AMAFI - 21-23c - MDR DAC 6 - Volume 2 - Typical I S P transactions

FR Professional guide - EU DAC 6

Volume 2 - Typical I S P transactions

Investment Services Provider

Mandatory Disclosure Regime (MDR)

Automatic Exchange of Information (AEI)

The English translation has been kindly prepared by Dentons and published by Amafi for the convenience of its members. The translation of the relevant provisions of the French legislation, decrees and regulations are for information purposes, and only the original French version may be relied upon

20 April 2021 - AMAFI / 21-23cEN

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AMAFI / 21-23cEN

20 April 2021

FR PROFESSIONAL GUIDE

DAC 6 - VOLUME 2

Treatment of typical I S P transactions

This Guide presents the French rules (see Volume 1, Annex 1) resulting from the transposition of the "DAC 6" directive (see Volume 1, Annex 2) instituting an obligation to report cross-border tax arrangements that present risks of aggressive tax planning. This directive is itself inspired by the work ofthe OECD (see Volume 1, Annex 3).

Through the elements of appreciation presented here, the Association wishes to guide its members inthe implementation of their DAC 6 obligations in the form of a two-volumeProfessional Guide:

• Volume 1 presents the legislative, regulatory and doctrinal framework of the DAC 6 rules;
• Volume 2 proposes, in an effort to facilitate the implementation of this reporting obligation in financial intermediation, a common interpretative base for typical activities of trading and finance professionals under DAC 6.

In addition to the directive's legal framework, the elements implemented by France in the context of its French transposition are taken into account, notably order No. 2019-1068 of October 21, 2019, decree No. 2020-270 of March 17, 2020, decree No. 2020-1769 of December 30, 2020, the BOI-CF-CPF-30- 40-... of November 25, 2020, the subsequent legislative developments and the clarifications provided by the Administration in response to the questions asked by professional organizations or in the context ofpublic interventions.

To accompany the implementation of the new reporting system, the DGFiP put on line, mid-December 2020, a Portal dedicated to the "Reporting ofcross-borderarrangements". It presents the legal framework of the DAC 6 rules, regroups the source texts, provides a "specifications" professional user guide for the constitution and filing of files relating to the reporting system, includes a future FAQ "Frequently Asked Questions" section and provides a specific email address for DAC 6 users: [e-mail].

To develop a reading grid of the "DAC 6 regulation", the AMAFI has relied on different dedicated task forces, whose analyses were then taken into account by its Tax Committee to address the issues specificto financial market participants.

To be as exhaustive as possible, the Guide also refers to the works, recommendations, master agreements… issued by other professional bodies of the financial sector, whether domestic or international, such as the ICMA (International Capital Market Association), ISDA (International Swaps and Derivatives Association), ISLA (International Securities Lending Agreement), SIFMA (Securities Industry and Financial Market Association), AFME (Association for Financial Markets in Europe), FBE (European Banking Federation), AFG (French Financial Management Association), AFTI (French Association of Securities Professionals), FBF (French Banking Federation), Bankenverband (Associationof German banks)…

Developed in a prospect of self-regulation intended to facilitate a harmonized DAC 6 approach in financial intermediation, this Guide is designed to evolve through successive incrementations depending on the interpretations that will be given in light of the evolution of the work setting the legal and regulatory framework (order, decree, decision, BOFiP, rulings...) on the one hand, and doctrinal and implementation

EU DAC6 - FR Professional Guide - Volume 2 - Typical I S P transactions - 13, rue Auber - 75009 Paris

Tél. : [phone] - www.amafi.fr - e-mail : info@amafi.fr - Twitter : @AMAFI_FR

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20 April 2021

work, on the other hand. It is thus built around an iterative process and may be updated again in light of other elements of appreciation that it may be deemed useful to take into account after its publication.The user is thus invited to refer to the latest version available on the association's website.

Despite the care taken in their drafting, the elements of appreciation presented in this Guide do not constitute an interpretation of the DAC 6 regulation within the meaning of French law. This interpretation remains subject to the control of the judge, only authority competent to interpret the law. Therefore, it is up those wishing to use them to form, under their responsibility and with the assistance, as may be relevant, of their counsel, their own opinion regarding the relevanceof the analyses developed here.

Principally, the Association proposes in this Volume 2 a common interpretative base for the DAC 6 treatment of some large categories of investment services made by financial market operators (routine financial intermediation, temporary transfers of ownership, derivatives, structured notes). The analysis thus proposed is intended to facilitate a harmonized approach of reporting practicesin financial intermediation.

When it participates in an arrangement as a simple service provider or as a designer, even as a relevant taxpayer, the Investment Service Provider (ISP) implements one or more legal structures.

