customer and to the Banque de France for information. A mandatory minimum period of forty five days shall be given to the account holder.

These provisions shall apply to persons subject to a ban on writing cheques and making card payment imposed by the banks (interdits bancaires).

As part of the prevention and the fight against exclusion from banking services, for dishonoured cheques a certificate of non-payment shall be delivered at the request of the bearer, after expiry of a period of thirty days, as from the initial presentation of the cheque in the event that the cheque was not paid upon its second presentation or if a provision has not been made to enable payment within the same period. This certificate shall be delivered by the drawee when a further presentation after the thirty-day period proves unfruitful. Any payment made by the drawer to the account on which the dishonoured cheque was drawn shall primarily be allocated to constitute a provision for the full payment of the dishonoured cheque.

Article 59

A consultative committee - Comité Consultatif - is hereby established to study matters concerning credit institutions' relations with their customers and suggest appropriate measures in this sphere, in particular by putting forward opinions or general recommendations.

The Committee shall report annually to the Conseil National du Crédit et du Titre. The report shall be published.

The Committee shall be chaired by a prominent person chosen for his competence in banking and financial matters and shall be composed predominantly, and in equal numbers, of representatives of the credit institutions and representatives of their customers.

32

Selected French Banking and Financial Regulations - Extract - September 1999

The conditions for the appointment of members of the Committee and its organizational and operational rules shall be fixed by decree.

CHAPTER V OPERATING CREDIT GRANTED TO UNDERTAKINGS

No facility, apart from ad hoc assistance, granted to an undertaking for an unspecified period by a credit institution, may be reduced or terminated without written notification and until expiry of a notice period fixed when the facility was granted.

Whether the credit was opened for a specified or unspecified period, the credit institution shall not be required to observe any notice period in the event of highly reprehensible behaviour on the part of the beneficiary of the credit or where the latter's situation proves to be irreparably compromised.

Non-compliance with these provisions may involve financial liability on the part of the credit institution.

Article 60-1

Whenever considering granting financial assistance to an individual entrepreneur for the latter's professional activity, a credit institution that intends to ask for real property that is not necessary for the business as security or collateral security from a natural person must inform the entrepreneur in writing that the latter may offer a guarantee on assets that are necessary for the business of the undertaking and state the amount of collateral it wishes to obtain in view of the amount of financial assistance sought.

If the individual entrepreneur fails to respond within fifteen days or if the credit institution refuses the guarantee offered by the individual entrepreneur, the credit institution shall inform the individual entrepreneur of the exact amount of security it wishes to obtain on assets that are not necessary for the business of the undertaking or from any other surety. If the entrepreneur does not agree, the credit institution can refuse to grant the financial assistance and its liability cannot be called into question.

In its dealings with the individual entrepreneur, a credit institution that has failed to fulfil the formalities referred to in the first and second paragraphs cannot call on any security it may have obtained. If the security is made up of real or personal property and subject to formal publicity, the credit institution cannot call on it once the registration of the guarantee has been struck off.

Article 61

Act 81-1 of 2 January 1981 facilitating credit to undertakings shall be amended as follows.

1. The first paragraph of Article 1 shall be replaced by the following provisions:

"Any credit granted by a credit institution to a legal person governed by private or public law, or to a natural person carrying on his business activity, may, simply by the delivery of a schedule, give rise to assignment or pledging in favour of that institution by the recipient of the credit of any claim that the latter may have on a third party, legal

Selected French Banking and Financial Regulations - Extract - September 1999 33

person governed by public or private law or natural person carrying on his business activity.

Claims due for payment, even at a future date, may be assigned or pledged. Claims arising from an act that has been or may be entered into but the amount and maturity of which have not yet been fixed may also be assigned or pledged."

2. Article 1, sixth paragraph, (4), shall be replaced by the following provisions:

"4) Description or specification of the claims assigned or pledged or identifying particulars, e.g. details of the debtor, the place of payment, the amount of the claims or their valuation and, where appropriate, their due date."

3. The second paragraph of Article 1 shall become the third paragraph of that Article . Point 5 of that paragraph shall be rescinded.

4. A fourth and fifth paragraph, in the following terms, shall be added after the third paragraph :

"Nevertheless, when transmission of the assigned or pledged claims is effected by a computerized process making it possible to identify them, the schedule need do no more than indicate, in addition to the details referred to in (1), (2) and (3) above, the medium by which they are being transmitted, their number and their total amount.

In the event of a dispute regarding the existence or transmission of one of these claims, the assignee may use any means to prove that the disputed claim is included in the total amount entered in the schedule."

5. An Article 1-1, in the following terms, shall be inserted after Article 1:

" Article 1-1 - Even when it is effected by way of guarantee and without stipulating a price, assignment of a claim shall transfer ownership of the assigned claim to the assignee.

Saving contrary agreement, the signatory of the deed of assignment or security shall be jointly and severally liable for payment of the assigned or pledged claims."

6. In Article 2, second paragraph, the words: "according to an inviolable technical procedure" shall be deleted.

7. A third and fourth paragraph, in the following terms, shall be added to Article 4:

Saving contrary agreement, delivery of the schedule automatically entails transfer of the sureties guaranteeing each claim.

In the event of a dispute over the date entered in the schedule, the credit institution shall use any means to prove the accuracy of that date."

8. Article 13 shall be replaced by the following provisions:

" Article 13 - Provisions contrary to the present Act contained in the Decree of 30 October 1935 on the financing of government and local authority contracts and in the Code of Public Contacts shall be rescinded. A decree of the Conseil d'Etat shall fix the procedures for implementing the present Act and make the necessary amendments to the Code of Public Contracts."

34

Selected French Banking and Financial Regulations - Extract - September 1999

Article 62

The provisions of Article 1-1, first paragraph, of Act 81-1 of 2 January 1981 facilitating credit to undertakings shall be interpretative in character.

Article 63

Article 13-1 of Act 75-1334 of 31 December 1975 relating to subcontracting shall be supplemented by a second paragraph in the following terms:

"He may, however, assign or pledge these claims in their entirety subject to obtaining beforehand, in writing, the joint and several personal guarantee referred to in Article 14 of the present Act visvis the subcontractors."

Article 64

Former provisions amending the Act 67-563 of 13 July 1967 on receivership, liquidation of assets, personal bankruptcy and criminal bankruptcies. This act has been repealed.

CHAPTER VI BANKING INTERMEDIARIES

A banking intermediary is any person who, as his regular business, brings together parties interested in concluding a banking operation, without being del credere.

A banking intermediary may only carry on his activity between two persons of whom at least one is a credit institution.

Article 66

The present Chapter shall not apply to notaries, who remain subject to the laws and regulations applying to them.

Nor shall it cover advice and assistance in financial matters.

Article 67

Any banking intermediary who, even occasionally, has funds entrusted to him as agent for the parties shall be required at any time to give proof of a financial guarantee specifically earmarked for repayment of the said funds.

This must be provided by a guarantee commitment given by a credit institution entitled to give such commitments or an insurance or "capitalization" undertaking ("entreprise d'assurance ou de capitalisation") governed by the Insurance Code.

Article 68

Banking intermediaries shall carry on business under the terms of a mandate issued by the credit institution. This mandate shall specify the nature and conditions of the operations that the intermediary is empowered to carry out.

Selected French Banking and Financial Regulations - Extract - September 1999 35

Article 69

Repealed by Act n° 96-597 of 2 July 1996.

Article 70

Banking intermediaries shall be subject to the provisions of Part II of Act 66-1010 of 28 December 1966 on usury, money loans and certain canvassing and advertising operations.

Article 71

No one who falls within the scope of Article 13 of the present Act may carry out the business of a banking intermediary.

TITLE IV BIS

RIGHT OF ESTABLISHMENT AND FREEDOM TO PROVIDE SERVICES IN MEMBER STATES OF THE EUROPEAN COMMUNITIES

Article 71-1

Under this title:

1. "Banking service" shall mean a banking operation within the meaning of Article 1 or a related activity within the meaning of Article 5 of the present Act;

2. "Competent authorities" shall mean the authority or authorities of a Member State responsible for authorizing or supervising credit institutions having their headquarters there, in keeping with the legislation of that State;

3. "Operations under the freedom to provide services" shall mean an operation whereby a credit institution or financial institution provides a banking service in a Member State other than the one in which its headquarters is located, otherwise than through a permanent presence in that Member State;

4. "Financial institution" (établissement financier) shall mean an undertaking not subject to authorization as a credit institution in the State in which its headquarters is located and which, as its main business, whether or not in combination with other activities:

a) carries out one or more of the activities referred to in points 1), 3), 4), and 5) of Article 5 of the present Act;

b) acquires equity holdings in undertakings which carry out banking operations or one of the aforementioned activities as their regular business;

c) for a financial institution with its headquarters in a Member State other than France, carries out banking operations within the meaning of Article 1 of this Act with the exception of receiving funds from the public.

Article 71-2

Within the limits of the services that it is authorized to provide in a Member State other than France, in which it has its headquarters, and in accordance with the terms of the authorization granted to it in that country, any credit institution may establish branches within the territory of the French Republic for the purpose of providing banking services and operations under the freedom to provide services, in keeping with Article 71-4 of this Act, subject to prior notification of the Comité

36

Selected French Banking and Financial Regulations - Extract - September 1999

des Établissements de Crédit et des Entreprises d'Investissement by the competent authorities of the Member State, in accordance with the conditions laid down by the Comité de la Réglementation Bancaire et Financière.

Article 71-3

Within the limits of the services that it is authorized to provide in a Member State other than France, in which it has its headquarters, any financial institution having received from the competent authorities of the said Member State a certificate of compliance with the conditions required for this purpose by the said authorities may establish branches within the territory of the French Republic for the purpose of providing banking services and operations under the freedom to provide services, in keeping with Article 71-4 of this Act, subject to prior notification of the Comité des Établissements de Crédit et des Entreprises d'Investissement by the competent authorities of the Member State, in accordance with the conditions laid down by the Comité de la Réglementation Bancaire et Financière.

Article 71-4

The institutions referred to in Article 71-2 and 71-3 and their branches in France are not subject to Articles 15, 16, 53 and 56.

They are not subject to the regulations of the Comité de la Réglementation Bancaire et Financière, except in respect of such provisions of the said regulations as have not been the subject of coordination among the Member States, when they are adopted in the interest of the general good or when they relate to monetary policy or the liquidity of institutions.

The Comité de la Réglementation Bancaire et Financière shall determine which provisions in its regulations shall remain applicable by virtue of this Article .

Article 71-5

For the purpose of the supervision of an institution qualifying for the provisions in Article 71-4 of this Act, and notwithstanding the provisions of Article 1 bis of the aforementioned Act 68-678 of 26 July 1968, the competent authorities to which the institution referred to in Article 71-4 is subject may order the said institution and its branches in France to disclose all information relevant to the said supervision. Further, subject solely to its having previously informed the Commission Bancaire, the said competent authorities may carry out themselves or through the intermediary of persons they appoint for that purpose on-site supervision of the said institution's branches in the territory of the French Republic.

Article 71-6

The Commission Bancaire shall monitor the compliance of the institutions referred to in Articles 71-2 and 71-3 of this Act with the laws and regulations applying to them under Article 71-4. It may examine the conditions under which they conduct their business and it may supervise their financial soundness having regard to the supervision by the competent authorities referred to in Article 71-1.

Articles 37 and 39-46 of this Act shall apply to these institutions. The striking off provided for at point 6 of Article 43 and in the first paragraph of Article 52-2 shall be understood to prohibit the institution from continuing to provide banking services within the territory of the French Republic.

Selected French Banking and Financial Regulations - Extract - September 1999 37

When an institution referred to in Articles 71-2 and 71-3 is the subject of a withdrawal of its authorization or is wound up, or, in the case of a financial institution, when it no longer satisfies the requisite conditions within the meaning of Article 71-3, the Commission Bancaire shall take all necessary measures to prevent it from taking up further operations within the territory of the French Republic and in order to protect the interests of depositors.

A decree in the Conseil d'Etat shall lay down the procedures to be followed by the Commission Bancaire in the discharge of its responsibilities and powers under the foregoing paragraphs. In particular, it shall lay down procedures for informing the competent authorities referred to in Article 71-1.

Article 71-7

Any credit institution having its headquarters in France and wishing to establish a branch in another Member State shall notify the Comité des Établissements de Crédit et des Entreprises d'Investissement of its plans and provide such information as determined by the Comité de la Réglementation Bancaire et Financière.

Unless, in the light of the said plan, the Comité des Établissements de Crédit et des Entreprises d'Investissement has grounds to doubt the adequacy of the credit institution's administrative structures or its financial soundness, it shall communicate this information within three months of the date of proper receipt thereof to the competent authority of the host Member State and shall notify the institution concerned.

In case of refusal by the Comité des Établissements de Crédit et des Entreprises d'Investissement to communicate the information referred to in the first paragraph of this Article to the competent authority of the host Member State, it shall inform the institution concerned of the reasons for this refusal within three months following proper receipt of the said information.

Credit institutions having their headquarters in France that wish to carry out their activities in another Member State for the first time under the freedom to provide services, shall declare their intention to the Comité des Établissements de Crédit et des Entreprises d'Investissement. This declaration shall be accompanied by such information as shall be determined by the Comité de la Réglementation Bancaire et Financière.

The Comité de la Réglementation Bancaire et Financière shall determine how the information referred to in the foregoing paragraphs is to be communicated to the competent authority of the other Member State.

Article 71-8

Any financial institution having its headquarters in France and wishing to establish a branch in another Member State in order to provide banking services under the right of establishment shall notify the Comité des Établissements de Crédit et des Entreprises d'Investissement of its plan and provide such information as shall be determined by the Comité de la Réglementation Bancaire et Financière.

The financial institution shall also show to the Comité des Établissements de Crédit et des Entreprises d'Investissement that it satisfies the conditions laid down by the Comité de la Réglementation Bancaire et Financière. These conditions refer to the activities carried out in France by these institutions, procedures whereby these institutions are placed under the control of

38

Selected French Banking and Financial Regulations - Extract - September 1999

credit institutions, and the applicable regulations for ensuring the quality and control of their management together with the guarantee of their liabilities by their parent companies.

If the institution satisfies the conditions referred to in the foregoing paragraph, the Comité des Établissements de Crédit et des Entreprises d'Investissement shall, unless it has grounds to doubt the adequacy of the financial institution's administrative structures or its financial soundness in the light of the plan, communicate the information pertaining to the plan within three months of receipt to the competent authority of the host Member State and shall notify the institution concerned.

Financial institutions wishing to carry out their business for the first time within the territory of another Member State under the freedom to provide services, shall declare their intention to the Comité des Établissements de Crédit et des Entreprises d'Investissement.

They shall further show that they satisfy the conditions referred to in the second paragraph of this Article .

The financial institution carrying out its business in another Member State under this Article shall be subject to Articles 17, 56 and 57 of this Act, and to the regulations adopted by the Comité de la Réglementation Bancaire et Financière, with respect to those regulations whose scope of application comprises this category of institution. The said financial institution shall be supervised by the Commission Bancaire in accordance with the procedures laid down in Articles 37 and 39-41; it may be subject to the measures and penalties provided for in Articles 42-45. The withdrawal of the authorization provided for in point 6. of Article 45 shall here mean withdrawal of eligibility for the regime defined in this Article .

A decree in the Conseil d'Etat shall, as required, lay down the conditions for application of Articles 71-7 and 71-8.

Article 71-9

For the purposes of the present Act, credit institutions having their headquarters in another State that is party to the agreement on the European Economic Area are considered equivalent to credit institutions having their headquarters in a Member State of the European Communities other than France2.

TITLE V

FINANCIAL HOLDING COMPANIES

Article 72

Financial holding companies ("compagnies financières") are financial institutions, as defined in point

4. of Article 71-1 of the present Act, whose subsidiaries are mainly or wholly one or more credit institutions, investment firms or financial institutions. At least one of the subsidiaries is a credit institution.

2 This article was initially introduced by Act 93-1420 of 31 December 1993, Article 7-2. See note to Article 15-1, second paragraph and Article 101 of the Banking Act for its territorial scope and date of entry into force.

Selected French Banking and Financial Regulations - Extract - September 1999 39

Article 73

Financial holding companies shall be subject to the provisions of Articles 13, 17, first paragraph, 40, 41, 43, 44, 45, 46, 51, 53 to 55, 75, 76 and 79 under conditions set forth in a regulation of the Comité de la Réglementation Bancaire et Financière.

The auditors of the above-mentioned companies shall also be subject to all the provisions of this Act applicable to the auditors of credit institutions and investment firms.

Article 74

The Commission Bancaire shall ensure that financial holding companies comply with the requirements laid down in Article 73 of the present Act.

If it appears that a financial holding company has violated the provisions of the previous Article , the Commission Bancaire may impose one of the sanctions provided for in the first and second points of Article 45 of the present Act.

The Commission Bancaire may, either in place of or in addition to these disciplinary sanctions, impose a fine not exceeding the minimum capital required of the credit institution or the investment firm that is the subsidiary of the financial holding company. When the financial holding company's subsidiaries include several credit institutions or investment firms, the upper limit on the fine shall be determined with reference to the capital of the credit institution or of the investment firm with the highest minimum capital requirement.

TITLE VI

PENALTIES

Article 75

Any natural person who disregards any of the prohibitions pursuant to Articles 10, 13 or 14 shall be liable to three years' imprisonment and a fine of FRF 2,500,000.

The court may order posting or publication of the conviction and sentence as provided by Penal Code Article 131-35.

Article 76

No one who has been convicted under Article 75 of an offence against Article 13 of the present Act may be employed in any capacity in the credit institution where he performed managerial or executive functions, was a member of the board of directors or supervisory board or was an authorized signatory, or in any subsidiary of that institution carrying on the business referred to in Article 1.

In the event of infringement of this prohibition, the offender and his employer shall be liable to the penalties laid down in Article 75 above.

Article 77

Any natural person who violates one of the prohibitions pursuant to Articles 65 or 71 shall be liable to two years' imprisonment and a fine of FRF 200,000.

40

Selected French Banking and Financial Regulations - Extract - September 1999

Article 78

Any banking intermediary who fails to satisfy the obligation pursuant to Article 67 shall be liable to one year's imprisonment and a fine of FRF 100,000.

Article 79

Any senior manager of a credit institution or of any of the legal persons or subsidiaries referred to in the second paragraph of Article 41 who, after being formally asked to do so, does not comply with a request for information by the Commission Bancaire, who interferes in any way with the exercise of its supervisory function or who supplies it with inaccurate information shall be liable to one year's imprisonment and a fine of FRF 100,000.

Article 79-1

The provisions of Articles 456 and 457 of Act 66-537 of 24 July 1966 on commercial companies apply to the auditors of all credit institutions, investment firms and financial holding companies, whatever their legal form.

Article 80

The senior managers of a credit institution who have not drawn up its inventory, annual accounts and a management report for each financial year in accordance with the provisions of Article 53 shall be liable to a fine of FRF 100,000.

