Monaco – The multi-family office issue
A draft law aiming to provide a legal framework to the activity of multi-family offices in Monaco is to be examined this year by the National Council.
The principality of Monaco currently tallies some 40 single family offices providing financial advisory services.
Multi-family offices (MFO) do officially not exist for the reason that no law in the jurisdiction yet exists to give a legal framework to the activity.
The issue will probably be sorted out this year as the National Council of Monaco – the Monegasque Parliament – is to examine a draft law on the establishment of MFOs in Monaco.
In June 2014, it proposed a law that would suit the creation of MFOs in the principality. Following an 18-month constitutional deadline, the government transformed it into a draft law.
The text came back in December 2015, but there is disagreement in the Council on the government’s amendments.
“The main issue with the current draft law dwells in the fact that it would allow banks and asset managers to set themselves up as multifamily offices in Monaco.
“Indeed, the text allows multi-family offices to transmit orders from investors and to manage portfolios,” says Thierry Crovetto, rapporteur of the proposed law at the National Council of Monaco and independent fund analyst at TC Stratégie Financière.
“That is entirely denaturing the activity of multi-family offices, which in the opinion of Monegasque national counsellors, shall be independent.
“Multi-family offices cannot be judge and jury. They cannot be banks or assets managers, but independent financial advisers.”
Crovetto says that it is not believable for MFOs managing families’ portfolios to assess themselves whether the fund management performs well or not.
In its draft law the government suggested that an “MFO should have the right to propose a wide range of services, including in the financial area.”
If the text, as currently amended, is voted through then MFOs will have to be licensed by the Monegasque government and by the Monegasque regulatory authority, the Commission de Contrôles des Activités Financières (CCAF), prior to any establishment.
Also, the draft law specifies MFOs will not be rewarded commission other than that pertaining to their clients.
Crovetto explains the gist of the law was to create a new financial sector, but it appears a number of businesses have started to worry about the establishment of MFOs in Monaco.
“For instance, lawyers are concerned about the fact that multi-family offices could give legal advice without being licensed,” the rapporteur of the proposed MFO law points out.
Moreover, the setup of a new activity in Monaco remains a delicate topic as the Monegasque constitution grants priority to Monegasque citizens for any public or private job.
But the establishment of MFO activity is seen as necessary.
An initial explanation for this is that the government implemented a plan some years ago to strengthen Monaco’s attractiveness to ultra-high-net-worth families.
In that context, the establishment of MFOs is seen as a way to entice such families to move to Monaco.
Crovetto, saying some MFOs are already interested in opening a branch in Monaco, notes that the country is currently missing an opportunity to
make its mark in the area.
“Ultra-high-net-worth families having a residence in Monaco are waiting for this activity to be created in the Principality.
“Families are currently going abroad to use external MFOs. It is a shame because with Monaco becoming ever more onshore, we need to set up this activity of MFOs,” Crovetto argues.
He believes the setup of MFOs will help boost Monaco as a financial centre at a time that it is becoming ever more ‘onshore’.
On 22 February, Monaco has signed an automatic exchange of information agreement with the European Union.
As from 2018, Monaco and the EU 28 will start to exchange information on the financial accounts held by citizens of the EU 28 living in Monaco.
“You have to find an activity that could take over and MFOs seem the right candidate. Plus, that would provide work to other financial and non-financial Monegasque activities,” Crovetto explains.
Further amendments to the draft law text will certainly be proposed by the Council but the government can also decide to withdraw it.
Crovetto said during a December public session of the Council, that “at this stage, it would not allow Monaco to compete with other financial places.”