The question here, in light of its DAC 6 reporting obligations, is less that of the legal structures used than that of the characteristics (economic, financial,...) of the arrangement itself examined as a whole, to characterize it as reportable or non-reportable.

Consequently, a category of product or transaction cannot, from the outset, be considered, by its nature, as included in the scope of the arrangement. However, the objective analysis of the different characteristics of the typical transactions made by the ISP in light of the DAC 6 hallmarks is part of the process leading the operator to identify whether it is participating in an arrangement that needs to be reported or not. The elements of appreciation presented below may contribute to this analysis.

EU DAC6 - FR Professional Guide - Volume 2 - Typical I S P transactions - 13, rue Auber - 75009 Paris

Tél. : [phone] - www.amafi.fr - e-mail : info@amafi.fr - Twitter : @AMAFI_FR

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	TABLE OF CONTENTS
I. Routine financial intermediation transactions....................................	5
1.	Receipt and transmission of orders on behalf of third parties.........................	6
2.	Execution of orders on behalf of third parties ...................................................	6
3.	Underwriting .........................................................................................................	6
4.	Guaranteed placement .........................................................................................	7
5.	Non-guaranteed placement .................................................................................	7
6.	Operation of a multilateral or organized trading facility ...................................	8
II. Other categories of typical transactions made by ISP ......................	9
1.	Temporary transfers of securities (stock lending, repurchase, collateral...	) ..9
	Description and objectives of temporary transfers of securities ...........................................................	9
	Cross-border nature ............................................................................................................................	12
	Role played by the ISP........................................................................................................................	12
	Knowledge of the characteristics of the arrangement .........................................................................	13
	Main benefit test .................................................................................................................................	13
	Relevant hallmarks..............................................................................................................................	14
	Regulatory documentation and framework .........................................................................................	18
	Reportability under DAC 6 ..................................................................................................................	18
2.	Derivatives ..........................................................................................................	19
	Description and objectives of derivatives ............................................................................................	19
	Examples of derivatives ......................................................................................................................	20
	Cross-border nature ............................................................................................................................	22
	Role played by the ISP........................................................................................................................	23
	Knowledge of the characteristics of the arrangement .........................................................................	23
	Relevant hallmarks..............................................................................................................................	24
	Regulatory documentary and framework ............................................................................................	28
	Reportability under DAC 6 ..................................................................................................................	28
3.	Structured notes .................................................................................................	30
	Description and objectives of structured notes ...................................................................................	30
	Examples.............................................................................................................................................	30
	Cross-border nature of the arrangement ............................................................................................	31
	Role played by the ISP........................................................................................................................	31
	Knowledge of the characteristics of the arrangement .........................................................................	32
	Main benefit test ..................................................................................................................................	32
	Relevant hallmarks..............................................................................................................................	33
	Regulatory documentation and framework .........................................................................................	36
	Reportability under DAC 6 ..................................................................................................................	37

EU DAC6 - FR Professional Guide - Volume 2 - Typical I S P transactions - 13, rue Auber - 75009 Paris

Tél. : [phone] - www.amafi.fr - e-mail : info@amafi.fr - Twitter : @AMAFI_FR

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I. ROUTINE FINANCIAL INTERMEDIATION TRANSACTIONS

1. By analogy to the doctrine issued by the tax administration regarding payment providers and credit institutions making routine banking transactions (BOI-CF-CPF-30-40-10-20-20201125, §90), should not be considered as service provider intermediary within the meaning of DAC 6 (French General Tax Code, Art. 1649 AE) the investment service providers authorized to operate in the regulated financial sector that make routine financial intermediary arrangements1, i.e.:

• Receipt and transmission of orders on behalf of third parties,
• Execution of orders on behalf of third parties,
• Underwriting,
• Guaranteed placement,
• Non-guaranteedplacement,
• Operation of a multilateral or organized trading facility.

On the other hand, a financial institution must be considered as a service provider intermediary in the event it is aware that its intervention, whatever its nature, constitutes aid, assistance or advice relating to the design, marketing or organization of a reportable cross-borderarrangement (BOI-CF-CPF-30-40-10-20-20201125, § 90).

2. The description, the objectives and the regulatory framework governing these arrangements are discussed below.

1These are investment service providers as defined in Article L. 531-1 of the French Monetary and Financial Code making routine financial intermediation transactions in the context of the investment services listed in Article L. 321-1 of the same Code.

EU DAC6 - FR Professional Guide - Volume 2 - Typical I S P transactions - 13, rue Auber - 75009 Paris

Tél. : [phone] - www.amafi.fr - e-mail : info@amafi.fr - Twitter : @AMAFI_FR

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