Article 81

The senior managers of a credit institution who fail to cause the appointment of its statutory auditors or to invite them to attend shareholders' meetings shall be liable to two years' imprisonment and a fine of FRF 200,000.

Any senior manager of a credit institution or any other person in its employ who interferes with the investigations or audits of the statutory auditors or refuses them on-site access to all documents useful in the discharge of their duties, including all contracts, records, accounting documents and registers of minutes, shall be liable to five years' imprisonment and a fine of FRF 500,000.

Article 82

The senior managers of a credit institution who fail to publish its annual financial statements as provided in Article 55 shall be liable to a fine of FRF 100,000.

Article 83

The senior managers of a credit institution who fail to prepare its accounts in consolidated form in accordance with Article 54 shall be liable to a fine of FRF 100,000.

Article 84

The senior managers of a financial holding company who fail to prepare its accounts in consolidated form in accordance with Article 73 shall be liable to a fine of FRF 100,000.

Selected French Banking and Financial Regulations - Extract - September 1999 41

Article 84-1

Legal persons may be convicted of the offences defined in Articles 75, 78, 79, 80, 81, 82, 83 and 84 as provided by Penal Code Article 121-2.

The punishment to which legal persons shall be liable is:

1. a fine as provided by Penal Code Article 131-38;

2. the punishment mentioned in Penal Code Article 131-39.

The prohibition referred to at 2 of Penal Code Article 131-39 relates to the activity in the course of or in connection with which the offence was committed.

Article 85

Courts hearing actions relating to offences referred to in Articles 75 to 84 of the present Act may, at any stage of the proceedings, ask the Commission Bancaire for any relevant advice and information.

For the purpose of implementing the provisions of the present title, the Commission Bancaire may institute civil action ancillary to the criminal action at any stage of the proceedings.

TITLE VII

SUNDRY AND TRANSITIONAL PROVISIONS

CHAPTER I SUNDRY PROVISIONS

Repealed by Act 93-949 of 26 July 1993 on the Consumer Code, Book III, Title I, Chapter I: Consumer Credit.

Article 87

Repealed by Act 93-949 of 26 July 1993 on the Consumer Code, Book III, Title I, Chapter III: Joint Provisions.

Article 88

I. The second paragraph of Article 3 of the Decree of 25 August 1937 regulating bons de caisse shall be rescinded.

II. The beginning of Article 6 of the said Decree shall be amended as follows:

" The provisions of the present decree shall not apply to credit institutions or companies... (The remainder unchanged.)

42

Selected French Banking and Financial Regulations - Extract - September 1999

Article 89

" The Ordinance 86-1243 of 1 December 1986 relating to free prices and free competition shall apply to credit institutions as far as their activities as defined in Articles 7 and 8 are concerned.

Articles 7 to 10 of Ordinance 86-1243 of 1 December 1986 on free prices and free competition apply to credit institutions as regards their banking operations and operations connected to their business. In the event of breaches of these provisions, action will be taken under the conditions laid down in Titles III and VI of the said Ordinance . The notification of claims provided for at Article 21 of the above-mentioned Ordinance 86-1243 of 1 December 1986 shall be furnished to the Commission Bancaire which shall deliver its opinion within two months. Should the Conseil de la Concurrence impose a penalty on conclusion of the procedure provided for at Articles 21 and 22 of the above-mentioned Ordinance 86-1243 of 1 December 1986, it shall where relevant state its reasons for diverging from the opinion of the Commission Bancaire.

Articles 7 to 10 of the Ordinance 86-1243 of 1 December 1986 relating to free prices and free competition shall apply to credit institutions as far as their banking activities are concerned. Offences against these provisions shall be recorded and punished by derogation of Article 45 of the present Act in accordance with the conditions laid down in Titles III and VI of the said Ordinance .

Article 90

I. The first paragraph of Article 17 of Act 56-760 of 2 August 1956 concerning military expenditure: 1) opening and cancellation of credits; 2) creation of new resources; 3) ratification of decrees, shall be replaced by the following provisions:

" Notwithstanding any provisions to the contrary, it shall be prohibited for any credit institution that receives funds from the public at sight or at less than five years to grant, by whatever means, a return on those funds higher than that fixed, as appropriate, by the Comité de la Réglementation Bancaire or by decree or by the Minister for Economic Affairs and Finance; such institution shall also be prohibited from opening or maintaining on an improper basis accounts benefiting from government aid, e.g. in the form of a tax exemption, or accepting sums in excess of the authorized ceilings for such accounts. "

II. The beginning of the second paragraph of the same Article shall be amended as follows:

" Without prejudice to the disciplinary action that may be taken by the Commission Bancaire, offences against the provisions... (The remainder unchanged.)

Article 91

I. The first paragraph of Article 12 of Act 78-1 of 2 January 1978 relating to compensation for French persons returning from overseas who have been dispossessed of their goods shall be replaced by the following provisions:

The priority indemnification bonds and indemnification bonds shall be in registered form. They may not be assigned, except in favour of a credit institution in accordance with the conditions laid down in Article 13. "

II. The first sentence of Article 13 of the said Act shall be replaced by the following provisions:

Selected French Banking and Financial Regulations - Extract - September 1999 43

" The priority indemnification bonds and indemnification bonds may be pledged in favour of a credit institution in connection with loans contracted by their holders. "

Article 92

An Article 18-1, in the following terms, shall be inserted in Act 66-1010 of 28 December 1966 relating to usury, money loans and certain canvassing and advertising operations:

" Article 18-1 - The present Act shall apply to the overseas territories and the Collectivité Territoriale de Mayotte (Territorial Unit of Mayotte). "

Article 93

An Article 7, in the following terms, shall be added to Act 75-619 of 11 July 1975 relating to the legal interest rate:

" Article 7 - The present Act, with the exception of Article 4 thereof, shall apply to the overseas territories and the collectivité territoriale of Mayotte. "

Article 93-1

Notwithstanding any legislative provisions to the contrary, payments and deliveries of financial instruments made within the framework of interbank settlement systems or within the framework of financial instrument settlement and delivery systems up until the end of the day on which a court orders reorganization or liquidation proceedings to be instigated against a direct or indirect participant in such a system may not be cancelled even on the grounds that a court has issued such an order.

These provisions shall also apply to payment instructions and to delivery instructions relating to financial instruments once they have become irrevocable in one of the systems mentioned in the preceding paragraph. The time when and procedures whereby an instruction is deemed irrevocable in a system shall be defined by the rules governing the operation of the system.

For the purposes of this Article , an interbank settlement system or a financial instrument settlement and delivery system shall mean a national or international procedure organizing dealings between two or more parties that have the status of credit institutions, or institutions or companies referred to in Article 8 of this Act, of investment firms or clearing house members governed by the Financial Activity Modernization Act 96-597 of 2 July 1996 or of non-resident institutions with comparable status, for the usual execution, whether or not this involves netting, of payments as well as, where financial instrument settlement and delivery systems are concerned, the delivery of financial instruments between said participants. This procedure must either have been instituted by a public authority or be governed by a master agreement complying with the general principles of a marketwide agreement or a standardized agreement. Where financial instrument settlement and delivery systems are concerned, this procedure must also have been approved by the Conseil des Marchés Financiers.

Article 93-2

When they organize dealings between more than two parties, the regulations, master agreements or standardized agreements governing any interbank settlement system or financial instrument settlement and delivery system mentioned in Article 93-1 may, in addition to the financial instrument accounts referred to in Article 29 of Act 83-1 of 3 January 1983 on the development of

44

Selected French Banking and Financial Regulations - Extract - September 1999

investment and the protection of savings, require direct or indirect participants in such systems to transfer assets, securities, bills, claims or sums of money, or to constitute security using the said assets, securities, bills, claims or sums of money, in order to meet the payment obligations stemming from participation in such a system. The above-mentioned transfers shall confer full property rights as security and shall be effective vis-à-vis third parties without formalities.

The regulations, master agreements or standardized agreements referred to in the preceding paragraph shall define the procedures for the constitution, employment, realization or utilization of the financial instrument accounts referred to in Article 29 of the above-mentioned Act 83-1 of 3 January 1983, or for the transfers, which are effective vis-à-vis the attaching creditors.

The provisions of Act 84-148 of 1 March 1984 relating to the prevention and amicable settlement of company difficulties, of Act 85-98 of 25 January 1985 relating to the court-ordered reorganization or liquidation of companies or those governing all court-ordered or amicable procedures instituted outside France, equivalent to those provided for by these Acts, shall not prevent application of this Article .

Article . 93-3

Credit institutions, investment firms, the branches located in France of foreign credit institutions, foreign investment firms, foreign financial institutions as defined at point 4 of Article 71-1 and, by way of exception to Article 8 of this Act, the Treasury, the financial services of the Post Office, the Banque de France, the Institut d'Emission d'Outre-Mer and the Caisse des Dépôts et Consignations shall comply with the following provisions when they make transfers within the European Economic Area denominated in the currency of one of the States party to the agreement on the European Economic Area on the orders or in favour of their customers:

1. Delays in executing credit transfers, the amount of which is at most equal to a threshold set by a regulation of the Comité de la Réglementation Bancaire et Financière, shall give entitlement to compensation calculated according to the procedures laid down in the above-mentioned regulation, even if there is no fault, without prejudice to the remedies available in ordinary law, at the latest fourteen working days after execution of the transfer.

2. Credit transfers as referred to in paragraph 1 above that are not completed shall be returned to the principal in question, even if there is no fault, within fourteen working days after receipt of a request, within a limit and according to procedures defined by a regulation of the Comité de la Réglementation Bancaire et Financière.

Restitution shall be made without prejudice to the remedies relating to liability available in ordinary law.

3. Restitution as referred to in paragraph 2 above does not apply if non-execution is either due to an error or omission of the principal in the instructions given to his institution, or attributable to an intermediary institution chosen by the principal.

Under these circumstances, however, the institutions concerned must use their best efforts to facilitate restitution of the funds in question to the principal.

4. The beneficiary of the transfer is responsible for restitution as referred to in paragraph 2 above if non-execution is attributable to that institution or to an intermediary institution chosen by it.

Selected French Banking and Financial Regulations - Extract - September 1999 45

5. A regulation of the Comité de la Réglementation Bancaire et Financière shall lay down the conditions of application of this Article .

CHAPTER II CONSEQUENTIAL AMENDMENTS TO CURRENT ACTS

(see also Act 96-597 of 2 July 1996 on the modernization of financial activities)

Article 94

I. The Act of 19 June 1930 prohibiting individuals convicted of certain offences and undischarged bankrupts from exercising the profession of banker, the instrument called Act 2-532 of 13 June 1941 on the regulation and organization of banking business, the instrument called Act 2-533 of 14 June 1941 on the regulation and organization of the businesses related to the profession of banker, Act 45-015 of 2 December 1945 on the nationalization of the Banque de France and the major banks and on the organization of credit, except for Articles 1, 3, 6, 7 and 8 thereof, Act 46-1071 of 17 May 1946 on the organization of credit in France, Articles 5 and 7 of Act 57-888 of 2 August 1957 on various provisions relating to the Treasury and Article 15-III of Act 70-601 of 9 July 1970 on various economic and financial provisions are hereby repealed.

II. References to the above-mentioned Acts of 19 June 1930, 13 June 1941, 14 June 1941 and 2 December 1945 in any Acts or regulations in force shall be replaced by references to the corresponding provisions of the present Act.

In all of the Acts in force and wherever they appear, the words " banks " (banques), " financial institutions " (établissements financiers) or " credit institutions with special legal status " (établissements de crédit à statut légal spécial) shall be replaced by the words " credit institutions " (établissements de crédit). The words: " banking trade auxiliaries " (auxiliaires des professions bancaires) shall be replaced by " banking intermediaries " (intermédiaires en opérations de banque). The words " Conseil National du Crédit " shall be replaced by the words " Comité de la Réglementation Bancaire " or the words " Comité des Établissements de Crédit ", depending on the attributions in question. The words " Commission de Contrôle des Banques " shall be replaced by the words " Commission Bancaire ".

III. 1. Article 2 of the savings and provident institutions code shall be replaced by the following provisions:

" Article 2. - The creation of new savings and provident institutions is subject to authorization by the Comité des Établissements de Crédit of proposals made by the Centre National des Caisses d'Epargne et de Prévoyance. "

2. Articles 68 and 69 of the said code are hereby repealed.

IV. 1. The first paragraph of Article 2 of the amended Decree 55-622 of 20 May 1955 on the status of municipal credit banks shall be supplemented by the following sentence:

" They shall conduct their business after having obtained the authorization of the Comité des Établissements de Crédit. "

2. The beginning of Article 3 of the above-mentioned Decree shall be amended as follows:

46

Selected French Banking and Financial Regulations - Extract - September 1999

" Without prejudice to the responsibilities conferred on the Comité de la Réglementation Bancaire, the organization and operation.... (The remainder unchanged.)

V. Provisions amending the Decree of 28 February 1852 on land mortgage banks (sociétés de crédit foncier) abrogated by Act 99-532 of 25 June 1999, Article 111.

VI. Former provisions amending the Decree of 24 March 1848 and the Act of 10 June 1853. These texts relating to the opening of sub-offices for credit guarantees (sous-comptoirs de garantie) and discount offices and sub-offices (comptoirs et sous-comptoirs d'escompte) were repealed by Act 94-679 of 8 August 1994, Article 13.

VII. Provisions amending the amended Imperial Act of 13 July 1899 on mortgage banks (banques hypothécaires), abrogated by Act 99-532 of 25 June 1999, Article 111.

VIII. 1. A second paragraph, worded as follows, shall be added to Article L. 312-2 of the Construction and Housing Code:

" Housing loan companies are, furthermore, subject to supervision by the Commission Bancaire. "

2. Point b) of Article L. 422-4 of the Construction and Housing Code shall be supplemented as follows:

" notwithstanding the limits set in the second paragraph of Article 7 of Act 84-46 of 24 January 1984 relating to the activities and supervision of credit institutions. "

3. The first paragraph of Article L. 422- 5 of the said code shall be replaced by the following provisions:

" Low-rent housing companies (sociétés d'habitation à loyer modéré) must be authorized by an administrative ruling. Home loan companies (sociétés de crédit immobilier) are subject to authorization by the Comité des Établissements de Crédit. "

4. The beginning of the first paragraph of Article L. 423-3 of the said code shall be amended as follows:

" Without prejudice to the responsibilities conferred on the Comité de la Réglementation Bancaire and on the Commission Bancaire in housing loan company matters, the financial rules.... " (The
remainder unchanged.)

5. The beginning of the first paragraph of Article L. 451-1 of the same code shall be amended as follows:

" Subject to the provisions in the second paragraph of Article L. 312-2 of this code, organizations for low-rent housing... " (The remainder unchanged.)

IX. Point a) in the first paragraph of Article 1 of amended Decree 55-873 of 30 June 1955 on regional development companies (sociétés de développement régional) shall be replaced by the following wording:

" a) Authorization as a credit institution ";

Selected French Banking and Financial Regulations - Extract - September 1999 47

X. 1. The second sentence of the third paragraph of Article 2 of the Act of 13 March 1917 on the organization of credit for small and medium-sized retail firms and small and medium-sized industrial enterprises shall be replaced by the following provisions:

" Nevertheless, this right can only be used at the end of the financial year, subject to three months' notice and if the redemption of the shares does not result in a reduction of the company's capital to an amount that is lower than the minimum capital it is required to have as a credit institution. "

2. Article 1 of the Act of 7 August 1920, which supplements and amends the above-mentioned Act of 13 March 1917 is hereby repealed.

3. Article 3 of the above-mentioned Act of 7 August 1920 shall be replaced by the following provisions:

" Article 3. - The use of the words " banque populaire " as a title or qualifier in a prospectus, advertisement, letter, etc. by any undertaking other than those provided in Title II of the Act of 13 March 1917 is prohibited on pain of the sanctions laid down in Article 405 of the Penal Code. "

4. Article 1 of the Act of 24 July 1929, which amends the above-mentioned Act of 13 March 1917, is hereby repealed.

5. The last part of the sentence in Article 1 of the Act of 17 March 1934, which amends and supplements the above-mentioned Act of 24 July 1929 shall be worded as follows:

" ... and the outright reference to the legislative provisions governing popular credit banks and credit institutions. "

6. Article 5 of the said Act is hereby repealed.

7. Article 5 of the Order of 20 June 1945 on mutual guarantee insurance companies (sociétés de caution mutuelle), Banques Populaires and the Caisse Centrale de Crédit Hôtelier, Commercial et Industriel is hereby repealed.

XI. The third paragraph of Article 5-1 and the third paragraph of Article 5-3 of Order 58-966 of 16 October 1958 shall be repealed.

XII. Article 646 and the second paragraph of Article 651 in Book V of the rural code are hereby repealed.

XIII. 1. The last sentence of Article 7 of Act 75-628 of 11 July 1975 on the Crédit Maritime Mutuel shall be repealed from the words " et fixe notamment ".

2. A sentence worded as follows shall be inserted between the first and second sentence of Article 8 of the said Act:

" The Caisses Régionales and, where appropriate, the Unions shall also be governed by Act 84-46 of 24 January 1984 relating to the activities and supervision of credit institutions. "

3. The third sentence of the second paragraph of Article 10 of the said Act shall be replaced by the following provision:

48

Selected French Banking and Financial Regulations - Extract - September 1999

" It may not be reduced to an amount that is less than the initial capital, set by the statutes at an amount that is at least equal to the minimum required of the Caisses Régionales de Crédit Maritime Mutuel and, where appropriate, the Unions, in their capacity as credit institutions. "

4. The second sentence of the fifth paragraph of Article 13 of the said Act shall be replaced by the following provision:

" This appointment must be approved by the Caisse Centrale de Crédit Coopératif under the conditions set by the Decree referred to in Article 20. "

5. The words " minister responsible for the merchant marine " and " minister responsible " in Article 15 of the said Act shall be replaced by the words " Caisse Centrale de Crédit Coopératif ".

6. The first paragraph of Article 16 of the said Act shall be replaced by the following provisions:

" If the board of directors makes any decisions contrary to the specific laws and regulations governing the Crédit Maritime Mutuel or to the guidelines provided in Article 5 , or if the board abstains from exercising its functions, the Caisse Centrale de Crédit Coopératif may, after serving notice without effect and under the conditions set by the Decree referred to in Article 20, ask the Minister for Economic Affairs and Finance to dissolve the board of directors and name an administrator or a temporary administration committee for the Caisse or the Union. "

7. The second sentence of the first paragraph of Article 18 of the said Act shall be supplemented by the words " and in accordance with the laws and regulations governing the appointment of auditors for credit institutions. "

XIV. 1. The beginning of Article 1 of amended Act 52-332 of 24 March 1952 on savings-lending undertakings (entreprises de crédit différé) shall be amended as follows:

" Savings-lending undertakings are credit institutions that grant loans... " (The remainder unchanged.)

2. The beginning of the fifth paragraph of Article 1 of the said Act shall be amended as follows:

" Savings-lending undertakings, which have been specially authorized to do so by the Comité des Établissements de Crédit, may grant loans for reimbursement..." (The remainder unchanged.)

