Warning Law 1.194 has been amended by Law 1.241 of July 3, 2001
Monégasque Law 1.194 of July 9, 1997
pertaining to Portfolio Management of Securities
and Related Activities in the Principality of Monaco
Section I - Portfolio Management
of Securities and Related Activities
Activities regularly or professionally carried on
behalf of a third party are subject to the provisions set by the present law and
1 - Portfolio management of securities and term
2 - Forwarding orders on financial markets
relating to securities and term financial instruments;
3 - Counseling and assisting in the matters
listed under 1
and 2 above;
All activities carried out regularly or
professionally, whatever their denomination, having for object or effect the
conduct of activities listed in Paragraphs 1 to 3 above are also subject to the
conditions stated in the present law.
The following are admitted to conduct the
activities listed in Article 1:
1 - Credit Establishments and those Financial
Companies members of a Stock Exchange ;
2 - Corporations accepted by the Minister of
State as qualified (Hereafter "Qualified Companies").
Section II - Approval of Companies Active
in Portfolio Management and Related Activities
The acceptance mentioned under 2 of Article 2
above may be issued after a motivated advice of the Control Commission created
by Article 16 of the present law to corporations justifying of:
1 - A Certificate of Incorporation with a purpose
clause permitting solely all or part of the activities listed in Article 1;
2 - A fully paid-in capital reflected by
registered shares. The minimum amount of capital is set in a Sovereign Order;
3 - A satisfactory financial capability which
will be notably appreciated in regard to the qualifications of direct or
indirect fund suppliers;
4 - The honorable character and professional
experience of the managers;
5 - Premises and employees that allow the
exercise of the activities referred to in 1.
The companies referred to above must be able to
justify, at any moment, of net assets at least equal to the amount of minimum
capital required in 2. They may be found to be qualified to exercise all or part
of the activities mentioned in Article 1.
The composition and contents of the application
submitted for qualification are set by a Sovereign Order.
Modifications subsequent to the application for
acceptance referred to in Article 2-2 of one or more of the characteristic
elements mentioned in the acceptance file must be notified without delay to the
Minister of State. The latter may order the company concerned to apply for a new
acceptance or to comply, in the time he will determine, with all the
requirements the modifications make necessary.
Section III - Transactions Related to
Portfolio Management of Securities
The Qualified Companies so accepted must exercise
their activities to the exclusive benefit of their client by virtue of the
authority mentioned in Article 8. They must not use such authority for purposes
other than those for which they have been given. Within the limits of such
authority the companies must also see to it that the clients are aware of the
risks inherent to the nature of the transactions they consider.
The Qualified Companies must enquire about the
financial situation of their clients, their experience in matters of
investments, their expectations in matters of customer service and they must
give, in an appropriate way, all the useful information as they negotiate with
The Qualified Companies may not receive from
their clients authority beyond that pertaining to the activities listed in the
acceptance issued under Article 2-2 or Article 4.
It is forbidden for the Qualified Companies to
receive fund deposits, securities or precious metals from their clients, and to
realize operations between their client accounts and their own account, nor are
they allowed to carry out operations among client accounts.
Subject to Articles 5 and 6, the above-mentioned
prohibition does not prevent Qualified Companies from receiving authority to
deposit or withdraw shares or funds for their clients if they hold a specific
and written power of attorney, to be renewed for each operation.
The authority given by clients to the Qualified
Companies are subject to written agreements, signed by both sides and according
to the rules set by a Sovereign Order.
Every Qualified Company exercising the activities
listed in Articles 1-1 and 2 hereof must, according to rules defined in a
Sovereign Order, be able to show proof of the moment of both reception and
forwarding of every order.
In addition, any Qualified Company given
authority to forward orders for execution on stock exchange markets by an agent
entitled to negotiate, must be able to justify that every order has been given
by the client.
The funds or securities given for management are
deposited by the client in one of the financial firms listed in Article 2-1
hereof, which will assure the safekeeping of the securities and the keeping of
the accounts, cash and shares, and will keep records of the operations on the
various authorized markets.
The financial firm holding the securities is not
responsible for the negotiations by the Qualified Company for its client.
The financial firm must not accept deposits nor
withdrawals of funds or securities upon order from a Qualified Company, except
pursuant to a specific and written power of attorney given by the client and to
be renewed for each operation.
The opening of the account is subject to a
written agreement, signed by both sides.
Every Qualified Company must communicate to the
Minister of State all documents it intends to publish or distribute, related to
its activities and meant for clients or public.
Whenever the Minister of State finds any
inaccuracy or oversight in the publications contemplated by law and regulations,
or in any of the documents listed in the above paragraph, he may, upon advice of
the Control Commission, prohibit the publishing of the publications or documents
in question or order the appropriate modifications.
