Revision of French definition for RTO in Investment Services

A Decree No 2023-813 issued on 22 August 2023, pertaining to investment service terminologies, has introduced noteworthy modifications to the French financial framework. Applicable from 01 September 2023, the decree brings adjustments to the national interpretation of the 'reception and transmission of orders for third parties' (RTO) service.

A significant change is the removal of a specific condition tied to the transmission of orders to an investment service provider (ISP) or an entity located in a non-European Union non-member state with an equivalent status. This alteration of the condition, which was distinct to the French system, marks a notable departure. This amendment is driven by two factors:

• Firstly, it aligns the definition of the RTO service to accommodate the enforcement of the Regulation (EU) 2020/1503 on European crowdfunding service providers for business since 10 November 2021. According to this regulatory framework, entities covered by the regulation are required to provide RTO services, even in cases where orders are transmitted to non-ISP entities (such as issuers or project owners).
• Secondly, this revision aims to foster convergence between the French interpretation of the RTO service and those adopted by other European countries. This move becomes necessary due to the absence of a harmonised description for this service within the context of MiFID 2.

The French Financial Markets Authority (AMF) underscores that the reception of an order from an external party, followed by its subsequent transmission to another entity for the purpose of executing a transaction, now unequivocally falls under the RTO service category. This classification remains irrespective of the status of the receiving entity. Consequently, engaging in such activities on a regular professional basis, except for specific exceptions, requires an appropriate authorisation.

• Intermediaries who have previously transmitted orders from clients domiciled in France without an RTO licence should apply (before the competent authority of their home Member State) for the relevant licence or for an extension of their existing licence.

In conclusion, the recently enacted amendments to the definition of the 'reception and transmission of orders for third parties' service in the investment sphere mirror a dynamic shift in alignment with European regulations. France seeks to enhance its financial service definitions in line with its European counterparts, ensuring streamlined practices and compliance within the investment sector.