3. The words " special authorization " in the third paragraph of Article 5 of the said Act shall be replaced by the words " special authorization provided for in the fifth paragraph of Article 1."

4. The beginning of the second paragraph of Article 6 of the said Act shall be amended as follows:

" The Comité de la Réglementation Bancaire shall set the conditions... " (The remainder unchanged.)

5. Article 8 of the said Act shall be replaced by the following provisions:

" Article 8. - The savings-lending undertakings referred to in the present Act shall be subject to the administrative and financial supervision of the Minister for Economic Affairs and Finance and the supervision of the Commission Bancaire. "

Selected French Banking and Financial Regulations - Extract - September 1999 49

6. Articles 2, 3, third paragraph, 4, 6, third paragraph, 7, second paragraph, 9, 10, 11, 12, 14 and 15 of the said Act are hereby repealed.

XV. The second sentence of the second paragraph of Article 14 bis of Order 45-1356 of 20 June 1945, which supplements the Order of 2 February 1944, which transforms the Caisse Centrale de la France Libre into the Caisse Centrale de la France d'Outre-Mer and amends the statutes appended thereto shall be repealed.

XVI. Point 1 of Article 2 of Act 46-860 of 30 April 1946 for the establishment, financing and execution of works and development plans concerning the territories under the responsibility of the minister for France's overseas possessions shall end with the words " and which shall not be subject ".

XVI bis. Mutual or cooperative banks shall be entitled to make public offerings.

XVII. All other laws and regulations contrary to this Act or incompatible with its provisions are hereby repealed.

CHAPTER III TRANSITIONAL PROVISIONS

Credit institutions and the central bodies referred to in Article 20 shall bring their statutes into conformity with the present Act within three months of its entry into force.

Article 96

Repealed by Act 92-518 of 15 June 1992, Article 3-V, on the Caisses de Crédit Municipal.

Article 97

Notwithstanding Articles 18 and 95, long-and medium-term credit banks on the list of banks prior to the enactment of the present Act shall bring their statutes into conformity with the Act within eighteen months of its becoming law.

Article 98

Within three months of the entry into force of the present Act, the Comité des Etablissements de Crédit shall draw up a list of the institutions that satisfy its provisions.

The institutions on this list shall be deemed to have obtained the authorization referred to in Article 15.

Other institutions must apply for authorization within six months of the date of publication of the list referred to in the first paragraph of the present Article , failing which they shall cease their operations and go into liquidation.

50

Selected French Banking and Financial Regulations - Extract - September 1999

Article 99

Repealed by Act 92-665 of 16 July 1992, Article 44-II. (The provisions of this Article concerning securities houses have been inserted in Article 18-2 ).

Article 100

If, on the date the present Act becomes law, they are carrying on activities other than those referred to in Articles 1 to 6, credit institutions must apply to the Comité des Etablissements de Crédit, within the period stipulated in the first paragraph of Article 98, for authorization to continue the said activities.

Article 100-1

As long as branches of credit institutions having their headquarters in a Member State of the European Community other than France are not covered by a guarantee scheme in their home State, they are bound to belong to a guarantee scheme in France under the conditions set by the Comité de la Réglementation Bancaire et Financière.

Until 31 December 1999, the amount and the scope of the coverage offered by French branches of credit institutions having their headquarters outside of France and belonging to the guarantee scheme of their home State must not exceed the maximum amount and scope of the coverage afforded by the corresponding guarantee scheme in force in France.

Article 100-2

Credit institutions whose authorizations have been revoked by the Comité des Établissements de Crédit before the date when the Financial Activity Modernization Act 96-597 of 2 July 1996 comes into force shall lose their credit institution status six months after that date. However, if the Commission Bancaire finds during that time that any of those institutions still owe funds received from the public, II through V of Article 19 shall apply to them in the manner decided by the Comité de la Réglementation Bancaire et Financière.

Credit institutions whose authorizations have been revoked by the Commission Bancaire before the date when the Financial Activity Modernization Act 96-597 of 2 July 1996 comes into force shall be subject to Articles 19-1 and 19-2 of this Act. The Commission Bancaire shall decide on the date of liquidation of the legal person.

Article 101

I.- This Act shall apply in the overseas territories and in the collectivité territoriale de Mayotte (Territorial Unit of Mayotte), except for Articles 15-1, 100-1 (first paragraph) and Title IV bis.

II.- Articles 15-1, 100-1 (first paragraph) and Title IV bis of this Act shall not apply in the collectivité territoriale de Saint-Pierre-et- Miquelon (Territorial Unit of Saint-Pierre-and-Miquelon).

Article 102

The laws and regulations relating to the persons and services referred to in Article 8 of the present Act and to credit institutions and banking operations, including the decree of 30 October 1935 unifying the Act on cheques, Act 66-455 of 2 July 1966, Act 66-1010 of 28 December 1966, Act 78-22 of 10 January 1978, Act 79-596 of 13 July 1979 and Act 81-1 of 2 January 1981, and the

Selected French Banking and Financial Regulations - Extract - September 1999 51

provisions issued to implement them, shall be codified by decrees adopted by the Conseil d'État after obtaining the opinion of the higher committee responsible for studying the codification and simplification of laws and regulations.

These decrees shall make such formal amendments to the current provisions as are rendered necessary by the work of codification excluding any amendments of substance.

Article 103

A decree in the Conseil d'État shall define the conditions for the application of the present Act.

Article 104

Pending the entry into force of this Act, the credit institutions shall remain subject to the accounting procedures and rules governing them as at 31 December 1983.

Article 105

This Act shall become law six months after publication in the Journal Officiel de la République Française.

Nevertheless the provisions of Articles 61, 63 and 104 shall become law on publication of the Act in the Journal Officiel.

This Act shall be executed as a law of the State.

52

Selected French Banking and Financial Regulations - Extract - September 1999

1.2.- FINANCIAL ACTIVITY MODERNIZATION ACT

FINANCIAL ACTIVITY MODERNIZATION ACT 96-597 OF 2 JULY 1996

TITLE I

THE PROVISION OF INVESTMENT SERVICES

CHAPTER I INVESTMENT SERVICES

Section 1 Financial Instruments

Financial instruments are:

1. Shares and other securities that afford or may afford direct or indirect access to equity or voting rights, transferable by book entry or by physical delivery;

2. Debt securities transferable by book entry or by physical delivery, each representing a claim on the legal person which issues it, other than trade bills (effets de commerce) and loan notes (bons de caisse);

3. Units or shares in collective investment undertakings;

4. Financial futures,

and, for the purposes of this Act, all instruments equivalent to the foregoing issued under foreign laws.

Financial instruments may be issued only by the State, a legal person, an unincorporated mutual fund (fonds commun de placement) or a securitization vehicle (fonds commun de créances).

Article 2

Collective investment undertakings are, for the purposes of this Act:

1. Open-end investment companies (sociétés d'investissement à capital variable);

2. Unincorporated mutual funds (fonds communs de placement);

3. Securitization vehicles (fonds communs de créances);

4. Real estate investment companies (sociétés civiles de placement immobilier).

Article 3

Financial futures are, for the purposes of this Act:

1. Financial futures and forward contracts involving any bills, securities, indices or currencies, including equivalent cash-settled instruments;

Selected French Banking and Financial Regulations - Extract - September 1999 53

2. Forward interest-rate agreements;

3. Swaps;

4. Commodities futures and forwards,

5. Options to acquire or dispose of financial instruments;

and all other futures and forward market instruments.

Section 2 Investment and Related Services

Investment services involve to the financial instruments referred to in Article 1 of this Act and comprise:

a) Receiving and transmitting orders for third parties;

b) Executing orders for third parties,

c) Trading for own account;

d) Portfolio management for third parties;

e) Underwriting;

f) Placing.

However, this Act does not apply to services provided to the State or the Banque de France in connection with the monetary, exchange-rate, public-debt and reserves management policies of the State.

Article 5

Services related to investment services [i.e. non-core services] comprise:

a) Safekeeping or administration of financial instruments;

b) Granting credits or loans to an investor to allow him to carry out a transaction involving a financial instrument where the undertaking granting the credit or loan is involved in the transaction;

c) Asset management advice;

d) Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and acquisitions of undertakings;

e) Services related to underwriting;

f) Foreign-exchange services where these are related to the provision of investment services;

g) Rental of safe-deposit boxes.

The conditions for investment firms carrying out the transactions listed in b) shall be set by the Comité de la Réglementation Bancaire et Financière.

54

Selected French Banking and Financial Regulations - Extract - September 1999

CHAPTER II INVESTMENT SERVICE PROVIDERS

Section 1 Types of Investment Service Providers

Investment service providers are investment firms and credit institutions authorized to provide investment services.

The provision of related services shall be free, subject to compliance with the relevant statutory and regulatory provisions. Such provision shall not, however, in itself entitle any person to claim the status of an investment firm.

Article 7

Investment firms are legal persons, other than credit institutions, whose principal and usual business is the provision of investment services.

Article 8

I - Investment firms may, pursuant to the rules enacted by the Comité de la Réglementation Bancaire et Financière referred to in Article 30 of Act 84-46 of 24 January 1984 on the activities and supervision of credit institutions, acquire and hold equity in existing undertakings and undertakings being organized.

II - Any change in the capital structure of an investment firm must be made in accordance with the regulations of the Comité de la Réglementation Bancaire et Financière, reported to the Comité des Établissements de Crédit et des Entreprises d'Investissement and the Conseil des Marchés Financiers, and, if appropriate, authorized by the Comité des Établissements de Crédit et des Entreprises d'Investissement.

In the case of portfolio management companies referred to in Article 15, the authority under this Article shall be exercised by the Commission des Opérations de Bourse.

Article 9

Investment firms may engage in a business other than those listed in Articles 4 and 5 only under the conditions set out by the Comité des Établissements de Crédit et des Entreprises d'Investissement.

Section 2 Authorizations

I - In all statutory and regulatory provisions, including Article 29 of Act 84-46 of 24 January 1984 aforesaid, the term: "Comité de la Réglementation Bancaire" shall be amended to read: "Comité de la Réglementation Bancaire et Financière", the term: "Comité des Établissements de Crédit" shall be amended to read: "Comité des Établissements de Crédit et des Entreprises d'Investissement" and

Selected French Banking and Financial Regulations - Extract - September 1999 55

the term: "Conseil National du Crédit" shall be amended to read: "Conseil National du Crédit et du Titre".

II - See Article 30 of Act 84-46 of 24 January 1984

III - See Article 31 of Act 84-46 of 24 January 1984

IV - See the eighth paragraph (6) and the ninth paragraph (7) of Article 25 of Act 84-46 of 24 January 1984

Article 11

An investment firm or credit institution must obtain authorization to provide investment services. Subject to the third paragraph below, such authorization shall be granted by the Comité des Établissements de Crédit et des Entreprises d'Investissement. It shall not be required for providing one or more services listed in Article 5 only.

Before such authorization is granted, the programme of operations of the investment firm or credit institution must be approved by the Conseil des Marchés Financiers. Such approval shall be necessary for each of the investment services provided for in Article 4.

A programme of operations relating to the service provided for in Article 4 d) shall be approved by the Commission des Opérations de Bourse. If the provision of such service is to be the principal business of an investment firm, the investment firm shall be authorized by the Commission des Opérations de Bourse.

A Decree in Conseil d'État shall set implementation procedures for this Article and define, inter alia, the rules under which the decisions are reached and notified as well as the specific provisions applicable to investment firms that are direct or indirect subsidiaries of investment firms or credit institutions that either have been authorized in another European Community Member State or are not subject to the laws of any such State.

Article 12

Before authorizing an investment firm, the Comité des Établissements de Crédit et des Entreprises d'Investissement referred to in Article 29 of Act 84-46 of 24 January 1984 aforesaid shall make sure that:

1. Its registered office and headquarters are in France;

2. It has, in view of the nature of the services that it wishes to provide, sufficient initial capital as determined by the Comité de la Réglementation Bancaire et Financière;

3. It identifies each of its direct and indirect natural- and legal-person shareholders with a qualifying holding and states the amount of such holding; the Comité shall assess such shareholders' qualifications in light of the need to ensure sound and prudent management of the investment firm;

4. At least two persons determine the course of its business;

5. Its legal form is appropriate for the business of an investment firm;

6. It has an approved programme of operations for each service which it plans to provide.

The Comité may withhold authorization when it is likely to be hindered in the conduct of its supervision of the applicant undertaking either by the existence of equity links or links of direct or

56

Selected French Banking and Financial Regulations - Extract - September 1999

indirect control between the undertaking and other natural or legal persons, or by the existence of laws or regulations of a State that is not a party to the agreement on the European Economic Area applicable to one or more of the above-mentioned natural or legal persons.

The Comité des Établissements de Crédit et des Entreprises d'Investissement shall rule within three months of being sent the application by the Conseil des Marchés Financiers. It shall state the reason for its decision and notify the applicant.

Article 13

Before authorization to provide one or more investment services by a credit institution is granted, the Comité des Établissements de Crédit et des Entreprises d'Investissement shall, in addition to the requirements specified in Article 15 of Act 84-46 of 24 January 1984 aforesaid, make sure that such institution:

1. Has, in view of the nature of the services which it plans to provide, sufficient initial capital as determined by the Comité de la Réglementation Bancaire et Financière;

2. Has the legal form that is appropriate for providing investment services;

3. Has an approved programme of operations for each service which it plans to provide.

The Comité des Établissements de Crédit et des Entreprises d'Investissement shall rule within three months of being sent the application by the Conseil des Marchés Financiers. It shall state the reasons for its decision and notify the applicant.

Article 14

Before approving the programme of operations of an investment service provider, the Conseil des Marchés Financiers, or the Commission des Opérations de Bourse if such programme relates to the investment service referred to in Article 4 d), shall assess the quality of such programme in the light of the qualifications and integrity of the senior management. Such programme shall describe the type of operations planned and the structure of the organization of the firm or institution.

The Conseil des Marchés Financiers or Commission des Opérations de Bourse shall rule within three months of the submission of the application. It shall state the reasons for its decision and notify the applicant.

A regulation of the Commission des Opérations de Bourse shall set the conditions for approval of a programme of operations including the investment service referred to in Article 4 d).

Article 15

An investment firm whose principal business is the provision of the services referred to in Article 4

d) shall be authorized by the Commission des Opérations de Bourse and called a portfolio management company (société de gestion de portefeuille).

Before authorizing a portfolio management company, the Commission shall make sure that:

1. Its registered office and headquarters are in France;

2. It has sufficient initial capital;

Selected French Banking and Financial Regulations - Extract - September 1999 57

3. It identifies each of its direct or indirect natural- and legal-person shareholders with a qualifying holding and states the amount of such holding; the Commission shall assess such shareholders' qualifications in light of the need to ensure sound and prudent management;

4. It is managed by persons having the necessary integrity and experience appropriate to their duties;

5. At least two persons determine the course of its business;

6. Its legal form is appropriate for providing the service referred to in Article 4 d);

7. It has a programme of operations for each service that it plans to provide.

The Commission des Opérations de Bourse may withhold authorization when it is likely to be hindered in the conduct of its supervision of the portfolio management company either by the existence of equity links or links of direct or indirect control between the applicant undertaking and other natural or legal persons, or by the existence of laws or regulations of a State that is not a party to the agreement on the European Economic Area applicable to one or more of the abovementioned natural or legal persons.

The Commission des Opérations de Bourse shall rule within three months of submission of the application. It shall state the reasons for its decision and notify the applicant.

A regulation of the Commission des Opérations de Bourse shall set the conditions for the authorization of portfolio management companies.

Article 16

I - The Minister for Economic Affairs and Finance shall appoint a financial management consulting committee of seven members appointed for four years.

The committee's membership shall consist of:

- one member of the Commission des Opérations de Bourse, as chairman, appointed on its recommendation;

- two members of the Conseil des Marchés Financiers appointed on its recommendation;

- four senior managers of portfolio management companies appointed after consultation with members of the profession concerned.

Two alternate members shall be appointed in the same conditions.

All persons participating in this committee's work shall be bound by the obligation of professional secrecy as provided and on pain of the penalties prescribed by Articles 226-13 and 226-14 of the Penal Code.

II - Said committee shall render an opinion on each authorization of a portfolio management company by the Commission des Opérations de Bourse.

It shall also render an opinion on each approval of a programme of operations by the Commission des Opérations de Bourse pursuant to Article 11 of this Act.

The Commission des Opérations de Bourse shall consult said committee with regard to the regulation referred to in the last paragraph of Article 15 and to every other regulatory provision concerning portfolio management.

58

Selected French Banking and Financial Regulations - Extract - September 1999

III - Articles 23 through 25 of the Capital Market Transparency and Security Act 89-531 of 2 August 1989 are repealed.

Article 17

See Article 5 of Act 84-46 of 24 January 1984

Article 18

I - The Comité des Établissements de Crédit et des Entreprises d'Investissement shall revoke the authorizations of investment firms other than portfolio management companies, either at the request of the investment firm or ex officio when the firm no longer fulfils the conditions to which the authorization is subject, when it has not made use of its authorization within 12 months or when it has ceased carrying on its business for six months or longer.

The revocation of authorization takes effect at the end of a period specified by the Comité des Établissements de Crédit et des Entreprises d'Investissement.

During that period:

- the investment firm remains subject to the supervision of the Commission Bancaire and the Conseil des Marchés Financiers. The Commission Bancaire, the Conseil des Marchés Financiers and the Commission des Opérations de Bourse may impose the disciplinary sanctions provided for in Article 45 of Act 84-46 of 24 January 1984 aforesaid and in Articles 69 and 71 of this Act upon any investment firm whose authorization has been revoked;

- it may engage only in operations strictly necessary for winding-up its investment services;

- it may not refer to its status as an investment firm without making it clear that its authorization is being revoked.

Any securities issued by such firm which are not traded on a regulated market shall be redeemed by the firm at maturity or, if such maturity is subsequent to the end of the aforesaid period, on the date specified by the Comité des Établissements de Crédit et des Entreprises d'Investissement.

At the end of said period, the firm shall no longer be an investment firm and its business name must be changed.

An investment firm that decides to dissolve before the end of such period remains subject to the supervision of the Commission Bancaire and the Conseil des Marchés Financiers until its liquidation has been completed.

The Commission Bancaire, the Conseil des Marchés Financiers and the Commission des Opérations de Bourse may impose the disciplinary sanctions provided for in Article 45 of Act 84-46 of 24 January 1984 aforesaid and Articles 69 and 71 of this Act, including striking a firm off the list of authorized investment firms. In this event, such a firm may not refer to its status as an investment firm without making it clear that it is in liquidation.

II - An investment firm other than a portfolio management company may be struck off the list of authorized investment firms by the Commission Bancaire as a disciplinary sanction.

Selected French Banking and Financial Regulations - Extract - September 1999 59

The striking off shall entail liquidation of the legal person if its registered office is in France. In the case of branches of investment firms with their registered office outside the European Economic Area, such striking off shall entail liquidation of the branch's balance-sheet and off-balance-sheet assets and liabilities.

