Under the current system, fund managers can already impose ‘gates’ to limit withdrawals by investors from open end funds in extreme market circumstances to avoid fire sales of assets.
On Thursday, the regulator Autorité des marchés financiers (AMF) launched a one-month public consultation to determine the circumstances in which asset management companies may use these gates.
The consultation paper proposes capping redemption requests in the same proportions for all unit holders in a fund, removing any ‘first mover’ advantage for early requests.
In addition, funds will be required to tell the watchdog and unit holders if gates are being activated, the maximum duration of gates and the thresholds for triggering such measures would also be defined, the AMF said.
The move would be similar to measures used in the UK, which came under the spotlight earlier this year when several commercial property funds suspended redemptions after sharp falls in their values following Britain’s vote in June to leave the European Union.
Standard Life Investment, Aviva and M&G all ceased trading on their respective funds due to an increase in redemption requests triggering share sales in property and asset management companies.
The Financial Conduct Authority (FCA) is due to publish a discussion paper on property funds next year, after expressing concerns about how the suspensions were handled.
The AMF said it proposes to broaden the conditions for applying suspensions in real-estate funds sold to retail investors by imposing a minimum redemption threshold.
It comes after regulators around the world have repeatedly raised concerns over the promises some funds make to give investors their money back at short notice.
