French Enforcement Committee issues €500,000 sanction over fund governance failures

A major French regulatory enforcement decision in December 2025 highlights how governance, transparency, and control failures inside an asset management business can translate into material sanctions for both the firm and an accountable senior executive. In a decision dated 10 December 2025, the Enforcement Committee of France’s financial markets regulator imposed financial penalties totalling €500,000 on an asset management company, Novaxia Investissement, and one of its former directors, Joachim Azan. The company was fined €400,000, and the former director was fined €100,000.

The case is important because it does not focus on a single isolated control issue. Instead, it addresses multiple professional obligations that together define how an asset manager should operate: how it implements its investment processes, how it manages and evidences checks, how it handles conflicts when using group service providers, how it explains distributor remuneration to investors, how it categorises clients, and how it performs anti-money laundering and counter terrorism financing due diligence. In other words, it is a governance and conduct case with broad operational consequences.

One of the first issues examined was whether the former director’s powers exceeded what had been set out in the company’s authorisation application. On this point, the Enforcement Committee held that the powers exercised did not exceed what was provided for. As a result, the company was not found to have breached the conditions of its authorisation in that specific respect. This finding matters because it clarifies that enforcement can distinguish between concerns raised in an accusation and what is ultimately established on the evidence.

However, the Committee did find significant weaknesses in the company’s investment and divestment framework. It concluded that the relevant procedure was not operational because it was incomplete. The decision also points to a lack of traceability in the checks that should demonstrate whether investment projects complied with the policy and constraints of the relevant funds. In addition, the Committee found that the company had not formally documented the due diligence conducted before allocating investment projects to particular funds. These are practical, process-level failings, but they have strategic significance: without a complete and operational procedure and without traceable records, an asset manager may struggle to prove that investment decisions were made within mandate and under effective oversight.

The decision also addresses the use of service providers from within the same corporate group. Even where such arrangements are common, they can create heightened conflict of interest risk. The Committee held that the company had not implemented an effective policy for preventing and managing conflicts of interest in this context. It also found that the company had not provided comprehensive, accurate, and understandable information to investors in advance regarding the remuneration paid to these group service providers. This element of the decision reinforces two connected expectations: conflict controls must be effective in practice, and investor disclosure must be clear enough to enable informed understanding of incentives and related party dynamics.

Another key theme is distribution economics and investor transparency. The Committee noted a lack of transparency toward investors regarding the retrocession of management fees to distributors for marketing the funds. It also referenced the need to justify the enhancement of the service provided in connection with such remuneration structures. This aspect of the case is particularly relevant for fund managers who rely on distribution networks and third-party marketing arrangements. Where fee sharing or retrocessions exist, regulators may expect not only that investors are informed, but also that the structure is meaningfully explained and supported by a clear rationale.

Beyond governance and transparency, the Committee found failures relating to client categorisation and anti-money laundering and counter terrorism financing obligations. These are foundational compliance areas: client categorisation can affect protections, disclosures, and suitability-related processes, while anti-money laundering and counter terrorism financing controls are central to financial system integrity and risk prevention. The decision, therefore, positions these shortcomings as professional obligation breaches rather than minor administrative issues.

Accountability is also addressed directly. The Committee held that the breaches found against the company were attributable to Joachim Azan during the period in which he served as president of the asset management company. This attribution underscores a regulatory posture that links control failings to individual responsibility when the evidence supports that connection, particularly for senior leadership with oversight over the relevant arrangements.

Finally, the decision notes that an appeal may be lodged. While enforcement outcomes are fact-specific, the practical implications for the market are broader: asset management firms are expected to maintain operationally effective procedures, preserve traceability and documentation, manage conflicts with robust policies that function in practice, and communicate fee and remuneration structures to investors with clarity. When these elements are weak, the consequences can extend beyond the firm to individuals who had responsibility during the period of non-compliance.

Source:  The AMF Enforcement Committee fines an asset management company and its former director a total of €500,000 | AMF