A firm struck off the list remains subject to the supervision of the Commission Bancaire until the liquidation has been completed. It may engage only in operations strictly necessary for its windingup. It may not refer to its status as an investment firm without making it clear that it has been struck off the list of authorized investment firms.

III - The Comité de la Réglementation Bancaire et Financière shall determine the implementing rules for this Article. It shall inter alia specify how:

- the decisions to revoke authorizations or strike investment firms off are publicized;

- the financial instruments entered in the firm's accounts may be transferred to another investment service provider or to the legal person that issued them.

Article 19

I - The Commission des Opérations de Bourse shall revoke the authorizations of portfolio management companies, either at the company's request or ex officio when the company no longer fulfils the conditions to which the authorization is subject, when it has not made use of its authorization within 12 months, when it has ceased carrying on its business for six months or longer, or when the continuation of its business is liable to harm the interests of investors.

The revocation takes effect at the end of a period specified by the Commission des Opérations de Bourse.

During such period:

- the portfolio management company shall be subject to the supervision of the Commission des

Opérations de Bourse. The Commission des Opérations de Bourse may impose the disciplinary sanctions provided for in Article 71, including striking off the list of authorized portfolio management companies, upon any company whose authorization is revoked;

- it may engage only in operations strictly necessary for protection of customer interests;

- it may not refer to its status as a portfolio management company without making it clear that its authorization is being revoked.

At the end of such period, the company shall no longer be a portfolio management company and its business name must be changed.

Any portfolio management company which decides to dissolve before the end of such period remains subject, until completion of its liquidation, to the supervision of the Commission des Opérations de Bourse, which may impose the sanctions provided for in Article 71 of this Act, including striking off the list of authorized portfolio management companies. It may not refer to its status as a portfolio management company without making it clear that it is in liquidation.

II - A portfolio management company may be struck off the list of authorized portfolio management companies by the Commission des Opérations de Bourse as a disciplinary sanction.

60

Selected French Banking and Financial Regulations - Extract - September 1999

The striking off shall entail liquidation of the legal person if its registered office is in France. In the case of branches of companies with their registered office outside the European Economic Area, such striking off shall entail liquidation of the branch's balance-sheet and off-balance-sheet assets and liabilities.

A company struck off the list of authorized portfolio management companies remains subject to the supervision of the Commission des Opérations de Bourse until the liquidation has been completed. It may engage only in operations strictly necessary for protection of customer interests. It may not refer to its status as a portfolio management company without making it clear that it has been struck off the list of authorized portfolio management companies.

III - The Commission des Opérations de Bourse shall set the implementing rules for this Article. It shall inter alia specify how the decisions to revoke authorizations or to strike companies off are publicized.

Article 20

See the third paragraph of Article 18-2 of Act 84-46 of 24 January 1984

Section 3 Prohibitions

No one other than an investment service provider may provide investment services to third parties as its usual business.

Article 22

No one may serve on the board of directors or the supervisory board of an investment firm or, directly, indirectly or through an intermediary person, administer, direct or manage an investment firm in any capacity, or be authorized to sign on behalf of such a firm:

1. If he has been convicted:

a) Of a crime;

b) Of theft, fraud or breach of trust;

c) Of violation of Penal Code Articles 432-11, 433-1 through 433-3, 441-1 or 441-8, of Labour Code

Article L.152-6, of Article 52-1 of Freedom of Pricing and Competition Ordinance 86-1243 of 1 December 1986, or of an offence punishable under special statutes by the penalties provided for in Penal Code Articles 313-1 through 313-4 or in Article 1 of the Gaming Act 83-628 of 12 July 1983;

d) Of misappropriation when acting as a public depositary, extortion of funds or securities, fraudulent bankruptcy, impairment of the public credit or breach of the exchange control laws;

e) Pursuant to Title II of Act 66-537 of 24 July 1966 on commercial companies or to Articles 6

(Consumer Code, art L 313-5) and 15 of Act 66-1010 of 28 December 1966 relating to usury, loans and certain canvassing and advertising operations;

f) Of receiving items procured by means of such offences;

g) Pursuant to Penal Code Articles 222-35 through 222-41 or Customs Code Article 415; or

h) Pursuant to Title VI of this Act;

Selected French Banking and Financial Regulations - Extract - September 1999 61

2. If he has been sentenced to more than two months' imprisonment pursuant to Article 66 of the

Banking Law Unification Decree of 30 October 1935 (on cheques);

3. If he has been the subject of a conviction by a foreign court of law that is res judicata, constituting under French law a conviction for any of the crimes or offences listed in this Article. The criminal court of the domicile of the convicted person shall, at the request of the State Prosecutor's Office, evaluate the validity and legality of the decision and give a ruling in chambers on the application of the prohibition in France, the person concerned having been duly summoned to attend;

4. If a personal bankruptcy or prohibition order as laid down in Article 108 of Act 67-563 of

13 July 1967 on receivership, court-ordered liquidation, personal bankruptcy and fraudulent bankruptcies has been pronounced against him or if he has been adjudged bankrupt by a foreign court of law provided that the adjudication in bankruptcy has been declared enforceable in France and he has not been discharged;

5. If he has been relieved of his duties as a law official by virtue of a court ruling.

Article 23

No undertaking other than an investment firm may use a business name, advertising or any expression whatsoever implying that it is an authorized investment firm or creating confusion in such regard.

No investment firm may imply that it belongs to a category other than that in which it is authorized or create confusion in such regard.

Section 4 Organization of the Profession

I - Each investment firm, market undertaking and clearing house shall belong to an association of its choosing responsible for the collective representation and the defence of the rights and interests of its members. Each such association shall be affiliated with the association for which provision is made in Article 23 of Act 84-46 of 24 January 1984 aforesaid.

II - In all statutory and regulatory provisions, including Article 23 of Act 84-46 of 24 January 1984 aforesaid, the term: Association Française des Établissements de Crédit shall be amended to read: Association Française des Établissements de Crédit et des Entreprises d'Investissement.

Section 5 Scope

The following may provide investment services in compliance with the relevant legislative provisions without being subject to the procedure provided for in Article 11 of this Act but without being entitled to the benefits provided for in Title IV:

62

Selected French Banking and Financial Regulations - Extract - September 1999

1. a) The Treasury;

b) The Banque de France;

c) The Institut d'Émission des Départements d'Outre-Mer and the Institut d'Émission d'Outre-Mer;

d) The Post Office;

2. a) Insurance and reinsurance companies governed by the Insurance Code;

b) Collective investment undertakings, securitization vehicles and real estate investment companies as well as the companies responsible for management thereof governed by the Collective Investment Undertaking and Securitization Vehicle Act 88-1201 of 23 December 1988;

c) Firms that provide investment services only to the legal persons that have direct or indirect control of them within the meaning of Article 355-1 of Act 66-537 of 24 July 1966 aforesaid and to the legal persons that such persons control within the meaning of that Article;

d) Firms whose investment services are limited to the management of an employee savings scheme;

e) Firms that limit their activity to the operations mentioned in c) and d) above;

f) Persons who provide an investment service incidentally to a business activity where the rules governing the activity do not expressly prohibit such provision;

g) Persons whose business is governed by the Futures Markets Act of 28 March 1885, Act 66-1010 of 28 December 1966 aforesaid and the Financial Canvassing, Placement and Insurance Act 72-6 of 3 January 1972;

h) Commodity brokers who provide an investment service only to their counterparties and only to the extent necessary for the purposes of their principal business.

Article 26

Investment services providers shall not be entitled to the benefits provided for in Title IV if their only business:

1. Is to provide the investment services referred to in Article 4 a); or

2. Relates to the financial instruments referred to in "Article 3-4".

TITLE II

THE CAPITAL MARKETS

CHAPTER I THE CONSEIL DES MARCHÉS FINANCIERS

Section 1 Organization

A professional authority named Conseil des Marchés Financiers shall be established as a legal person.

Selected French Banking and Financial Regulations - Extract - September 1999 63

It shall have 16 members appointed by a Decree of the Minister for Economic Affairs and Finance for a four-year term.

Fourteen members shall be appointed after consultation of the representative trade associations and trade unions:

- six represent market intermediaries, at least two of which represent investment firms;

- one represents commodity markets;

- three represent industrial or commercial companies whose securities are traded on a regulated market;

- three represent investors, one of which manages portfolios represents managers for third parties;

- one represents employees of firms or institutions providing investment services, employees of market undertakings and employees of clearing houses.

Two members shall be prominent persons chosen for their financial expertise.

The chairman of the Conseil des Marchés Financiers shall be elected by its members from amongst their number. Notice of his election shall be published in the Journal Officiel de la République Française.

In the event of a tie, the chairman shall have the casting vote.

A representative of the Banque de France may attend the meetings of the Conseil without a vote. He may also sit on the specialized committees without a vote.

A Government commissioner shall be appointed by the Minister for Economic Affairs and Finance. He also sits on the disciplinary committees. When necessary, the Minister may appoint a Government commissioner to each of the specialized committees of the Conseil. The Government commissioner has no vote.

Prior to its deliberations, the Conseil may hear qualified persons.

Where urgency established by its chairman so requires, the Conseil may, except in disciplinary matters, rule by means of written consultations.

A Decree in Conseil d'État shall define the implementing rules for this Article and, inter alia, set forth the voting, quorum and proxy rules as well as the procedures for written consultations. Such Decree shall provide for filling half of the seats on the Conseil every other year after the second year following its establishment. At the first meeting of the Conseil des Marchés Financiers, the terms of office of each of its members shall be determined by drawing lots as provided by said decree, the terms of eight of the members being two years and the terms of the other eight four years.

The members may be reappointed once.

Article 27-1

The Conseil may, under the conditions and within the limits set by its General Regulations, delegate to the chairman or his representative, who shall be a member of the Conseil, the power to take

64

Selected French Banking and Financial Regulations - Extract - September 1999

individual decisions, except in disciplinary matters, concerning bodies under its supervision and subject to the Government commissioner being informed in advance.

Article 28

The Conseil des Marchés Financiers may decide by a two-thirds majority to appoint its members to specialized committees for the exercise of its powers other than those governed by Articles 33 and

34.

Such committees prepare the decisions of the Conseil. Each shall be chaired by the chairman of the Conseil des Marchés Financiers, who is an ex officio member, or by a member delegated by him to do so. Each committee chairman shall have the casting vote in the event of a tie.

The operating procedures and powers of such committees shall be set forth in the General Regulations of the Conseil des Marchés Financiers.

When necessary, the Conseil may recommend that the Minister for Economic Affairs and Finance appoint experts to attend and vote at meetings of such committees for a specified period.

In addition to these experts, the chairman of a specialized committee may invite qualified persons to participate in the committee's work in a consultative capacity.

Article 29

The Conseil des Marchés Financiers shall appoint some of its members to disciplinary committees.

Each shall be chaired by the chairman of the Conseil des Marchés Financiers, who is an ex officio member, or by a member delegated by him to do so. Each committee chairman shall have the casting vote in the event of a tie. Each disciplinary committee shall have six members, including the member representing employees.

Said committees shall exercise the disciplinary powers assigned to the Conseil des Marchés Financiers by this Act.

A decree in Conseil d'Etat shall set forth the operating rules for the disciplinary committees.

The decisions of the disciplinary committees shall be reported to the Conseil.

Article 30

Every member of the Conseil must inform the chairman of any interests he holds or comes to hold and any functions he performs or comes to perform in a financial or economic activity and any office which he holds or comes to hold in a legal person. The members of the Conseil shall have access to such information as well as that concerning the chairman.

No member of the Conseil may deliberate in a matter in which he or a legal person in which he performs functions or holds office has an interest. Neither may he participate in a deliberation in which he or a legal person in which he performs functions or holds office has represented one of the interested parties in the 18 months preceding the deliberation.

The chairman of the Conseil des Marchés Financiers shall take appropriate steps to enforce the obligations and prohibitions contained in the two preceding paragraphs.

Selected French Banking and Financial Regulations - Extract - September 1999 65

Article 31

The members, employees and agents of the Conseil des Marchés Financiers as well as the experts and persons consulted shall be bound by the obligation of professional secrecy as provided and on pain of the penalties prescribed by Articles 226-13 and 226-14 of the Penal Code.

Section 2 Regulations

The General Regulations of the Conseil des Marchés Financiers shall be approved by a Decree of the Minister for Economic Affairs and Finance after consultation of the Commission des Opérations de Bourse and the Banque de France. Such Decree and the annexed General Regulations of the Conseil shall be published in the Journal Officiel de la République Française.

The General Regulations shall set forth:

Concerning investment service providers, market undertakings and clearing houses:

1. The rules of conduct said persons shall observe at all times, except those applicable to the services referred to in Article 4 d); said rules shall have due regard for the business expertise of the person to whom the investment service is provided;

2. The conditions governing the provision by investment service providers of the services listed in

Article 5 , as well as the clearing and account-keeping functions;

3. The conditions governing authorization and revocation of authorization of natural persons acting under the authority or on behalf of such service providers and undertakings or of the Conseil des Marchés Financiers;

4. The conditions governing the approval of the rules of clearing houses by the Conseil des Marchés

Financiers pursuant to Article 47 of this Act;

5 . The conditions governing the exercise of supervision by the Conseil des Marchés Financiers pursuant to part III of this Act;

6. The rules applicable to the persons covered by Article 74 of this Act;

7. Deleted, as regards the guarantee fund (Act 99-532 of 25 June 1999, Article 71 - II;

8. The conditions under which certain investment service providers may act otherwise than as del credere agents;

9. The conditions governing the authorization of certain natural or legal persons who are not investment service providers to provide services referred to in Article 4 b) and c) on regulated markets.

Specifically concerning regulated markets:

10. The general organizational and operating principles that regulated markets must observe and the rules governing execution, reporting and publicizing of transactions in financial instruments traded on those markets;

11. The conditions under which the Conseil des Marchés Financiers proposes to recognise or revoke the status of regulated market in financial instruments, pursuant to Articles 41 and 42 of this Act;

12. The conditions for obtaining a derogation to the first paragraph of Article 45 of this Act.

66

Selected French Banking and Financial Regulations - Extract - September 1999

The General Regulations shall also specify:

13. The administrative and financial operating procedures of the Conseil des Marchés Financiers.

14. The conditions governing the activities of safekeeping and administration of financial instruments by legal persons which carry out transactions involving a public solicitation of savings and by intermediaries authorized to perform such activities by the Conseil des Marchés Financiers;

15. The conditions governing the authorization of central depositories by the Conseil des Marchés

Financiers and the conditions under which the Conseil approves their operating rules;

16. The general organizational and operational principles of financial instrument settlement and delivery systems and the conditions under which the Conseil des Marchés Financiers approves the operating rules of such systems, without prejudice to the powers granted to the Banque de France by Article 4 of Act 93-980 of 4 August 1993 on the status of the Banque de France and the activities and supervision of credit institutions.

Article 33

To ensure shareholder equality and market transparency, the General Regulations of the Conseil des Marchés Financiers shall set forth the rules governing public offerings involving financial instruments traded on a regulated market as well as:

1. The conditions under which a natural or legal person, acting alone or in concert within the meaning of Article 356-1-3 of Act 66-37 of 24 July 1966 aforesaid, who directly or indirectly comes to hold a certain percentage of the capital stock or voting rights in a company whose shares are traded on a regulated market shall be required forthwith so to inform the Conseil and file a proposed tender offer with a view to acquiring a specified quantity of the company's securities. If this filing is not made, the securities that the person holds in excess of the aforementioned percentage of the capital stock or voting rights shall be deprived of voting rights;

2. The conditions under which a proposed acquisition of a block of securities vesting a majority of the capital stock or voting rights of a company whose shares are traded on a regulated market entails an obligation for the acquirer(s) to buy any such securities then offered to them at the price at which the block is sold;

3. The conditions governing buy-out offer and request procedures when the majority shareholder(s) of a company whose shares are traded on a regulated market or whose securities have ceased to be traded on a regulated market hold in concert, within the meaning of Article 356-1-3 of Act 66-537 of 24 July 1966 aforesaid, a specified percentage of the voting rights or when a company whose shares are traded on a regulated market takes the form of a partnership limited by shares;

4. The conditions under which securities not tendered by the minority shareholders in a buy-out offer or request, and representing five percent or less of the capital stock or voting rights, are to be transferred to the majority shareholders at their demand and their holders compensated; the valuation of the securities by the objective methods used in cases of asset disposals shall take into account, according to a weighting appropriate to each case, the value of the company's assets, its earnings, its subsidiaries if any, its business prospects and the market value of the securities. The compensation per security shall be the greater of the result of such valuation and the buy-out price offered. The amount of the compensation accruing to unidentified holders shall be escrowed.

Article 34

A Decree shall determine the date and conditions for discontinuing the daily over-the-counter (hors-cote) market statements.

Selected French Banking and Financial Regulations - Extract - September 1999 67

The procedure prescribed in the third paragraph (2) of Article 33 shall be applicable from the date of publication of this Act until the date specified by the Decree provided for in the preceding paragraph to those companies whose shares have appeared at least once in the daily over-thecounter market statement in the period between 1 January 1995 and the date of publication of this Act.

From the date of publication of this Act, only the securities issued by the aforesaid companies may appear in the daily over-the-counter market statement.

Section 3 Other Powers

The Minister for Economic Affairs and Finance, the chairman of the Commission des Opérations de Bourse and the Governor of the Banque de France, acting as chairman of the Commission Bancaire, may refer any matters to the Conseil des Marchés Financiers that are within its attributions.

The government commissioners on any committee of the Conseil des Marchés Financiers may request a reconsideration of any matter under rules enacted by a Decree in Conseil d'Etat.

In the event that the Conseil des Marchés Financiers fails to act, the steps dictated by the circumstances shall be taken urgently by Decree.

Article 36

The Conseil des Marchés Financiers may make decisions of general or individual application to implement its General Regulations and to exercise its other powers under this Act.

Article 37

At the request of one or more investment service providers or of a trade association of investment service providers, the Conseil des Marchés Financiers may, after consulting the Banque de France and the Commission des Opérations de Bourse, approve standard contracts for transactions in financial instruments.

Article 38

The Conseil des Marchés Financiers shall publish annual reports to which its financial statements shall be annexed.

Section 4 Appeals

The individual decisions of the Conseil des Marchés Financiers, other than those of a disciplinary nature and those relating to the approval of a programme of operations pursuant to the second paragraph of Article 11, may be appealed to the judicial courts.

68

Selected French Banking and Financial Regulations - Extract - September 1999

Such appeals have no suspensive effect, but the court to which an appeal is taken may stay execution of the appealed decision.

A Decree in Conseil d'État shall determine the implementing rules for this Article.

CHAPTER II REGULATED MARKETS

Section 1 Market undertakings

A market undertaking is a commercial company whose principal business is the operation of a regulated market for financial instruments.

Subject to Article 47, such companies may also manage one or more clearing houses.

They grant the authorizations of natural persons referred to in Article 32-3 with regard to access to the regulated markets which they operate.

