Reform of the regulation of financial activities: Monaco holds its Place

2022 01 17 reforme activite financiere2

On April 30, 2021, a bill was submitted to the National Council to amend law No. 1.338 of September 7, 2007 laying the foundations for the regulation of financial activities in Monaco.

In view of the forthcoming admission of the CCAF to the International Organization of Securities Commissions (IOSCO) as an ordinary member, this bill clarifies and significantly strengthens the powers of the regulator, in particular in terms of supervision and investigation, on an international level as well. This is all the more important as the bill introduces several new obligations.

The most notable of those is the submission of the license application’s modifications (shareholding, activities program, delegation, etc.) to the prior authorization of the CCAF.

The regulator's supervision will also extend to banks with the removal of certain exemptions of article 32 of law No. 1.338, now requiring the banks to communicate in advance to the CCAF the financial documentation intended for their clients and the public. The exemption from which banks benefited in terms of canvassing is also over: Monaco financial actors are now all subject to the same legal restrictions. The notion of canvassing is also defined as any offering a financial product or service in Monaco to non-professional individuals.

2022 01 17 reforme activite financiere2

The bill also aims at improving investor protection by establishing new rules for managing conflicts of interest. Licensed entities will have to adopt written procedures and, when the risk of conflict cannot be avoided, prior information of the client will be mandatory. This reinforcement of procedures comes at the same time as the bill proposes to suppress the historical incompatibility between the activities of Monegasque fund management and reception-transmission of orders.

Finally, all services and transactions will have to be registered, in compliance with data protection rules. If this new obligation constitutes an operational challenge, it is justified by the requirement to improve and facilitate the supervision of the activity of licensed entities by the CCAF.

It should be noted that the bill also proposes a reform of market offences.

Thus, this promising bill seems to answer many of the questions of Monegasque professionals which constituted until now points of uncertainty or even blockage. Under review by the Commission since October 6, 2021, this text could be adopted before the end of the year.