All approaches at the residence or domicile of
clients, on their job or in public places are prohibited - except at the
premises of the Qualified Companies and Financial Firms listed in Article 2-1
and aiming to propose orally or in writing, by telephone or any telemetric or
computerized way, the services of a Qualified Company. These approaches may,
however, be authorized by the Minister of State upon advice of the Control
Commission created by Article 16.
It is also prohibited to advertise the acceptance
referred to in Article 2-2, especially as constitutive of finding of management
Within six months after the annual closing of the
books, the Qualified Company sends an annual report of its activities to the
Minister of State, in compliance with the rules set by a Sovereign Order, and
certified true and regular by the auditors mentioned in Article 14. The
company's balance sheet is attached to the report of annual activity.
The Qualified Companies must designate, for a
period of three financial years, two auditors chosen amongst certified public
accountants practicing in Monaco.
Except for the case mentioned in the Article 307
of the Monégasque Penal Code, the auditors' responsibility can not be engaged.
They notify the Attorney General of the illegal facts they are aware of. They
are required to notify the Minister of State if they find, in the performance of
their mission, that the activity of the company is not in conformity with the
acceptance it has received by virtue of Article 2-2 or Article 4.
For the accomplishment of their mission, the
auditors are compensated by reference to a rate set by a ministerial order taken
upon the advice of the Control Commission created by Article 16.
The obligations imposed upon the Qualified
Companies by Articles 5,8 and 9-2 also apply to the Financial Firms mentioned in
Article 2-1 if they carry on one or more of the activities mentioned in Article
Section IV - The Control Commission of
Portfolio Management and Related Activities
A Control Commission for portfolio securities
management and related stock exchange activities is created to guarantee
compliance with the present law. Its composition and operating rules will be set
by a Sovereign Order.
In strict compliance with its mission and free
from the restrictions of professional privacy except by notaires and
other representatives of the law, it may:
1 - Require communication of all documents
distributed by the Financial Firms mentioned in Article 15 and by the Qualified
Companies, as well as all documents it finds useful and, in particular, all
contracts, books of account, vouchers and minute books;
2 - Collect any useful information for the
accomplishment of its mission from third parties having performed work or
transactions for one of the financial firms listed in Article 15 or for
3 - It may call-in and audition the managers or
representatives of the Financial Firms listed in Article 15 or of the Qualified
Companies, as well as any persons likely to give information on the case it
examines. The persons called-in may choose to be assisted by an attorney;
4 - The Control Commission may receive and
investigate all claims submitted by any person justifying of an interest, with a
view, if appropriate, to the application of Article 18;
It may, by a specific decision, mandate any
person it desires to collect information and documents needed for its mission
and proceed to the callings and auditions mentioned in the third paragraph of
the present article, if appropriate.
The members of the Control Commission and the
persons it mandates by virtue of Article 16 are bound by the confidence
provisions of Article 308 of the Monégasque Penal Code. They are bound by an
obligation of confidentiality on every element of information they acquire in
the exercise of their authority.
When the Control Commission finds that the law
and regulations it seek to enforce are not respected, it informs the Minister of
State so that the Financial Firm or the Qualified Company may be ordered to put
an end to the irregularities the Control Commission has found as well as to
If the formal notice is unsuccessful within the
time given, the Minister of State may request the President of the Court of
First Instance, in a summary proceeding, to order the Financial Firm or the
Qualified Company to comply with the formal notice it has received. The
President may complete his decision by a per diem fine and take, if necessary,
conservatory measures in order to preserve the clients' interests.
Section V -Penalties
The Minister of State may withdraw the
qualification of a Qualified Company with no significant activity during a
period of twelve months or which does not have the staff or premises required to
carry on its statutory activity with no legitimate reason.
This decision is taken after receipt of the
detailed recommendation of the Control Commission established by Article 16
which has duly asked the company's representative to present his explanations.
The company not accepted must be dissolved as
provided by Articles 5 to 7 of Law 767 of July 8, 1964. Failing compliance, the
Minister of State may ask the Court of General Jurisdiction to order the
dissolution of the company and designate a liquidator.
Whoever carries or tries to carry on, for himself
or for any reason, part or whole of the activities mentioned in Article 1
without having the acceptance required in Articles 2-2, 4 or 30 is subject to a
one to five year prison sentence and/or to the fine mentioned in Article 26-2 of
the Monaco Penal Code. The fine may be as high as the amount of profit made in
the exercise of the illegal activity.