Section 2 General Provisions Governing Regulated Markets

Recognition of a regulated market for financial instruments shall be granted by Decree by the Minister for Economic Affairs and Finance on the recommendation of the Conseil des Marchés Financiers after consulting the Commission des Opérations de Bourse and the Banque de France. Such recognition may be revoked in the same conditions. The Decrees shall be published in the Journal Officiel de la République Française. The rules of markets so recognized shall be published as directed by the Conseil des Marchés Financiers.

Article 42

I - To be recognized as a regulated market, a market for financial instruments must ensure regular trading. The rules enacted by the market undertaking must inter alia include membership requirements and listing requirements, rules regarding the organization of trading, conditions under which trading in one or more financial instruments may be halted, and rules for the recording and publicizing of trades.

Such rules shall be subject to approval by the Conseil des Marchés Financiers.

Amendments to such rules shall be notified to the Conseil des Marchés Financiers, the Commission des Opérations de Bourse and the Banque de France. The Conseil decides on the compatibility of the amendments with the recognition granted under Article 41 of this Act, informs the Commission des Opérations de Bourse and the Banque de France of its decision and refers any incompatibility to the Minister for Economic Affairs and Finance. In the event of disagreement regarding the decision of the Conseil des Marchés Financiers, the Commission des Opérations de Bourse or the

Selected French Banking and Financial Regulations - Extract - September 1999 69

Banque de France may appeal to the Minister for Economic Affairs and Finance within 15 days of the notification of such decision.

II - 1. Decisions to admit financial instruments to listing on a regulated market shall be made by the market undertaking, subject to the right of opposition of the Commission des Opérations de Bourse.

The express consent of the issuer of the financial instruments is required.

Where the financial instrument contains an underlying element, the issuer of the underlying element shall have a right of opposition in the cases and according to the procedures set forth in the General Regulations of the Conseil des Marchés Financiers. Where, this right of opposition shall not exist when the underlying element is a currency, a public debt security, a financial futures contract or an index.

2. After so informing the issuer, a market undertaking may halt trading in a financial instrument traded on its regulated market for a specified period pursuant to the rules of such market. It shall also inform the chairman of the Commission des Opérations de Bourse and the chairman of the Conseil des Marchés Financiers of such halt. A market undertaking may exceptionally be required to halt trading in a financial instrument by the chairman of the Commission des Opérations de Bourse in order to protect public savings. Such a halt may also be required by the chairman of the Conseil des Marchés Financiers within the powers of the Conseil under this Act.

The issuer of a financial instrument traded on a regulated market may request the market undertaking to halt trading in such instrument in order to enable the public to be informed satisfactorily.

3. Delisting of a financial instrument shall be decided on by the market undertaking, subject to the right of opposition of the Commission des Opérations de Bourse.

III - If an extraordinary event interferes with the regular operation of a regulated market, the chairman of the Conseil des Marchés Financiers or, if he is unable, his representative designated by him for that purpose may halt trading in whole or in part for not more than two consecutive trading days. Longer halts may be decreed by the Minister for Economic Affairs and Finance on recommendation of the chairman of the Conseil des Marchés Financiers.

If a trading halt on a regulated market lasts longer than two consecutive trading days, the transactions pending on the date of the halt may be cleared and settled under the rules of the market.

Article 43

I - To be valid, trades and sales involving financial instruments traded on a regulated market and carried out in French departments may be effected only by an investment service provider or, where they are effected on a regulated market, by any member of such market.

II - However, the requirement contained in the preceding paragraph does not apply to sales:

a) Between two natural persons, where the sale involves securities;

b) Between two companies one of which directly or indirectly holds at least 20% of the other's capital stock;

70

Selected French Banking and Financial Regulations - Extract - September 1999

c) Between a legal person other than a company and a company if the legal person directly or indirectly holds at least 20% of the company's capital stock;

d) Between two companies controlled, within the meaning of Article 355-1 of Act 66-537 of 24 July

1966 aforesaid, by the same undertaking;

e) Between insurance companies belonging to the same group;

f) Between legal persons and the pension or provident funds that they manage.

Article 44

I - In addition to duly authorized investment service providers, membership of a regulated market for financial instruments is, notwithstanding Article 21, open to:

a) Legal persons whose members or shareholders have unlimited joint and several liability for their debts and obligations, provided that such members or shareholders are authorized to provide the services referred to in Article 4 b) and c);

b) Natural or legal persons authorized by the Conseil des Marchés Financiers to provide the services referred to in Article 4 b) and c);

c) Natural or legal persons already authorized, on the date of publication of this Act, to provide the services referred to in Article 4 b) and c) on markets recognized as regulated pursuant to Article 2-VI of Act 96-109 of 14 February 1996 relative to financial relations with other countries as regards foreign investments in France.

The authorization referred to in b) above shall be granted with due regard for the requirements of expertise, integrity, solvency and, insofar as need be, capital and guarantees specified in the General Regulations of the Conseil des Marchés Financiers.

II - Admission to and maintenance of membership in a regulated market by the market undertaking responsible for organizing trading on such market shall be subject to compliance with such market's rules.

The relations between a market undertaking and members of the market shall be contractual in nature.

III - A market undertaking may not limit the number of investment service providers on its market. The Conseil des Marchés Financiers shall see to it that market undertakings adapt their technical capacity, insofar as need be, to the admission applications made to them.

IV - The trading members of a regulated market shall be responsible for execution of all orders placed with them, their agents or their employees, regardless of how such orders are placed.

Article 45

Transactions in a financial instrument traded on a regulated market and carried out for the benefit of an investor established or customarily residing in France by an investment service provider authorized in France or operating in France under the right of establishment or the freedom to provide services shall be void unless effected on a regulated market in a State party to the European Economic Area Agreement.

As a derogation to the provisions of the preceding paragraph, the transactions referred to therein may be carried out otherwise than on a regulated market pursuant to orders placed by investors established or customarily residing in French departments if the trade satisfies the requirements of

Selected French Banking and Financial Regulations - Extract - September 1999 71

the General Regulations of the Conseil des Marchés Financiers regarding its size, the investor's status, the nature of the financial instrument traded and reporting to the regulated market on which such instrument is listed. This derogation shall be automatic in the case of transactions that, included in an agreement other than an outright sale, are a necessary element thereof.

Section 3 Provisions Applicable to Futures Markets

I - The financial futures referred to in Article 3 shall be valid, even if they are subject to special legislative provisions, as long as the cause and purpose thereof are lawful. No one may invoke Civil Code Article 1965 to avoid the obligations resulting from forward transactions even if such transactions are settled by the payment of a difference.

II - Commodity futures contracts that do not entail deliveries must be entered into by two or more parties at least one of which is an investment service provider, or an institution, body or undertaking referred to in Article 25, or a non-resident body having a comparable status.

CHAPTER III CLEARING ARRANGEMENTS

I - Clearing houses ensure the supervision of positions, margin calls and, where necessary, the automatic closing of positions. Each must have the status of, or be managed by, a credit institution. Their operating rules shall be subject to approval by the Conseil des Marchés Financiers.

The relations between a clearing house and a person mentioned in II below shall be contractual in nature.

II - Only the following may be members of a clearing house:

- persons authorized to become members of a regulated market;

- credit institutions. Such institutions are subject, with regard to their clearing business, to the same rules regarding approval of programmes of operations and supervision as this Act provides for investment firms;

- legal persons whose principal or sole object is the clearing of financial instruments. Such persons are subject to the same rules regarding authorization, approval of programmes of operations and supervision as this Act provides for investment firms.

III - The senior managers, employees and agents of clearing houses shall be bound by the obligation of professional secrecy as provided and on pain of the penalties prescribed by Articles 226-13 and 226-14 of the Penal Code.

Article 48

I - A clearing house may decide, without discrimination, that its members are del credere agents (commissionnaires ducroire) with regard to the principals (donneurs d'ordres) whose accounts they

72

Selected French Banking and Financial Regulations - Extract - September 1999

keep. The del credere requirement shall be necessary for a financial market to be recognizable as a regulated market pursuant to Article 41.

II - In all cases, the members of a clearing house undertake to discharge, vis-à-vis the clearing house, all the obligations deriving from the trades entered in their accounts in the names of third parties. Payment of any sums due on such basis may not be deferred. Any clause to the contrary shall be void.

Article 49

Regardless of their nature, all ownership rights relative to deposits by principals with investment service providers or members of a clearing house, or by such members with a clearing house as margin or collateral for positions taken on a market for financial instruments, are transferred when made, either to the service provider or to the member or to the clearing house concerned in payment of any debit balance in the event of an automatic closing of positions and of any other sum due to the service provider or member or to the clearing house.

No creditor of a member of a clearing house, of a service provider as referred to in the preceding paragraph or, as appropriate, of the clearing house itself, may assert any right to such deposits, even on the basis of the Business Reorganization and Bankruptcy Act 85-98 of 25 January 1985 or of Act 84-148 of 1 March 1984 regarding the Prevention and Out-of-Court Settlement of Business Problems.

Article 50

The provisions of the second paragraph of Article 49 also apply to every creditor of a principal, every representative of a principal or of a member of a clearing house, and every agent of a court appointed pursuant to Act 85-98 of 25 January 1985 or Act 84-148 of 1 March 1984 aforesaid.

The prohibitions contained in the first paragraph of this Article and the second paragraph of Article 49 also apply to judicial or other proceedings commenced outside France that are equivalent or similar to those provided for by Act 85-98 of 25 January 1985 or Act 84-148 of 1 March 1984 aforesaid.

Article 51

I - If recovery proceedings are instituted against a member of a clearing house, or in any other event of default of such a member:

1. The clearing house may require that the deposits made with such member as margin and security for positions taken by non-defaulting principals be transferred to another member;

2. The clearing house may transfer the positions recorded by it for the account of such member's principals and the related margin and security deposits to another member.

II - The members of the clearing houses may not invoke professional secrecy obligations to refuse inquiries by such clearing houses, for the purpose of supervision of positions, concerning the identity, positions and solvency of the principals whose accounts they keep.

Article 52

The liabilities and claims arising from transactions in financial instruments carried out in accordance with the General Regulations of the Conseil des Marchés Financiers or governed by a master

Selected French Banking and Financial Regulations - Extract - September 1999 73

agreement in keeping with the general principles of a national or international master agreement organizing the relations between two parties, at least one of whom is an investment service provider or a public institution or an institution, undertaking or body eligible for the benefit of Article 25 of this Act, or a non-resident having a comparable status, shall be set off according to the valuation rules in such General Regulations or master agreement.

If one of the parties is subject to proceedings under Act 84-148 of 1 March 1984 or Act 85-98 of 25 January 1985 aforesaid, said General Regulations or master agreement may provide for automatic cancellation of the transactions referred to in the preceding paragraph.

The terms and procedures of cancellation, valuation and set-off prescribed by the General Regulations or master agreements referred to in the foregoing paragraphs shall be binding on the attaching creditors. Any cancellation, valuation and set-off made because of a civil execution proceeding shall be deemed to have antedated such proceeding.

The assignment of claims resulting from transactions governed by the master agreement referred to in the first paragraph of this Article shall be binding on third parties by virtue of the written agreement of the debtor. The parties to such master agreement may also provide, with regard to such transactions, for transfers conferring full ownership rights, made as security so binding on third parties without formality, of assets, securities, instruments or sums of money in order to cover changes in the value of such transactions. The liabilities and claims relative to such transfers and to such transactions shall be set off pursuant to the first paragraph of this Article.

The provisions of Act 84-148 of 1 March 1984 and Act 85-98 of 25 January 1985 aforesaid do not prejudice the application of this Article.

Article 53

Article 38 bis of the General Tax Code shall be amended as follows:

A . A II bis reading as follows shall be added:

"II bis - The provisions of I and II of this Article apply under the same conditions to transfers conferring full ownership rights, made as security, of assets, securities or instruments pursuant to the fourth paragraph of Article 52 of the Financial Activity Modernization Act 96-597 of 2 July 1996 in connection with over-the-counter forward transactions in financial instruments and to the transfers of securities provided for in Article 31 c) of the Act referred to in I."

B - III shall be amended to read:

"III - 1. Failing the restitution of the cash, assets, securities or bills transferred as security or of the loaned securities corresponding to such transfers, the disposal shall be deemed for tax purposes to occur on the date of the default;

"2. For the purposes of Article 39 duodecies, the transferred assets, securities or bills shall be deemed to have been held until the date of the transfer thereof as security or, in the case of the loaned securities referred to in 1, until the date of the loan."

TITLE III

74

Selected French Banking and Financial Regulations - Extract - September 1999

OBLIGATIONS AND SUPERVISION OF INVESTMENT SERVICE PROVIDERS

CHAPTER I OBLIGATIONS OF INVESTMENT SERVICE PROVIDERS

Section 1 Management Standards

Investment service providers shall be required as regards their investment service activities to meet the management standards designed to ensure their liquidity, solvency and the equilibrium of their financial structure as specified by the Comité de la Réglementation Bancaire et Financière pursuant to Article 33-1 of Act 84-46 of 24 January 1984 aforesaid.

They must in particular meet risk-cover and risk-diversification ratios.

Breach of said requirements shall entail application of the procedure provided for in Article 45 of Act 84-46 of 24 January 1984 aforesaid.

Article 55

I - See Article 33 (10) of Act 84-46 of 24 January 1984.

II - See Article 33-1 of Act 84-46 of 24 January 1984.

Article 56

The words: " investment firms defined in Article 7 of the Financial Activity Modernization Act 96-597 of 2 July 1996 " shall be inserted after the words: " credit institutions " in the second paragraph (1) of Article 19-III of Act 91-716 of 26 July 1991 containing various economic and financial provisions.

Section 2 Accounting and Reporting Requirements

Investment firms shall be bound by the obligations set forth in Articles 54, 55, 56 and 57 of Act 84-46 of 24 January 1984 aforesaid.

Section 3 Rules of Conduct

Investment service providers and the persons listed in Article 44-I shall be required to comply with rules of conduct designed to ensure the protection of investors and the regularity of transactions.

Selected French Banking and Financial Regulations - Extract - September 1999 75

Such rules shall be drawn up by the Conseil des Marchés Financiers, except that those relating to the services referred to in Article 4 d) shall be drawn up by the Commission des Opérations de Bourse.

Such rules apply to any related services that investment service providers may provide.

They require inter alia investment service providers :

1. To act honestly and fairly in the best interests of their customers and of the integrity of the market;

2. To conduct their business with due skill, care and diligence in the best interests of their customers and of the integrity of the market;

3. To have the resources and procedures necessary to conduct their business properly and to use such resources and procedures efficaciously;

4. To seek information regarding the financial condition, investment experience and objectives of their customers as regards the services requested;

5. To make adequate disclosure of useful information in their dealings with their customers;

6. To try to avoid conflicts of interest and, when they cannot be avoided, to ensure that their customers are fairly treated;

7. To comply with all the regulations applicable to the conduct of their business so as to promote the best interests of their customers and the integrity of the market.

The rules set forth in this Article must be applied with due regard for the professional investment service expertise of the person to whom the investment service is provided.

Article 59

Investment service providers authorized to provide the investment services referred to in Article 4

a) and b) shall be liable to their principals for the delivery of and payment for what they sell or buy.

Subject to Article 48-I, the General Regulations of the Conseil des Marchés Financiers specify the conditions under which derogations to the preceding paragraph may be granted.

Article 60

Every investment service provider and every person referred to in Article 44-I shall set forth in its internal regulations:

a) The conditions under which employees may trade in financial instruments for their own account;

b) The conditions under which employees must so inform their employer;

c) The requirements incumbent upon them with a view to avoiding undue disclosure of confidential information.

The rules setting forth such conditions and requirements shall be included in the programme of operations submitted to the Conseil des Marchés Financiers pursuant to Article 11.

Article 61

Investment service providers and the persons listed in Article 44-I shall be required to inform investors, before entering into business relations with them, of the existence of an applicable

76

Selected French Banking and Financial Regulations - Extract - September 1999

compensation scheme in regard to the transaction(s) envisaged, of the amount and extent of the coverage provided, and of the identity of the compensation fund if any.

Article 62

A securities guarantee mechanism is hereby established. Its members shall be credit institutions and investment firms authorized in France, when they are the custodians of financial instruments entrusted to them by third parties, intermediaries authorized by the Conseil des Marchés Financiers to have custody of and administer financial instruments, and members of clearing houses. Its purpose is to compensate investors if their financial instruments or their cash deposits relating to an investment service or to the clearing or custody of financial instruments are unavailable and do not fall within the scope of the deposit guarantee fund established by the above-mentioned Act 84-46 of 24 January 1984. The persons and funds excluded from compensation under the above-mentioned Article 52-1 may not benefit from the guarantee mechanism.

Article 62-1

Without prejudice to the provisions hereafter, the deposit guarantee fund shall manage the securities guarantee mechanism under the conditions laid down at Articles 52-2 to 52-13 of the abovementioned Act 84-46 of 24 January 1984. For application of the first paragraph of Article 52-2 of the Act, the securities guarantee mechanism shall intervene at the request of the Commission Bancaire after seeking an opinion from the Conseil des Marchés Financiers as soon as the Commission finds that an institution mentioned at Article 62 of this Act is no longer able to return, immediately or in the short term, the financial instruments or deposits it has received from the public under the legal, regulatory and contractual conditions governing their restitution. If the guarantee mechanism intervenes, the member concerned shall be struck off. For the persons referred to at Article 74 and Articles 71-2 and 71-3 of the above-mentioned Act 84-46 of 24 January 1984, such striking-off shall be deemed to mean a ban prohibiting the member concerned from continuing to provide its services on the territory of the French Republic.

Sous réserve des dispositions ci-après, le fonds de garantie des dépôts gère le mécanisme de garantie des titres dans les conditions édictées par les articles 52-2 à 52-13 de la loi n° 84-46 du 24 janvier 1984 précitée. Pour l'application du premier alinéa de l'article 52-2 de cette loi, le mécanisme de garantie des titres est mis en oeuvre sur demande de la Commission bancaire après avis du Conseil des marchés financiers, dès que celle-ci constate que l'un des établissements mentionnés à l'article 62 de la présente loi n'est plus en mesure de restituer, immédiatement ou à terme rapproché, les instruments financiers ou les dépôts qu'il a reçus du public dans les conditions législatives, réglementaires ou contractuelles applicables à leur restitution. L'intervention du fonds de garantie entraîne alors la radiation de cet adhérent. Pour les personnes visées à l'article 74 et aux articles 71-2 et 71-3 de la loi n° 84-46 du 24 janvier 1984 précitée, cette radiation s'entend comme se traduisant par une interdiction faite à cet adhérent de continuer à fournir ses services sur le territoire de la République française.

