Last month Mediapart revealed that Natixis Asset Management (NAM) was under investigation by the French financial markets regulator, the l’Autorité des marchés financiers (AMF), which suspects the firm of operating since 2008 a system of hidden commissions on funds sold to clients of its parent bank, Groupe BPCE.
NAM is responsible for creating and managing funds that are sold in France to the small investor customers of the BPCE via the nationwide branches of the Banque Populaire and Caisse d’Epargne, the two banks which merged to form the BPCE in 2009.
The hidden commissions, or charges, lifted from the funds, the details of which are published further below, are estimated by Mediapart to total about 100 million euros.
The French regulator’s investigation stems from a separate affair revealed in the summer of 2014, when the London subsidiary of Swiss bank Crédit Suisse alerted Natixis that its asset management arm NAM was involved in irregular practices in a number of operations on structured products where Crédit Suisse was a counterparty. NAM, the Swiss bank reported, asked it to overprice the structured products and to transfer back to NAM the benefit from the bloated value.
That resulted in an internal investigation by Natixis and its parent, Groupe BPCE. NAM argued that the activities denounced by Crédit Suisse involved only transactions on behalf of Natixis Assurance, the insurance arm of its parent company Natixis, and therefore was contained to the company and not its clients. The Swiss bank was told that the practices were an operational mistake that would be corrected.
But the internal investigation prompted accusations of other irregular practices by NAM, and notably that of a system of hidden margins on some of its fund products sold to the general public by the Banque Populaire and Caisse d’Epargne.
The management of NAM and its parent company Natixis have attempted to minimize the affair amid what now appears will be an inevitable conclusion by the French regulator, the AMF, to take action against the company. But beyond the hope of limiting the penalties imposed by the AMF, the company now faces the ire of the small investors who signed up to the funds.
Mediapart has gained access to a confidential document which details the funds concerned by the system of secret commissions. Pierre Servant, a member of Natixis’ management and executive committee and who, as chief executive of Natixis Global Asset Management, head’s the firm’s asset management activities, faces more than embarrassment with the publication of the document here. For the discovery by the firm’s clients that it tolerated such practices exposes it to discredit, both in France and abroad, and potential legal action for compensation.
As previously revealed by Mediapart, among the 75 funds which Natixis still runs, there are hidden margins that vary between 0.05% and 0.57%, and which total about 0.24% on a yearly average. Given that, altogether, the funds manage almost 7 billion euros, Mediapart has calculated that the secret commissions total about 100 million euros, of which 65 million euros were still contained within the funds.
The document that Mediapart publishes here (below) identifies the 75 funds still in operation, and which are divided into two categories. The page in blue concerns the funds presented to clients of the Caisse d’Epargne, while that in red concerns clients of the Banque Populaire. In both, the funds themselves are also split into two categories: those which contain hidden commissions of more than 0.30% per year, and those with hidden commissions of less than 0.30% per year.
The BPCE’s internal inspection report last year contained the results of 88 funds that were launched between the second half of 2006 and the first half of 2014. It details that “20 funds recorded a margin superior to 0.40%”, while one, called 'Fructi Sécurité – Juillet 2017' had a margin of 0.56%. The report concluded that by September 2014, “the accumulated cushion represents 62 million euros”.
An insight into the likely number of small investors affected by the hidden commissions can be found from a previous scandal involving the BPCE. In 2001, eight years before the Groupe BPCE was created by the merger of the Caisse d’Epargne and the Banque Populaire, the Caisse d’Epargne launched a savings account called ‘Doubl’Ô’ which promised small investors the doubling, over a period of six years, of the sums they placed in it. In the event, the bank’s clients who signed up to the fund were left after the six-year period with just the same amount they placed in it (the average investment was 8,000 euros), minus fees.
The Caisse d’Epargne eventually escaped prosecution for misleading its clients due to the French law of limitations. In a ruling in March 2014, the Council of State ruled that no legal action could be taken because of the number of years that had elapsed since the account was advertised.
While the ‘Doubl’Ô’ account involved just six investment funds, and only clients of the Caisse d’Epargne, the total number of small investors who lost out in the scandal was 264,000. It would therefore appear probable that the hidden commissions of the 75 funds offered across the network of branches of both the Caisse d’Epargne and the Banque Populaire will have affected several million customers.
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- The French version of this article can be found here.