Monaco Update: Update on the rules governing the marketing of financial services and products in the Principality

The rules governing the marketing of financial services and products in the Principality are based on the monopoly granted to companies duly authorized by the Commission de Contrôle des Activités Financières (CCAF) to carry out financial activities in the Principality, which has as its corollary the strict prohibition of the direct marketing of financial products by non-authorized entities.

Law 1.338 as amended by Law 1.515, which came into force on 7 January 2022, has given an extremely broad scope to this prohibition, thus greatly reinforcing the protection of duly authorized companies. Paragraph 1 of Article 29 of Law 1.338, as amended by Law 1.515 provided that “Companies not authorized under this law are prohibited from making any approach, whether solicited or not, with a view to offering financial services or products, regardless of the place or means used.”

This prohibition did not seem to be subject to any exceptions: it applied without distinction to all types of customers (natural or legal persons, professionals or not) and “regardless of the place or means used”. Moreover, by referring to “solicited or unsolicited” approaches, the article prohibited the use of “reverse solicitation” – a term referring to circumstances in which a potential client approaches a financial institution, exclusively on his own initiative, with a view to subscribing to a financial product or service in Monegasque law.

However, this text was not without difficulties and seemed to impact relationships between Monegasque residents and foreign financial players.  Based on this observation, the rules governing direct canvassing of financial services were amended again when Bill 1049 regarding various economic and legal provisions was adopted on 27 July 2022:

(i) Article 29 of Law 1.338 as amended by Bill 1049 now specifies that the prohibition on unauthorized companies canvassing, whether solicited or not, Monegasque residents is only applicable (x) on the territory of the Principality, and (y) if the target of the approach is not an institutional investor or a duly authorized company in the Principality acting on its own behalf or on behalf of a client.

This amendment, resulting from Bill 1049, now introduces exceptions to the monopoly of authorized companies and rectifies the previous wording of Article 29, which had a major impact on cross-border relations between financial players in the financial area (banks and management companies) and issuers of foreign financial products due to the general nature of the prohibition on direct marketing.

(ii) A new article 29-1 is introduced into law 1.338 prohibiting, only when unsolicited, approaches made remotely with a view to offering financial services, instruments or products to Monegasque residents, regardless of the means of communication used.

Through this article, unauthorized financial actors benefit from a legal framework allowing them to be solicited by Monegasque residents, which was not the case under the previous regime, which prohibited reverse solicitation.

Although the conditions of application of these texts have yet to be specified by a Sovereign Order at the date of drafting this article, the exceptions provided for the monopoly of duly authorized companies are likely to strengthen the attractiveness of the financial center in the Principality, while preserving the objective of protecting non-institutional clients.

By Gordon S. Blair Law Firm, Monaco, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact monaco@transatlanticlaw.com

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