On a proposal from the Commission Bancaire after seeking an opinion from the Conseil des Marchés Financiers, the securities guarantee mechanism may also intervene in a preventive capacity when a member's situation gives rise to fears that the deposits or financial instruments it has received from the public may become unavailable at some point in the future, taking into consideration the support from which the member concerned may otherwise benefit. When the guarantee mechanism agrees to take such preventive action, it shall define the conditions of its intervention after seeking an opinion from the Commission Bancaire and the Conseil des Marchés Financiers. In particular, it may make its intervention conditional on the total or partial sale of the

Selected French Banking and Financial Regulations - Extract - September 1999 77

undertaking concerned or the extinction of its activity, including by the sale of its business. It may also acquire the shares of a member institution.

Article 62-2

A regulation of the Comité de la Réglementation Bancaire et Financière, adopted with the approval of the Conseil des Marchés Financiers, shall lay down:

- the compensation ceiling per investor, the compensation procedures and time limits and rules regarding customer information;

- the characteristics of certificates of association and the conditions for their remuneration and for their reimbursement should authorization be revoked, after deduction of any losses suffered by the fund where applicable;

- the total amount of and the method for apportioning the annual subscriptions payable by the institutions mentioned at Article 62, the basis for which is the value of the deposits and financial instruments covered by the guarantee under Article 62, weighted by subscriptions already paid and by indicators of the financial situation of each institution concerned, reflecting the objective risks to which the member exposes the fund;

- the conditions under which an institution may be dispensed from paying part of such contributions to the guarantee fund in return for the constitution of appropriate guarantees.

Subscriptions due from credit institutions affiliated to one of the central bodies mentioned at Article 20 of the above-mentioned Act 84-46 of 24 January 1984 shall be paid directly to the guarantee fund by the central body concerned.

Article 62-3

Two members representing the members of the securities guarantee fund that are not credit institutions shall sit in a consultative capacity on the supervisory board of the deposit guarantee fund, except when the board takes decisions concerning the deposit guarantee. In such case, the financial contributions used to count votes under Article 52-9 of the above-mentioned Act 84-46 of 24 January 1984 are those called up under Article 62-2 of this Act. The regulation of the Comité de la Réglementation Bancaire et Financière mentioned at Article 62-2 shall lay down the conditions and procedures for appointing the above-mentioned two representatives and the length of their term of office.

The two representatives referred to in the preceding paragraph must meet the conditions set forth at Article 22.

Article 63

I - Investment service providers and the persons listed in Article 44-I shall protect the title to the financial instruments of the investors whose accounts they keep. They may use such securities for their own purposes only with the explicit consent of the investor.

II - Investment firms may not under any circumstances use for their own purposes funds deposited with them by their customers, subject to the provisions of Articles 49 et ff.

78

Selected French Banking and Financial Regulations - Extract - September 1999

III - Investment service providers and members of regulated markets shall record their orders as provided by the General Regulations of the Conseil des Marchés Financiers.

Article 64

I - Investment services providers may provide the service referred to in Article 4 d) only pursuant to a written agreement.

II - The shareholders, members or owners of a firm or institution providing investment services and authorized to manage financial instruments for third parties may take no action whose purpose or effect would be to prefer their own interests to the detriment of those of the investors that are customers of the undertaking.

The senior managers of the firms and institutions mentioned in the preceding paragraph must, in the course of managing portfolios for third parties, maintain their independence in decision-making so as to ensure that the interests of their customers prevail in all circumstances.

Article 65

Portfolio management companies shall be prohibited from accepting deposits of funds, securities or gold from their customers and from carrying out transactions between the account of a customer and their own account or direct transactions between the accounts of their customers.

Article 66

Investment service providers, market undertakings and clearing houses must provide the Banque de France with the data necessary for the compiling of monetary statistics.

CHAPTER II SUPERVISION OF INVESTMENT SERVICE PROVIDERS

Section 1 Supervisory Powers of The Conseil des Marchés Financiers

I - The Conseil des Marchés Financiers shall supervise the compliance of investment service providers doing business in France, intermediaries authorized to have custody of or administer financial instruments, central securities depositories, members of the regulated markets mentioned at point I of Article 44, market undertakings and clearing houses with their professional obligations under this Act and the general regulations of the Conseil des Marchés Financiers. Such supervision shall be subject to the powers of the Commission Bancaire and, as regards supervision of persons providing the services referred to in Article 4 d), of the Commission des Opérations de Bourse.

The Conseil des Marchés Financiers shall also monitor the regularity of transactions carried out on regulated markets.

II The Conseil may delegate the supervision of the business and transactions of members of regulated markets and of investment service providers that have transmitted orders on the market ainsi que par les prestataires de services d'investissement ayant transmis des ordres sur le marché to the relevant market undertakings and, where applicable, clearing houses. This delegation must be the subject of a written agreement and it may be cancelled at any time.

Selected French Banking and Financial Regulations - Extract - September 1999 79

The Conseil des Marchés Financiers may, for the supervision of investment service providers and within the limit of their business relating to investment services or connected services, have recourse to outside supervisory bodies, the auditors of the above-mentioned service providers, experts appearing on a list of court experts or persons or authorities with competence in the matter of investment services or connected services. A decree in Conseil d'Etat shall specify the conditions of application for this paragraph.

The Conseil des Marchés Financiers and the organizations referred to in Article 40 and Article 47-I shall advise the Commission des Opérations de Bourse of any fact liable to infringe its regulations of which they have notice in the discharge of their duties, and supply it with the information necessary for an assessment thereof.

- III In connection with the supervision under I of this Article, professional secrecy may not be invoked to refuse information to the Conseil des Marchés Financiers, to the supervisory body, persons or authorities referred to at the second paragraph of point II above, au corps de contrôle, personnes ou autorités visés au deuxième alinéa du II ci-dessus, to any market undertakings or clearing houses which assist the Conseil by delegation.

For implementation of this Article, auditors shall be relieved of their professional secrecy obligation with regard to the Conseil des Marchés Financiers.

All persons who participate or have participated in the supervision of the parties mentioned in the first paragraph of I of this Article shall be bound by the obligation of professional secrecy as provided and on pain of the penalties prescribed by Article 226-13 of the Penal Code. However, this secrecy may not serve as grounds for non-disclosure of information to a court engaged in criminal proceedings.

IV. - Auditors are required to advise the Conseil promptly of any fact or decision concerning an investment service provider or an intermediary authorized to have custody of or administer financial instruments that comes to their attention in the conduct of their assignment and that may constitute a breach of the general regulations of the Conseil des Marchés Financiers relating to good conduct or the conditions under which financial instruments are held in custody or adminsitered. The Conseil des Marchés Financiers may also furnish the auditors of investment service providers with the information they require to conduct their assignment. Information furnished in this way is covered by a professional secrecy obligation.

V. - The Conseil des Marchés Financiers may ask the auditors of an investment service provider or of an intermediary authorized to have custody of or administer financial instruments for all information concerning application by such service provider or intermediary of the provisions of this Act or of the general regulations of the Conseil des Marchés Financiers relating to good conduct or the conditions under which financial instruments are held in custody or administered.

Article 68

For implementation of this Act, exchanges of information between supervisory authorities are governed by the provisions of Article 45 of Act 92-665 of 16 July 1992 adapting the legislation governing insurance and credit to the Single European Market.

80

Selected French Banking and Financial Regulations - Extract - September 1999

Article 69

I - If an investment service provider or a person referred to in Article 44-I breaches its professional obligations under the relevant laws and regulations, the Conseil des Marchés Financiers may, after affording its senior managers a hearing, address to them a cautionary notice.

II - Investment service providers, members of a regulated market, market undertakings and clearing houses shall be liable to sanctions by the Conseil des Marchés Financiers for breaches of their professional obligations under the relevant laws and regulations.

In disciplinary matters, the Conseil acts either ex officio or at the request of the Government commissioner, of the chairman of the Commission des Opérations de Bourse, of the Governor of the Banque de France, acting as chairman of the Commission Bancaire, of a market undertaking or of a clearing house. It rules in this field by giving its decisions and reasons therefor. No sanction may be imposed unless the legal representative of the investment service provider, the market undertaking or the clearing house has been afforded a hearing, or failing that, duly summoned to appear.

The applicable sanctions are warnings, reprimands, and temporary or permanent prohibitions on providing some or all of the services concerned. Such prohibitions entail, as the case may be, suspension or revocation of the authorization to provide the relevant service granted pursuant to Article 11.

The Conseil des Marchés Financiers may also impose, instead of or in addition to such sanctions, a pecuniary sanction not exceeding FRF 5,000,000 or ten times any profits realized. The sums shall be paid into the guarantee fund with which the penalized person is affiliated, or else to the Treasury.

The Commission Bancaire and the Comité des Établissements de Crédit et des Entreprises d'Investissement shall be informed of every temporary or permanent prohibition on performing some or all of the activities concerned.

III - Persons subject to the authority or acting on behalf of investment service providers, market undertakings and clearing houses shall be liable to sanctions by the Conseil des Marchés Financiers for breaches of their professional obligations under the relevant laws and regulations.

The Conseil acts either ex officio or at the request of the Government commissioner, of the chairman of the Commission des Opérations de Bourse, of the Governor of the Banque de France, acting as chairman of the Commission Bancaire, of a market undertaking or of a clearing house. It rules by giving its decisions and reasons therefor. No sanction may be imposed unless the person has been afforded a hearing, or failing that, duly summoned to appear.

The applicable sanctions are warnings, reprimands, and temporary or permanent revocation of the authorization. The Conseil des Marchés Financiers may also impose, instead of or in addition to such sanctions, a pecuniary sanction not exceeding FRF 400,000 or three times any profits realized. The sums shall be paid into the guarantee fund with which the legal person under whose authority or on whose behalf the penalized party acts is affiliated, or else to the Treasury.

If urgency so requires, a person against whom proceedings are taken under this paragraph may be suspended by the Conseil des Marchés Financiers.

Selected French Banking and Financial Regulations - Extract - September 1999 81

IV - The Conseil des Marchés Financiers shall, if appropriate, inform the European Commission and the competent authorities of the other Member States of the European Community of its decisions taken pursuant to this Article.

It may also publicize such decisions.

Article 69-1

The safekeeping and administration of financial instruments and central depository activities shall be subject to the provisions of Articles 67 through 69.

Section 2 The Powers of the Commission des Opérations de Bourse

Only the Commission des Opérations de Bourse shall issue rules of conduct regarding the investment services referred to in Article 4 d).

Only the Commission des Opérations de Bourse has the power to supervise investment service providers authorized to provide the services referred to in Article 4 d) and portfolio management companies.

Article 70-1

Any person who participates or has participated in the supervision of companies carrying on the business of portfolio management for third parties shall be bound by the obligation of professional secrecy subject to the penalties laid down in Article 226-13 of the Penal Code. This secrecy may not serve as grounds for non-disclosure of information to a court engaged either in a court-ordered liquidation procedure concerning a company carrying on the business of portfolio management for third parties or in criminal proceedings.

Article 71

I - If an investment service provider authorized to provide the services referred to in Article 4 d) or a portfolio management company breaches its professional obligations under the relevant laws and regulations, the Commission des Opérations de Bourse may, after affording its senior managers a hearing, address to them a cautionary notice.

II - Without prejudice to the powers of the Conseil de Discipline de la Gestion Financière, investment service providers authorized to provide the services covered by Article 4 d) and portfolio management companies shall be liable to sanctions by the Commission des Opérations de Bourse for breach of their professional obligations under the relevant laws and regulations.

The Commission des Opérations de Bourse acts either ex officio, or at the request of the Governor of the Banque de France, acting as chairman of the Commission Bancaire, or of the chairman of the Conseil des Marchés Financiers. It rules in this field by giving its decisions and reasons therefor. No sanction may be imposed unless the legal representative of the investment service provider or the portfolio management company has been afforded a hearing, or failing that, duly summoned to appear.

82

Selected French Banking and Financial Regulations - Extract - September 1999

The applicable sanctions are warnings, reprimands, and temporary or permanent prohibitions on providing some or all of the services concerned.

Such prohibitions entail, as the case may be, suspension or revocation of the authorization granted under Article 11 for the service concerned.

The Commission des Opérations de Bourse may also impose, instead of or in addition to such sanctions, a pecuniary sanction not exceeding FRF 5,000,000 or ten times any profits realized. The sums shall be paid to the Treasury.

The Commission Bancaire and the Comité des Établissements de Crédit et des Entreprises d'Investissement shall be informed of every temporary or permanent prohibition on performing some or all of the activities concerned.

III - Persons subject to the authority or acting on behalf of investment service providers authorized to provide the services referred to in Article 4 d) or of portfolio management companies shall be liable to sanctions by the Commission des Opérations de Bourse for breaches of their professional obligations under the relevant laws and regulations.

The Commission des Opérations de Bourse acts either ex officio or at the request of the Governor of the Banque de France, acting as chairman of the Commission Bancaire, or of the chairman of the Conseil des Marchés Financiers. It rules by giving its decisions and reasons therefor. No sanction may be imposed unless the person concerned has been afforded a hearing, or failing that, duly summoned to appear.

The applicable sanctions are warnings, reprimands, and temporary or permanent revocation of the authorization. The Commission des Opérations de Bourse may also impose, instead of or in addition to such sanctions, a pecuniary sanction not exceeding FRF 400,000 or three times any profits realized. The sums shall be paid to the Treasury.

If urgency so requires, the persons mentioned in this paragraph against whom proceedings are being taken may be suspended by the Commission des Opérations de Bourse.

IV - The Commission des Opérations de Bourse shall, if appropriate, inform the European Commission and the competent authorities of the other Member States of the European Community of its decisions taken pursuant to this Article.

It may also publicize such decisions.

V - Persons upon whom sanctions are imposed pursuant to this Article may appeal to the Conseil d'Etat within two months of service of the decision.

Article 71-1.

The auditors of portfolio management companies are relieved of the professional secrecy obligation with regard to the Commission des Opérations de Bourse.

Auditors are required to advise the Commission des Opérations de Bourse promptly of any fact or decision concerning a portfolio management company that comes to their attention in the conduct of their assignment and that may:

- constitute a breach of the laws or regulations applicable to such a company and be likely to have significant effects on its financial situation, results or assets;

Selected French Banking and Financial Regulations - Extract - September 1999 83

- prejudice its status as a going concern; - cause the auditors to issue a qualified or adverse opinion.

The same obligation applies to the facts and decisions referred to above that come to the auditors' attention in the conduct of their assignment with regard to a parent or subsidiary of an abovementioned company.

Auditors may not be held liable for any information or facts they may disclose in the conduct of their assignment or in fulfilment of the obligations imposed by this Article.

The Commission des Opérations de Bourse may also furnish the auditors of portfolio management companies with the information they require to discharge their duties. Information furnished in this way is covered by a professional secrecy obligation.

Article 71-2

When a breach of the provisions of this Act committed by an auditor of a portfolio management company, undertaking for collective investment in transferable securities, open-end investment company or unincorporated mutual fund comes to the notice of the Commission des Opérations de Bourse, or when it considers that the conditions of independence necessary for the proper conduct of an auditor's assignment are not met, it may ask the competent court to relieve the auditor concerned of his duties as set forth at Article 227 of Act 66-537 of 24 July 1966 on commercial companies.

The Commission des Opérations de Bourse may also report such breach to the competent disciplinary authority. To this end, the Commission des Opérations de Bourse may furnish all information necessary to ensure that the authority concerned is fully informed.

Section 3 The Supervisory powers of the Commission Bancaire

I - See Article 37-1 of Act 84-46 of 24 January 1984.

II - See the second paragraph of Article 40 of act 84-46 aforesaid.

IV - See Article 45 of act 84-46 aforesaid.

TITLE IV

RIGHT OF ESTABLISHMENT AND FREEDOM TO PROVIDE SERVICES IN THE MEMBER STATES OF THE EUROPEAN COMMUNITY

Article 73

I - In this Act and for purposes of the provisions relative to the right of establishment and freedom to provide services:

84

Selected French Banking and Financial Regulations - Extract - September 1999

1. The term "competent authorities" means the authorities of a European Community Member State empowered pursuant to that State's laws to authorize or to supervise investment firms having their registered office there;

2. The term "home Member State" means, in the case of an investment firm, the Member State where it has its registered office or, if under its national law it has no registered office , the State where it is actually managed and, in the case of a market, the State where the registered office or else the actual management of the body that provides trading facilities is situated;

3. The term "host Member State" means any Member State where the investment firm does business through a branch or under the freedom to provide services;

4. The term "branch" means one or more parts of an investment firm which are not legal persons and whose purpose is to provide investment services;

5. The term "transaction under the freedom to provide services" means transaction whereby an investment firm provides an investment service in a host Member State otherwise than by means of a permanent presence in such State.

II - For the purposes of this Act, investment firms having their registered office or actual management in another State party to the European Economic Area agreement shall be equated with investment firms having their registered office or actual management in a Member State of the European Community other than France.

CHAPTER I FREEDOM TO PROVIDE SERVICES AND RIGHT OF ESTABLISHMENT IN FRANCE

To the extent of the services it is authorized to provide in its home Member State and in accordance with such authorization, any natural or legal person authorized to provide investment services may, without prejudice to Articles 71-1 ff. of Act 84-46 of 24 January 1984 aforesaid, establish branches in metropolitan France and the French overseas departments to provide investment and related services, and operate under the freedom to provide services pursuant to the rules enacted by the Conseil des Marchés Financiers, as regards inter alia the protection of customer funds.

For the purposes of Articles 21, 37, 43, 44, 46, 52, 56, 58, 60 through 64 and 66, the persons referred to in the preceding paragraph shall be equated with investment service providers.

CHAPTER II FREEDOM TO PROVIDE SERVICES AND RIGHT OF ESTABLISHMENT IN THE OTHER MEMBER STATES OF THE EUROPEAN COMMUNITY

I - 1. Any investment service provider having its registered office in metropolitan France or the French overseas departments and authorized to provide investment services pursuant to Article 11 that wishes to open a branch in another Member State shall notify the Comité des Établissements de Crédit et des Entreprises d'Investissement and the Conseil des Marchés Financiers of its intention according to the rules laid down by a Decree in Conseil d'État.

Such intentions and the information prescribed by Article 61 ensuring the protection of the branch's customers shall, within three months of receipt thereof, be transmitted to the competent authorities

Selected French Banking and Financial Regulations - Extract - September 1999 85

of the host Member State as provided by the Decree in Conseil d'État referred to above. Such transmittal may be refused only if the Comité des Établissements de Crédit et des Entreprises d'Investissement and the Conseil des Marchés Financiers determine that the administrative structures or financial condition of the investment firm or credit institution providing investment services preclude the opening of such a branch.

The investment service provider concerned shall be notified of such transmittal.

If the Comité des Établissements de Crédit et des Entreprises d'Investissement and the Conseil des Marchés Financiers refuse to report the information mentioned in the first paragraph to the competent authorities of the host Member State, they shall advise the investment firm or credit institution concerned of the reasons for such refusal within three months of receipt of said information.

On receipt of the reply of the competent authorities of the host Member State competent authorities, or if they do not reply within two months of the receipt of the information provided by the Comité des Établissements de Crédit et des Entreprises d'Investissement and the Conseil des Marchés Financiers, the branch of the applicant firm or institution may be opened and commence business subject to meeting any specific conditions required for trading on a regulated market.

