Amendments to Law n° 1.338 of September 7th, 2007 on financial activities, as amended
Law n° 1.529 on various economic and legal provisions was published on August 12th, 2022 in the Journal de Monaco (the “Law”).
Article 69 of the Constitution provides that Laws and Sovereign Orders may only be invoked against third parties from the day after their publication in the “Journal de Monaco”.
The purpose of the Law is to complete the Monegasque legislative and regulatory system, by providing some clarifications in various fields:
- Gift taxation;
- Private international law;
- The law on securities and credit;
- Business law;
The present note relates the Law which completes and amends Law n° 1.338 of 7 September 2007 on financial activities, as amended (“Law n° 1.338”).
In order to better understand the subject hereof, we invite you to read our previous notes and comments on the “Draft law amending the law No. 1.338 dated September 7th 2007 on financial activities, as amended” and on “Law n° 1.515 of January 7th 2022, amending Law n° 1.338 of September 7th 2007 on financial activities, as amended“, which are available in the ” Latest News” section of our website.
The Law has added an obligation of professional certification, so that persons performing certain functions to be determined by Sovereign Order are required to obtain such certification following a training course, the cost of which is to be borne by the licensed companies. Furthermore, the Law has added that, when carrying out financial activities, licensed companies must ask their clients, including prospect clients, for information on their knowledge and experience in investment matters, in relation to the suggested or requested activity or the specific type of financial instrument, in order to be able to determine whether the activity or the financial instrument is appropriate.
The core of the additions and amendments of the Law concern the prohibition on any steps, whether solicited or unsolicited, in Monaco with a view to offering financial services, instruments or products, introduced by Law n° 1515 of January 7th, 2022, amending Law n° 1.338 of September 7th, 2007 on financial activities, as amended.
In order to alleviate the difficulties caused by such an absolute prohibition, the authorities have clarified this prohibition principle and introduced exceptions.
Article 29 of Law n°1.338 provides that:
“Any person or entity not licensed under the conditions provided for by this law is prohibited from taking any steps, whether solicited or unsolicited, within the territory of the Principality, with a view to offering financial services, instruments or products to persons domiciled in the Principality, regardless of the place or means used.
However, these provisions do not apply when the person domiciled in the Principality is:
1°) an institutional investor;
2°) a licensed company;
3°) a client of a licensed company when the steps are taken through its services.
The prohibition referred to in the first paragraph does not apply to events organised on the territory of the Principality which bring together professionals from the banking and financial sector, subject to prior notification to the Commission and unless the Commission gives a negative opinion.
The conditions of application of this article shall be specified by Sovereign Order.”.
The prohibition is limited by the introduction of article 29-1:
“Any unsolicited remote step by any person or entity not licensed under the conditions provided for by this law, with a view to offering financial services, instruments or products to persons domiciled in the Principality, regardless of the means of communication used, shall also be prohibited.
The prohibition referred to in the previous paragraph does not apply when the person domiciled in Monaco is a client of the unlicensed person or entity.”.
Similarly, article 29-2 states that:
“Licensed companies are prohibited from making unsolicited steps at the home or residence of persons, or at their place of work, with a view to offering, by whatever means, financial services, instruments or products. These prohibitions do not apply to the relations of licensed companies with their clients. Mention of the license issued in accordance with article 2 must appear on the commercial documentation of licensed companies; however, such mention, for advertising purposes, presented in particular as constituting a label of management quality, is strictly prohibited.”.
In summary, the principle of the prohibition of any presence in Monaco, whether solicited or not, physically aimed at persons domiciled in Monaco remains, except if aimed addressed to:
(i) an institutional investor;
(ii) a licensed company;
(iii) a client of a licensed company where the steps are taken through its services.
The Government has therefore focused the criteria on a physical presence in Monaco and excludes steps within the territory of Monaco, in particular towards individual investors or to Single Family Offices which, in our view and in the absence of a definition in the Law, should not be considered as “institutional investors”.
Any step, as long as it is unsolicited and carried out remotely by an entity not licensed in the Principality, is prohibited, unless the person domiciled in Monaco is already a client of the unlicensed person or entity.
Conversely, solicited steps by a person domiciled in Monaco and carried out exclusively remotely with unlicensed foreign persons or entities are now authorised. Any physical presence of the representatives of the unlicensed entity in Monaco will be prohibited.
Our team remains at your disposal to assist you and to answer your questions on this matter.
 Law provides for more information.