Financial activities allowed in Monaco finally clarified

Financial activities allowed in Monaco

Financial activities in the Principality have been regulated differently according to the evolution of Monegasque legislation. In 2021, when Law n°1.515 came into force, these activities were drastically limited regarding unlicensed financial companies, i.e. financial activity companies and credit institutions that had not requested and/or received a license from the Commission de Contrôle des Activités Financières (CCAF).

Summary of the exceptions introduced by the Law n°1.589 :

Unauthorized persons or entities may take steps, whether solicited or not, on the territory of the Principality to offer financial services, instruments or products, regardless of the place or means used:

  • to institutional investors domiciled in Monaco;
  • to approved companies domiciled in Monaco;
  • to the client of an approved company in Monaco if the procedures are carried out through the latter;
  • persons who request their services, provided that these steps are taken remotely to offer financial instruments or products to persons domiciled in Monaco,
  • to people who are already customers of the offering company.

Indeed, when it came into force in December 2021, Law n°1.515, prohibited these companies from welcoming solicitations made by potential customers, a process commonly referred to as “reverse solicitation”, in addition to prohibiting any approach aimed at offering, regardless of the place or means used, financial services or products, which was already prohibited in the past.

As it stood, unlicensed companies had their scope of business reduced to zero, as the law prohibited “solicited or unsolicited” business. Thus, how were such companies supposed to approach or acquire new clients in the Principality? Only the possibility existed for unregistered companies to go through the intermediary of a company registered in the Principality, but it does not seem that this was put in place in practice…

It is then that the Law n°1.529 of last July 29 came to soften certain provisions and thus to clarify what would be henceforth allowed.

Under the new section 29 of the Act, the principle remains a rather general prohibition. Indeed, the article reiterates the provision according to which “any person or entity not authorized under the conditions provided for by the present law is prohibited from taking any steps, whether solicited or unsolicited, on the territory of the Principality, with a view to offering, regardless of the place or means used, financial services, instruments or products to persons domiciled in the Principality“.

However, the article goes on to introduce important exceptions:

  1. The law now introduces an exception related to the nature of the potential client. Indeed, the prohibition does not apply when the person domiciled on the territory of the Principality is an institutional investor; an authorized company or a client of an authorized company when the steps are carried out through its intermediary. Here are therefore 3 targeted categories of potential clients who fall directly outside the scope of article 29.
  2. With regard to solicitation, it is specified that the prohibition referred to in the first paragraph does not apply to events organized on the territory of the Principality which bring together professionals from the banking and financial sector, subject to prior notification of the Commission and unless the Commission gives an unfavorable opinion. Consequently, approaches made on the occasion of these events would be considered as authorized.
  3. The third exception arises from a reading a contrario of article 29-1, which provides that “all unsolicited approaches made at a distance with a view to offering financial services, instruments or products to persons domiciled in the Principality, regardless of the means of communication used, are also prohibited to any person or entity that is not authorized under the conditions provided for by this law“. In fact, this provision suggests that solicitations, made at a distance, with a view to offering financial services, instruments or products to persons domiciled in the Principality, are now permitted. In fact, the legislator has not specified “all approaches, solicited or not” but only “all approaches, not solicited”, thus leaving the possibility of accepting the famous reverse solicitation, provided that it is carried out at a distance.
    This third exception nevertheless raises the question of the exact definition of “domicile” and what this notion excludes. Without any further clarification from the legislator, it is appropriate to refer to article 79 of the Monegasque Civil Code, which states that “a foreigner holding a residence permit is presumed, in the absence of proof to the contrary, to have his domicile in the Principality. Companies and legal entities having their registered office in the Principality are deemed to be domiciled there“.Even if this is a simple presumption, which can be overturned by any person who has an interest in it, the fact remains that this definition covers a large part of the foreigners present on Monegasque territory. Indeed, any foreigner who holds a residence permit will be deemed to be “domiciled” in Monaco. Foreigners who are only passing through Monaco, such as visitors, who do not hold a residence permit, would be excluded from this definition.
  4. Finally, this same article specifies that the prohibition does not apply when the person domiciled in Monaco is already a client of the non-authorized person or entity. The clarification is finally provided: entities may freely continue a client relationship already established before the entry into force of this law. We understand from this provision that the relationship must already be established (contractually) and that any form of discussions, negotiations or talks cannot fall within the scope of this exception.

Source: Regis Bergonzi Law Firm

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