2. Any investment service provider with its registered office in metropolitan France or the French overseas departments and authorized to provide investment services pursuant to Article 11 of this Act that wishes to do business in another Member State under the freedom to provide services shall so advise the Comité des Établissements de Crédit et des Entreprises d'Investissement and the Conseil des Marchés Financiers as provided by the Decree in Conseil d'État referred to in 1 above.

The Comité des Établissements de Crédit et des Entreprises d'Investissement and the Conseil des Marchés Financiers shall notify the competent authorities of the host Member State of such advice within one month of due receipt thereof. The investment service provider may then begin to provide the advised investment services in the host Member State.

This Article applies automatically to the provision of investment services mentioned in Article 4. It may also apply to the related services referred to in Article 5 if the applicant investment service provider is authorized to provide some or all of the services listed in Article 4.

II - The Commission des Opérations de Bourse exercises the powers specified in Chapters I and II with regard to portfolio management companies as well as those undertakings subject to Article 74 whose principal business is the provision of the services referred to in Article 4 d).

Article 76

The Comité des Établissements de Crédit et des Entreprises d'Investissement shall prepare and keep current a list of the investment service providers doing business in France, showing the activities performed. Such list shall contain the names and activities of the investment service providers authorized to provide investment services on the date this Act goes into force. It shall be published in the Journal Officiel de la République Française.

The Comité des Établissements de Crédit et des Entreprises d'Investissement shall supply the list of investment service providers providing investment services in the other Member States of the European Community under the right of establishment or the freedom to provide services to the competent authorities of each of such other States.

86

Selected French Banking and Financial Regulations - Extract - September 1999

The Comité des Établissements de Crédit et des Entreprises d'Investissement shall receive the information supplied by the competent authorities of the other Member States with regard to investment service providers providing investment services in France under the right of establishment or the freedom to provide services according to the provisions of this Act.

The Comité des Établissements de Crédit et des Entreprises d'Investissement shall forthwith supply all such lists to the Conseil des Marchés Financiers and the Commission des Opérations de Bourse.

Article 77

The Decree in Conseil d'État mentioned in Article 75 shall define the conditions for supplying the information mentioned in this Article to the competent authorities of the Member State concerned.

CHAPTER III ACCESS TO THE REGULATED MARKETS OF THE EUROPEAN COMMUNITY

Subject to provisions relating to the protection of public savings, every regulated market of a Member State which operates without requiring the actual presence of natural persons may afford means of access to such market in metropolitan France and the French overseas departments.

CHAPTER IV SUPERVISION

I - The competent authorities of its home Member State may require of an investment service provider enjoying the benefit of Article 74 and of its branches in France that they supply all information useful for the supervision of such provider.

Following prior notice to the Commission Bancaire, or in the case of the services referred to in Article 4 d) to the Commission des Opérations de Bourse, the branches of such service provider in metropolitan France or French overseas departments may be subjected to on-site supervision by the competent authorities of their home Member State, directly or through persons specially mandated by such authorities to do so. The results of such supervision shall be reported to the Commission Bancaire without being hindered by professional secrecy rules. The Commission Bancaire shall, where appropriate, report such supervision and the results thereof to the Conseil des Marchés Financiers or the Commission des Opérations de Bourse.

The Commission Bancaire, the Commission des Opérations de Bourse and the Conseil des Marchés Financiers shall also make any verifications requested by the competent authorities of the home Member State.

II - The Conseil des Marchés Financiers shall enforce compliance by the investment service providers referred to in Article 74 of this Act with the laws and regulations applicable to them, other than the management standards that such service providers are subject to within the meaning of Article 33-1 of Act 84-46 of 24 January 1984 aforesaid.

Selected French Banking and Financial Regulations - Extract - September 1999 87

The Conseil shall examine how they perform their activities and the results thereof, with due regard for the supervision by the competent authorities of the home Member State.

III - If the Commission Bancaire or, in the case of the service referred to in Article 4 d), the Commission des Opérations de Bourse, determines that an investment service provider enjoying the benefit of Article 74 is in breach of the laws and regulations of a prudential nature or regarding its authorization, said authorities may require the provider to remedy such breach and so notify the competent authorities of the home Member State.

If, despite the steps taken by the home Member State or because such steps are inadequate or no such steps are taken in that State, the investment service provider persists in breaching the laws and regulations mentioned in the preceding paragraph, the Commission Bancaire, the Commission des Opérations de Bourse and, where appropriate, the Conseil des Marchés Financiers shall take appropriate steps to prevent or sanction further irregularities and, if need be, to prevent such service provider from carrying out further transactions in metropolitan France and the French overseas departments. Said authorities shall forthwith so inform the authorities of the home Member State.

IV - A Decree in Conseil d'État shall set forth the procedures to be followed by the Commission Bancaire, the Commission des Opérations de Bourse and the Conseil des Marchés Financiers in the exercise of their powers under the preceding paragraphs. Said decree shall in particular set forth the procedures for informing the competent authorities of the other Member States.

TITLE V

EXCHANGE OF INFORMATION

Article 80

Subject to reciprocity, the Conseil des Marchés Financiers, market undertakings and the clearing houses of regulated markets may supply their foreign counterparts with the information necessary for the discharge of their respective duties concerning access to, organization and security of markets, provided that such counterpart organizations are also bound by an obligation of professional secrecy within a legislative framework offering similar guarantees to those in force in France. In the case of market undertakings that organize trading and clearing houses of regulated markets, such information, for the supervision of the risks incurred by their members, includes positions taken on the market, security or margin deposits and the composition thereof, as well as margin calls.

The information received by the organizations mentioned in the preceding paragraph may be used only in accordance with the instructions of the competent authority which supplies the same.

Article 81

I - Opening of information, liaison or representative offices in France by investment firms must be reported in advance to the Comité des Établissements de Crédit et des Entreprises d'Investissement, which shall inform the Conseil des Marchés Financiers.

Such offices shall show the names of the firms which they represent.

88

Selected French Banking and Financial Regulations - Extract - September 1999

II - Such investment firms whose principal activities are those referred to in Article 4 d) shall make the required report to the Commission des Opérations de Bourse, which shall inform the Comité des Établissements de Crédit et des Entreprises d'Investissement and the Conseil des Marchés Financiers.

TITLE VI

PENALTIES

Article 82

A natural person found guilty of either of the following offences shall be liable to three years' imprisonment and a fine of FRF 2,500,000:

1. Provision of investment services to third parties on a professional basis without being authorized as provided by Article 11 or being exempted under Article 25;

2. Execution of trades or sales in France, other than those mentioned in the last six paragraphs of

Article 43-II, involving financial instruments traded on a regulated market without recourse to an investment service provider.

A natural person found guilty of either of the offences listed in 1 and 2 above also incurs the following additional punishments:

1. Loss of civic, civil and family rights as provided in Penal Code Article 131-26;

2. Disqualification for not more than five years, as provided in Penal Code Article 131-27, to hold public office or to perform the professional or social activity in the course of or in connection with which the offence was committed;

3. Closing for not more than five years of any or all of the places of business used for committing the offence;

4. Confiscation of anything used or meant to be used for commission of the offence or anything resulting from the offence, except articles which can be restituted;

5. Posting or publication of the conviction and sentence as provided by Penal Code Article 131-39.

Article 83

Any natural person disregarding a disqualification pursuant to Article 22 or a prohibition pursuant to Article 23 shall be liable to three years' imprisonment and a fine of FRF 2,500,000.

The court may also order posting or publication of its decision as provided by Penal Code Article 131-39.

Article 84

The senior managers of an investment firm who fail to prepare for each financial year the inventory and annual financial statements and a management report as provided by Article 57 shall be liable to a fine of FRF 100,000.

Selected French Banking and Financial Regulations - Extract - September 1999 89

Article 85

The senior managers of an investment firm who fail to cause the appointment of its statutory auditors or to invite them to attend the shareholders' meeting shall be liable to two years' imprisonment and a fine of FRF 200,000.

The senior managers of an investment firm or any other person in its employ who interfere with the investigations or audits of the statutory auditors or refuse them on-site access to all documents useful for the discharge of their duties, including contracts, records, accounting documents and registers of minutes, shall be liable to five years' imprisonment and a fine of FRF 500,000.

Article 86

The senior managers of an investment firm who fail to publish its annual financial statements as provided by Article 57 shall be liable to a fine of FRF 100,000.

Article 87

The senior managers of an investment firm who fail to prepare its financial statements in consolidated form in accordance with Article 57 shall be liable to a fine of FRF 100,000.

Article 88

Legal persons may be convicted of the offences described in Articles 82 through 87 of this Act as provided by Penal Code Article 121-2.

The punishment to which legal persons shall be liable is:

1. A fine as provided by Penal Code Article 131-38;

2. The punishment prescribed by Penal Code Article 131-39.

The prohibition referred to at point 2 of Penal Code Article 131-39 relates to the activity in the course of or in connection with which the offence was committed.

TITLE VII

SUNDRY PROVISIONS

CHAPTER I PROVISIONS RELATING TO THE COMMISSION DES OPÉRATIONS DE BOURSE

Ordinance 67-833 of 28 September 1967 establishing a Commission des Opérations de Bourse and relative to the information of securities holders and the disclosure of certain securities market transactions shall be amended as follows:

I - In Article 1:

a) The first paragraph shall be amended to read:

90

Selected French Banking and Financial Regulations - Extract - September 1999

" The Commission des Opérations de Bourse, an independent administrative authority, shall be responsible for the protection of savings invested in financial instruments and all other investments involving a public solicitation of savings, for the information of investors and for the proper functioning of the markets for financial instruments. ";

b) The second paragraph shall be amended to read:

" In the discharge of the duties of the Commission under this ordinance , the chairman thereof shall be empowered to act in the name of the State in any court except a criminal court. "

II - Article 2 shall be amended as follows:

1. The first paragraph shall be amended to read:

" The Commission consists of a chairman and nine other members. ";

2. The third paragraph shall be replaced by ten paragraphs that read:

"The members are:

" - a member of the Conseil d'État appointed by its vice-chairman;

" - a member of the Cour de cassation appointed by its senior presiding justice;

" - a member of the Cour des Comptes appointed by its senior presiding judge;

" - a representative of the Banque de France appointed by the Governor;

" - a member of the Conseil des Marchés Financiers appointed by it;

" - a member of the Conseil National de la Comptabilité appointed by it;

" - three qualified persons appointed respectively by the speaker of the Senate, the speaker of the

National Assembly and the chairman of the Conseil Économique et Social chosen because of their financial and legal expertise and their experience in the field of public solicitation of savings. "

" The chairman or a member of the Commission delegated by him to do so shall be the rapporteur for purposes of the decisions reached pursuant to Articles 9-1 and 9-2 of this ordinance . "

" A representative of the Minister for Economic Affairs and Finance shall be heard by the Commission except with regard to individual decisions. He may submit any proposal for consideration by the Commission except in such cases. "

III - Two Articles (2 bis and 2 ter) reading as follows shall be inserted after Article 2:

" Article 2 bis - The Commission shall adopt internal regulations containing rules regarding the preparation of the decisions and deliberations of the Commission. They shall be published in the Journal Officiel de la République Française.

" Article 2 ter - The chairman and other members of the Commission must inform it of any interests they hold or come to hold and any functions they perform or come to perform in an economic or financial activity and of any offices they hold or come to hold in legal persons.

" Neither the chairman nor any other member of the Commission may deliberate in a matter in which he or a legal person in which he performs functions or holds office has an interest, or participate in a deliberation concerning a matter in which he or a legal person in which he performs

Selected French Banking and Financial Regulations - Extract - September 1999 91

functions or holds office has represented an interested party in the 36 months preceding the deliberation. "

IV - The words: " to the official list of the securities exchanges or in the daily statement of the over-the-counter (hors cote) market " in the first paragraph of Article 3 shall be replaced by the words: " to trading on a regulated market or appear in the daily statement of the over-the-counter market mentioned in Article 34 of the Financial Activity Modernization Act 96-597 of 2 July 1996 ".

V - In Article 4:

In the second paragraph, the words: " of securities " shall be replaced by the words: " of financial instruments ", the words: " securities exchanges " shall be replaced by the words: " markets for financial instruments ", and the words: " brokerage firms " shall be replaced by the words: " investment service providers ".

In the third paragraph, the words: " and to the Parliament " shall be inserted after the words: " to the President of the Republic ".

The following paragraph shall be inserted after the third paragraph:

" The chairman of the Commission des Opérations de Bourse shall testify before the finance committees of both houses of Parliament at their request and may request to be heard by them. "

VI - The following paragraph shall be inserted after the first paragraph of Article 4-1:

"The instructions and recommendations adopted by the Commission to specify the interpretation and conditions of application of its regulations shall be published by it within fifteen days of their transmittal to the Minister for Economic Affairs and Finance."

VII - The following paragraph shall be inserted after the fourth paragraph of Article 5 bis:

" The Commission may, for the implementation of the preceding paragraphs, make agreements organizing its relations with foreign authorities having powers similar to its own. Such agreements shall be approved by the Commission as provided in Article 2, and shall be published in the Journal Officiel de la République Française. "

VIII - In Article 6:

The words: " to the official list of the securities exchanges " in the second paragraph shall be replaced by the words: " to trading on a regulated market ".

The last sentence of the third paragraph shall be amended to read:

" In the event of an initial listing on a regulated market, it shall also be placed at the disposal of the public at the market undertaking which operates such market. "

IX - The following Article 9-3 shall be inserted after Article 9-2:

" Article 9-3 - If the Commission des Opérations de Bourse imposes a pecuniary penalty which becomes final before the criminal court has ruled by final judgement on the same or connected facts, the criminal court may order the pecuniary penalty to be credited against any fine imposed by it. "

92

Selected French Banking and Financial Regulations - Extract - September 1999

X - Article 10-1 shall be amended to read:

" Article 10-1 - The senior managers of a company mentioned in Article 162-1 of the Commercial Companies Act 66-537 of 24 July 1966, or anyone having, by virtue of his profession or functions, inside information with regard to the prospects or situation of an issuer whose securities are traded on a regulated market or the future price of a financial instrument traded on a regulated market, who directly or through an intermediary person carries out one or more transactions or knowingly enables such transactions to be carried out before the public is aware of such information shall be liable to two years' imprisonment and a fine neither less than the amount of any profit realized nor more than the greater of FRF 10 million or ten times the amount of such profit.

" Anyone having, by virtue of his profession or functions, inside information with regard to the prospects or situation of an issuer whose securities are traded on a regulated market or the future price of a financial instrument traded on a regulated market, who discloses the same to another party otherwise than in the ordinary course of his profession or functions shall be liable to six months' imprisonment and a fine of FRF 100,000.

" Anyone who knowingly spreads in any way false or misleading information in the public as to the prospects or situation of an issuer whose securities are traded on a regulated market or the future price of a financial instrument traded on a regulated market which is likely to affect prices shall be liable to the punishments provided in the first paragraph. "

XI - Article 10-3 shall be amended to read:

" Article 10-3 - Anyone who directly or through an intermediary person takes or attempts to take action intended to interfere with the proper functioning of a market for financial instruments by misleading others shall be liable to the punishments provided in the first paragraph of Article 10-1. "

XII - The following Articles 10-4 and 10-5 shall be inserted after Article 10-3:

" Article 10-4 - Legal persons may be convicted as provided by Penal Code Article 121-2 of the offences described in Articles 10-1 and 10-3 of this ordinance .

" The punishment to which legal persons shall be liable is:

" 1. A fine as provided by Penal Code Article 131-38;

" 2. The punishments prescribed by Penal Code Article 131-39.

" The prohibition referred to in 2 of Penal Code Article 131-39 relates to the activity in the course of or in connection with which the offence was committed.

" Article 10-5 - Articles 10-1 and 10-4 shall be applicable where the information relates to an issuer whose securities appear or have appeared in the daily over-the-counter (hors-cote) market statement. "

Article 90

Notwithstanding the second and fourteenth paragraphs of Article 2 of Ordinance 67-833 of 28 September 1967 aforesaid:

- the terms of office still current on the effective date of this Act shall end on the date of the first meeting of the Commission following the appointments made pursuant to Article 89-II of this Act;

Selected French Banking and Financial Regulations - Extract - September 1999 93

- the appointments made more than four years before the effective date of this Act shall be disregarded for the purposes of the rules regarding reappointments in Article 2 of Ordinance 67-833 of 28 September 1967 aforesaid.

CHAPTER II COORDINATING PROVISIONS Article 91

Act 88-1201 of 23 December 1988 aforesaid shall be amended as follows:

I - The first paragraph of Article 11 shall be amended to read:

"The unincorporated mutual fund (fonds commun de placement) shall be created on the joint initiative of a portfolio management company governed by Article 15 of the Financial Activity Modernization Act 96-597 of 2 July 1996 or a management company referred to in Article 12 responsible for management thereof, and of a legal person that is the custodian of its assets."

II - The first sentence of the second paragraph of Article 12 shall be deleted.

III - The following paragraph shall be inserted after the first paragraph of Article 12:

" The management company shall be subject to the same authorization, supervision and other rules as the companies referred to in Article 15 of the Financial Activity Modernization Act 96-597 of 2 July 1996. "

IV - The last paragraph of Article 12 shall be amended to read:

" The unincorporated mutual fund shall be represented vis-à-vis third parties by the company responsible for managing it, mentioned in the first paragraph of Article 11. Such company may defend or assert the rights or interests of the unit holders in legal proceedings. "

Article 92

Article 34 of Act 88-1201 of 23 December 1988 aforesaid shall be amended as follows :

1. The last sentence of the first paragraph shall be deleted;

2. The third paragraph shall be amended to read:

" The conditions under which the fund may acquire claims and issue new units after the initial units of shares and the rules of investment of the moneys temporarily available and awaiting employment shall be specified by Decree. The fund may not borrow. "

Article 93

The Futures Markets Act of 28 March 1885 shall be amended as follows:

1. Article 11 shall be amended to read:

" Article 11 - Only investment service providers and legal persons referred to in Article 44 of the Financial Activity Modernization Act 96-597 of 2 July 1996 may resort to canvassing with a view to executing transactions in the financial forwards and futures defined in Article 3 of that Act. ";

2. In Article 15:

94

Selected French Banking and Financial Regulations - Extract - September 1999

The words: " Conseil du Marché à Terme " in the first paragraph shall be replaced by the words: " Conseil des Marchés Financiers ";

The words: " Conseil du Marché à Terme " in the fourth paragraph shall be replaced by the words: " Conseil des Marchés Financiers ";

The words: " to the Treasury " in the fourth paragraph shall be amended to read: " to the guarantee fund mentioned in Article 61 of Act 96-597 of 2 July 1996 aforesaid or else to the Treasury ";

3. The following sentence shall be inserted at the end of the second paragraph of Article 18:

" Said provisions, except those relative to the protection of public savings, do not apply to regulated markets having their registered office in a Member State of the European Community. ";

4. Articles 1, 2, 4 through 9, 7 and 17 bis shall be repealed.

Article 94

I - The Securities Exchange Act 88-70 of 22 January 1988 shall be repealed, except that the amendments of other Acts and Codes made by that Act remain valid.