The following persons are subject to both or only
one of the penalties established by the preceding article:
1 - The managers of Qualified Companies
conducting activities which are not within the purpose of the company as set
forth Article 3-1 or which exceed the limits set forth by the acceptance issued
under Article 2-2, Articles 4 or 30.
2 - The managers of Qualified Companies who
continue to carry the activities listed in Article 1 after their acceptance
under Article 2-2 , Article 4 or Article 30 has been completely or partially
revoked, or after the Court has ordered the activity to be stopped.
Are subject to one or both of the penalties
listed in Article 20:
1 - The managers of Qualified Companies who
receive from their clients, without the specific power of attorney mentioned in
Article 7, one or more of the fund deposits prohibited in that Article or
realize one or more of the prohibited by said Article prohibits;
2 - The managers of Qualified Companies who
receive from their clients one or more powers other than those permitted by
3 - The managers of Financial Firms subject to
Article 15 or of Qualified Companies who do not pursue the exclusive interest of
their clients or use their authority to other purposes than those mentioned in
4 - The managers of Financial Firms holding
securities or funds given to them for management and who accept, without a
specific power, one or more of the deposits or withdrawals prohibited by Article
The following are subject to a one to five year
prison sentence and/or to the fine mentioned in Article 26-4 of the Monégasque
1 - The managers of Qualified Companies who do
not cooperate with the auditors in their verifications or control, who refuse to
communicate to the auditors the documents they need to accomplish their mission;
2 - The managers of Financial Firms subject to
Article 15 or of Qualified Companies refusing to give the Control Commission or
the persons it appoints by virtue of Article 16 the documents needed to
accomplish their mission;
3 - The managers of Qualified Companies who do
not proceed to the submission required by Article 11, who distribute or cause
the distribution of documents by any means, knowing of a decision ordering such
documents to be modified or not published;
4 - The managers of Qualified Companies who, in
violation of Article 12, take actions or cause the publication of advertising.
The managers of a Qualified Company, who do not
arrange for the nomination of the auditors as required in Article 14-1, are
subject to a six month to two year prison sentence and/or to the fine mentioned
in Article 26-3 of the Monégasque Penal Code;
Are subject to the fine mentioned in Article 26-3
of the Monégasque:
1 - Managers of financial firms or of accepted
companies called for audition by the Control Commission or by those it mandates
and who don't obey to their calling with no legitimate reason;
2 - Managers of an accepted company who don't
transmit to the Minister of State the documents or information mentioned in
Articles 4 and 13 in the conditions set by law and regulation;
3 - Any person not mentioned in Article 23-1 who
stands in the way of the verifications and supervision led by the auditors or
who refuse communication of documents they need to accomplish their mission.
Is subject to a 3 month to 1 year prison sentence
and/or to the fine mentioned in Article 26-4 of the Monégasque Penal Code any
auditor giving or wittingly confirming an untrue information upon the situation
of an accepted company or who doesn't inform the Attorney General of punishable
facts he is aware of.
In the legal action based on violations of the
law an regulation involving managers of a financial firm or of an accepted
company the Court may, at any level of the procedure, receive advice from the
Control Commission created by Article 16.
The Court can also decide that the financial firm
or approved company is compelled jointly with its managers to pay the fines
ordered against them. The Court can also put an end to the activity or order the
winding-up of the accepted company.
In case of repetition of an offence within 5
years and without prejudice to the provisions of Article
40 of the Monégasque Penal Code not to the offences listed in Articles 20 to
26, the fine mentioned in these articles will be doubled.
The provisions of the present Section apply to
foreign companies accepted by virtue of Article 30 and to their managers.
Section VI -Miscellaneous provisions
The opening of an agency or branch
by a company whose head office is based abroad and aiming to carry activities
mentioned in Article 1 hereof are subject to acceptance by the Minister of
In order to obtain this
acceptance, the foreign company needs to prove that the activity it intends to
pursue is subject, in its head-office country, to a regulation comparable with
the regulation in effect in Monaco. It must, further, prove the honorability and
professional experience of the managers of the proposed agency or branch,
sufficient premises, staff and financial guarantees.
Except for the provisions of
Section II, all foreign companies are subject to all other provisions of the
The Minister of State may, under
the conditions set by Article 19 hereof, withdraw the acceptance given to a
All persons who carry on, at the date of
publication of the present law, all or part of the activities listed in Article
1 have six months to submit to the Minister of State the appropriate and
necessary application in order to regularize their situation. These persons may
continue their activities until the date they receive notification of the
rulings on their requests.
All contrary provisions to the present law are
and will remain abrogated.
The present law is promulgated and will be given
effect as a law of the Principality.
Signed in Our Palace in Monaco, July 9, 1997.