II - The words: "brokerage firms" shall be replaced by the words: "investment service providers" in all laws and regulations in force.

III - Article 44 of Act 85-1321 of 14 December 1985 amending certain provisions of the law of securities, negotiable debt securities and securities transactions shall be repealed.

Article 95

I - See Article 12-4 of Act 84-46 of 24 January 1984.

II - See Article 35 (first paragraph) and 49 of Act 84-46 of 24 January 1984.

III - See the first paragraph of Article 15-1 of Act 84-46 of 24 January 1984.

IV - See Article 34-4 of Act 84-46 of 24 January 1984.

V - See the third paragraph of Article 41-1 of Act 84-46 of 24 January 1984.

VI - See Article 53 of Act 84-46 of 24 January 1984.

VII - See Article 53-1 of Act 84-46 of 24 January 1984.

VIII - See Article 68 of Act 84-46 of 24 January 1984.

IX - See Article 69 of Act 84-46 of 24 January 1984.

X - See Article 72 of Act 84-46 of 24 January 1984.

XI - See the third paragraph of Article 74 of Act 84-46 of 24 January 1984.

Article 96

I - Act 66-537 of 24 July 1966 aforesaid shall be amended as follows:

a) In Article 72, the words: " admitted to the official list or the second market of a securities exchange " shall be replaced by the words: " admitted to trading on a regulated market ";

Selected French Banking and Financial Regulations - Extract - September 1999 95

b) In Articles 97-1 and 119, the words: " to the official list of a securities exchange " shall be replaced by the words: " admitted to trading on a regulated market ";

c) In Article 162-1, the words: " admitted to the official list or the second market of a securities exchange " shall be replaced by the words: " admitted to trading on a regulated market or appearing in the daily over-the-counter market statement mentioned in Article 34 of the Financial Activity Modernization Act 96-597 of 2 July 1996 ";

d) In Article 172-1, the words: " admitted to the official list or the second market of a securities exchange " shall be replaced by the words: " whose shares are admitted to trading on a regulated market ";

e) In Article 180-V and Article 208-1, the words: " to the official list or the second market of a securities exchange " shall be replaced by the words: " to trading on a regulated market ";

f) In Articles 186-1, 186-3, 200 and 271, the words: " admitted to the official list or the second market of a securities exchange " shall be replaced by the words: " admitted to trading on a regulated market ";

g) In Article 193-1, the words: " the equity securities are admitted to the official list or the second market of a securities exchange " shall be amended to read: " the shares are admitted to trading on a regulated market " and the words: " securities of another company admitted to the official list or the second market of the Paris stock exchange or admitted to the official list of a State party to the European Economic Area agreement other than France or of the securities exchange of a Member State of the Organization for Economic Cooperation and Development " shall be replaced by the words: " shares of another company whose shares are admitted to trading on a regulated market of a State which is a party to the Economic European Area agreement or a member of the Organization for Economic Cooperation and Development ";

h) In Article 194-5, the words: " admitted to the official list or the second market of a securities exchange " shall be replaced by the words: " admitted to trading on a regulated market ";

i) In Articles 196 and 217-2, the words: " to the official list or the second market of a securities exchange " shall be replaced by the words: " to trading on a regulated market ";

j) In Article 217-5, the words: "the securities dealers association" shall be replaced by the words: "the

Conseil des Marchés Financiers";

k) In Article 263-2: the words; " listed on a securities exchange " shall be replaced by the words:

" traded on a regulated market ";

l) In Articles 341-1, 341-2 and 357-2, the words: " admitted to the official list of securities exchanges " shall be replaced by the words: " admitted to trading on a regulated market ";

m) In Article 347-2, the words: " admitted to the official list or the second market " shall be replaced by the words: " admitted to trading on a regulated market ";

n) In Article 352, the words: " admitted to the official list or the second market " shall be replaced by the words: " admitted to trading on a regulated market ";

o) In Article 356-1, the words: " admitted to the official list or the second market or the over-thecounter market of a securities exchange " shall be replaced by the words: " admitted to trading on a regulated market or appearing in the daily over-the-counter market statement mentioned in Article 34 of the Financial Activity Modernization Act 96-597 of 2 July 1996 ", the words: " admitted to the official list of a securities exchange or the second market " shall be replaced by the words: " admitted to trading on a regulated market " and the words: " the securities dealers association " shall be replaced by the words: " the Conseil des Marchés Financiers ";

p) In Article 356-1-1, the words: " if it is listed " shall be replaced by the words: " if its shares are admitted to trading on a regulated market " and the words: " Conseil des Bourses de Valeurs " shall be replaced by the words: " Conseil des Marchés Financiers ";

96

Selected French Banking and Financial Regulations - Extract - September 1999

q) In Article 356-1-4, the words: " listed on a French regulated market " shall be replaced by the words: " whose shares are admitted to trading on a regulated market ";

r) In Article 434, the words: " admitted to the official list of a securities exchange " shall be replaced by the words: " admitted to trading on a regulated market ".

II - In the second paragraph of Article 94-II of the 1982 Budget Act (Act 81-1160 of 30 December

1981), the words: "admitted to the official list or the second market of a securities exchange" shall be replaced by the words: "admitted to trading on a regulated market".

III - In the other laws in force not referred to above as well as regulations, the provisions applicable in the same way to the official list or the second market of a securities exchange apply to the regulated markets governed by this Act.

IV - Article 19 of Act 91-716 of 26 July 1991 aforesaid shall be amended as follows:

- in I, the words: " or over the counter " shall be inserted after the words: " on a regulated market ";

- V shall be repealed.

CHAPTER III IMPLEMENTING PROVISIONS Article 97

I - The legal persons authorized to provide an investment service referred to in Article 4 on the date when this Act enters into force need not follow, in order to provide such service, the procedures provided for in Article 11 and shall be entitled to the benefit of Articles 75 and 78.

They shall harmonize their articles of association with this Act and file an activity report, before 31 December 1996, with the Comité des Établissements de Crédit et des Entreprises d'Investissement, which shall publish a list thereof as provided in Article 76. In compiling such list, the Comité des Établissements de Crédit et des Entreprises d'Investissement shall assess the accuracy of such reports and may correct the information they contain. The Commission des Opérations de Bourse shall exercise the powers under this paragraph of the Comité des Établissements de Crédit et des Entreprises d'Investissement with regard to portfolio management companies and investment firms whose principal business activity is that referred to in Article 4 d).

The legal persons on the lists issued by the Comité des Établissements de Crédit et des Entreprises d'Investissement and the Commission des Opérations de Bourse shall be deemed to be authorized under Article 11 to provide the services concerned.

If they do not file the aforementioned report, they shall discontinue providing the investment services listed in Article 4.

II - The management companies referred to in Article 12 of Act 88-1201 of 23 December 1988 aforesaid shall also harmonize their articles of association, their organization and their resources with this Act; they shall file an activity report and submit authorization applications to the Commission des Opérations de Bourse before 31 December 1996. They may continue their operations until such applications are acted on.

III - The management companies governed by Article 23 of the Capital Market Transparency and Security Act 89-531 of 2 August 1989 shall automatically become portfolio management companies and need not follow the procedure prescribed by Article 15 of this Act.

Selected French Banking and Financial Regulations - Extract - September 1999 97

IV - The securities houses (maisons de titres) governed by the third paragraph of Article 18-2 of the Banking Act 84-46 of 24 January 1984 must, before 1 January 1998, choose the status of investment firm governed by this Act or that of credit institution.

They must notify their choice to the Comité des Établissements de Crédit et des Entreprises d'Investissement. If they make no such notification within such time, they shall be deemed to have chosen investment firm status.

A securities house that chooses investment firm status shall be deemed to be authorized to provide all of the investment services listed in Article 4. It must satisfy the capital and all other requirements entailed by such status.

A securities house that chooses credit institution status shall be subject to the procedure prescribed by Article 15 of Act 84-46 of 24 January 1984 aforesaid. It shall also be deemed to be authorized to provide all of the investment services listed in Article 4 of this Act provided that it satisfies all the capital and other requirements entailed by such status.

V - In Article 191-1 of Act 66-537 of 24 July 1966 aforesaid, the words: " institutions authorized as such as provided by Decree, whether credit institutions or institutions referred to in Article 99 of the Banking Act 84-46 of 24 January 1984, " shall be amended to read: " investment service providers authorized as such as provided in Article 11 of the Financial Activity Modernization Act 96-597 of 2 July 1996 ".

VI - This Act does not prejudice the collective bargaining agreements in force on the date of publication of this Act.

VII - The securities and futures markets based on the aforesaid Acts of 28 March 1885 and 88-70 of 22 January 1988 that are regularly operating on the date of publication of this Act shall be recognized as regulated markets within the meaning of Article 41 of this Act.

VIII - Only " brokerage firms " (sociétés de bourse) and " money market brokers " (agents des marchés interbancaires) authorized as such on the date of publication of this Act may continue to use such names to describe themselves.

Article 98

The Conseil des Marchés Financiers exercises the powers devolved on the Conseil des Bourses de Valeurs and the Conseil du Marché à Terme by the statutory provisions in force that are not repealed by this Act.

Until publication in the Journal Officiel de la République Française of the notice concerning the establishment of the Conseil des Marchés Financiers, the Conseil des Bourses de Valeurs and the Conseil du Marché à Terme as they are composed on the date of publication of this Act shall exercise the powers devolved on them by the laws and regulations in force on that date.

On the date of such publication, the Conseil des Marchés Financiers shall be subrogated in the respective rights and obligations of the Conseil des Bourses de Valeurs referred to in Article 5 of Act 88-70 of 22 January 1988 aforesaid and the Conseil du Marché à Terme referred to in Article 5 of the Act of 28 March 1885 aforesaid.

98

Selected French Banking and Financial Regulations - Extract - September 1999

Article 99

I - See Article 75 of Act 84-46 of 24 January 1984.

II - See Article 77 of Act 84-46 of 24 January 1984.

III - See Article 78 of Act 84-46 of 24 January 1984.

IV - See Article 79 of Act 84-46 of 24 January 1984.

V - See Article 80 of Act 84-46 of 24 January 1984.

VI - See Article 81 of Act 84-46 of 24 January 1984.

VII - See Article 82 of Act 84-46 of 24 January 1984.

VIII - See Article 83 of Act 84-46 of 24 January 1984.

IX - See Article 84 of Act 84-46 of 24 January 1984.

X - See Article 84-1 of Act 84-46 of 24 January 1984.

Article 100

A - See Article 19 of Act 84-46 of 24 January 1984.

B - See Articles 19-1 and 19-2 of Act 84-46 of 24 January 1984.

C - See Article 46 of Act 84-46 of 24 January 1984.

D - See Article 52-1 of Act 84-46 of 24 January 1984.

E - See Article 100-2 of Act 84-46 of 24 January 1984.

Article 101

A report on the application of this Act shall be submitted by the government to Parliament by 31 December 1998.

Such report shall among other things describe the difficulties entailed by the operation in France of natural persons authorized as investment firms in their home Member States. It shall also describe the effects of this Act on the development of the securities houses (maisons de titres) and on the application of measures regarding the over-the-counter (hors-cote)market.

Article 102

I - Article 29 of the Savings Protection and Investment Development Act 83-1 of 3 January 1983 shall be amended to read:

" Article 29 - An account of financial instruments mentioned in Article 1 of the Financial Modernization Activity Act 96-597 of 2 July 1996 shall be pledged, between the parties as well as vis-à-vis the issuer and other persons, by a statement signed by the account holder. The contents of

Selected French Banking and Financial Regulations - Extract - September 1999 99

such statement shall be specified by Decree. The financial instruments in the pledged account, those substituted therefor or added thereto in any way as well as any income therefrom and proceeds thereof in all currencies shall be subject to the pledge. The account keeper shall, at the pledge creditor's request, give the pledge creditor a financial instrument account pledge certificate detailing the financial instruments and sums in all currencies in the pledged account on the date of such certificate.

" The pledged account shall be a special account in the holder's name kept by an authorized intermediary, a central depository or the issuer of the instruments concerned.

" In the absence of a special account, the financial instruments referred to in the first paragraph and the sums in all currencies identified for that purpose by a computer process shall be deemed to form the pledged account.

" The pledge creditor and the holder of the account shall agree on the terms on which the latter may dispose of the financial instruments and sums in all currencies in the pledged account. The pledge creditor has in any event a possessory lien on the financial instruments and sums in all currencies in the pledged account.

" A pledge creditor having a rightful claim which is due and payable may foreclose the pledge, be it civil or commercial, on any French and foreign securities traded on a regulated market, collective investment undertaking units referred to in the first Article of Act 96-597 of 2 July 1996 aforesaid and sums in all currencies eight days, or at the end of any other time previously agreed on with the holder of the account, after service of notice of default on the debtor by hand delivery or registered mail. Such notice of default shall also be served on the pledgor, if other than the debtor, and on the account keeper if it is not the pledge creditor. The pledge shall be foreclosed in accordance with the procedures specified by decree.

" The pledge shall be foreclosed on financial instruments other than those referred to in the preceding paragraph as provided in Commercial Code Article 93. "

II - The following Article 29-1 shall be inserted after Article 29 of Act 83-1 of 3 January 1983 aforesaid:

" Article 29-1 - The fifth and sixth paragraphs of Article 29 relative to foreclosure of pledges apply to pledges antedating the date this Act enters into force, where such pledges relate to French or foreign financial instruments held in account. "

III - The third paragraph of Article 19-II of Act 91-716 of 26 July 1991 aforesaid shall be amended to read:

" Negotiable debt securities (titres de créances négociables) shall be pledged as provided in Article 29 of the Savings Protection and Investment Development Act 83-1 of 3 January 1983. "

IV - Article 7 of Ordinance 45-679 of 13 April 1945 requiring banks, financial institutions and certain other organizations to deposit their Treasury bills in current accounts shall be repealed.

Article 103

The following paragraph shall be added to Article 47ter of Act 83-1 of 3 January 1983 aforesaid:

100

Selected French Banking and Financial Regulations - Extract - September 1999

" An account keeper or custodian which settles a transaction by delivery of securities versus a cash payment in lieu of its defaulting customer shall be entitled to the benefit of this Article; it acquires full ownership rights to the securities or cash received from the counterparty. The Business Reorganization and Bankruptcy Act 85-98 of 25 January 1985 does not prejudice the application of this Article. No creditor of the defaulting customer may assert any right to such securities or cash. "

Article 104

The Savings Act 87-416 of 17 January 1987 shall be amended as follows:

1. The words "full ownership rights" shall be added to the second paragraph of Article 31-c;

2. The following paragraph shall be added to Article 31:

" The parties may agree on additional full-ownership transfers of cash or securities to allow for changes in value of the securities loaned. ";

3. The following Article 33 shall be reinserted:

" Article 33 - Debts and claims relating to loans of securities and governed by a master agreement governing the dealings between two parties may be set off as provided in such master agreement. ";

" Such master agreement may provide, when one of the parties is the subject of one of the procedures provided for by Acts 84-148 of 1 March 1984 and 85-98 of 25 January 1985 aforesaid and by Title III of Book III of the Consumer Code, for automatic cancellation of all the loans of securities mentioned in Article 31 of this Act.

" This Article applies notwithstanding any provision of said Acts and Code. "

Article 105

I - In the second paragraph of Article 5 of the French Language Use Act 94-665 of 4 August 1994, the words: " the Banque de France or the Caisse des Dépôts et Consignations " shall be inserted after the words: " of an industrial and commercial nature ".

II - The following sentence shall be added to the same paragraph of the same Article of the same Act:

" For the purposes of this paragraph, loans issued under the benefit of General Tax Code Article 131 quater and contracts for the provision of investment services as defined in Article 4 of the Financial Activity Modernization Act 96-597 of 2 July 1996 which may be sued on in a foreign court shall be deemed to be performed entirely outside France. "

Article 106

The General Regulations of the Conseil des Bourses de Valeurs and the Conseil du Marché à Terme remain applicable. They may be amended or repealed by the Conseil des Marchés Financiers as provided in Article 32 of this Act or by the Comité de la Réglementation Bancaire et Financière as provided in Article 30 of Act 84-46 of 24 January 1984 aforesaid.

This Act shall be executed as an Act of the State.

Article 107

I - Articles 44-1 (c), 53, 95 III and Title IV of this Act shall not apply in the collectivité territoriale de Saint Pierre et Miquelon (territorial unit of Saint Pierre et Miquelon).

Selected French Banking and Financial Regulations - Extract - September 1999 101

II - The following, as worded prior to the promulgation of Act n° 98-546 of 2 July 1998, shall remain applicable in the overseas territories and the collectivité territoriale de Mayotte (territorial unit of Mayotte) : Title I of the present Act, except for Article 26, Title II, except for Articles 44-1 (c) and 53, Title III, except for Article 56 Titles V and V, and Articles 90, 93, 94-I and II, 95-I and II, 95-IV to 95-XI, 96-I (b), 96-I (c), 96-I (h) to 96-I (j), 96-I (l), 96-I (n) to 96-I (r), 96-III, 97 to 101 and 106 of Title VII, subject to the following modifications :

- Article 22, 1°, c : the reference to Article 52-1 of Freedom of Pricing and Competition Ordinance

86-1243 of 1 December 1986 shall be deleted and the reference to Labour Code Article L. 152-6 shall be replaced by the reference to Penal Code Article 717-1;

- Article 25, 2°, g : the reference to Act 72-6 of 3 January 1972 shall be deleted ;

- Article 62, paragraph 2 : the words "by 1 January 1998" shall be replaced by the words "within eighteen months from the date of publication of Ordinance 98-775 of 2 September 1998 in the overseas territory or territorial unit concerned";

- Article 96, I, b : the reference to Article 97-1 of Act 66-537 of 24 July 1966 shall be deleted;

- Article 96, I, c : the words : "or appearing in the daily over-the-counter market statement mentioned in Article 34 of the Financial Modernization Act 96-597 of 2 July 1996" shall be deleted;

- Article 96, I, i : the reference to Article 217-2 shall be deleted;

- Article 96, I, l : the reference to Article 357-2 shall be deleted;

- Article 97, I, paragraph 1, the words : "and shall be entitled to the benefit of Articles 75 and 78" shall be deleted;

- Article 97, I, paragraph 2, the words : "before 31 December 1966" shall be replaced by the words:

"within six months from the date of publication of Ordinance 98-775 of 2 September 1998 in the overseas territory or territorial unit concerned";

- Article 97, II, the words : "before 31 December 1966" shall be replaced by the words by the words

: "within six months from the date of publication of Ordinance 98-775 of 2 September 1998 in the overseas territory or territorial unit concerned";

- Article 97, IV, paragraph 1, the words : "before 1 January 1998" shall be replaced by the words :

"within eighteen months from the date of publication of Ordinance 98-775 of 2 September 1998 in the overseas territory or territorial unit concerned".

102

Selected French Banking and Financial Regulations - Extract - September 1999