A draft law aiming to provide a legal framework for the activities of multi-family offices in Monaco is to be examined this year by the principality’s National Council.
Wealth management experts note that the ability to set up multi-family offices, or MFOs, is seen as a way Monaco may be able to boost its standing as a financial centre, at a time when it is becoming ever more ‘onshore’. (See related story, EU, Monaco sign landmark information exchange agreement, here.)
Monaco currently has some 40 single family offices which provide financial advisory and other services to wealthy clans.
However, until now, multi-family offices (MFOs) have not existed in the Monaco marketplace, for the simple reason that a legal framework providing for their creation has never existed.
The first indication that things might be about to change came in June 2014, when the National Council proposed a law that would accommodate the creation of MFOs in the principality. Following an 18-month constitutional deadline, the government issued a draft law on the matter.
It has now emerged, though, that there is some disagreement in the Council on the government’s amendments, mainly having to do with the fact that the draft law, as currently written, would allow banks and asset managers to set themselves up as multi-family offices in Monaco.
In its draft law, the government suggests that an MFO “should have the right to propose a wide range of services, including in the financial area”.
“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 [must be] independent financial advisers.”
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 establishing themselves as as a multi-family office operating in Monaco.
Crovetto explains the gist of the law was to create a new financial sector, but it appears that a number of existing Monegasque businesses have started to worry about that very fact.
“For instance, lawyers are concerned about the fact that multi-family offices could give legal advice without being licensed” to do so, the rapporteur of the proposed MFO law points out.
The proposal to make possible the setting up of a new type of business in Monaco is delicate for another reason, which is the fact that the Monegasque constitution grants priority to citizens of Monaco for any public or private job. This is the case even though the establishment of MFO activity is widely seen as necessary if the principality is to boost its attractiveness to ultra-high-net-worth families.
Crovetto says Monaco is already missing out on an opportunity to make its mark in the area of multi-family offices, since some MFOs are known to have already expressed an interest in opening a Monaco branch, but for now are having to wait.
What’s more, he adds, “ultra-high-net-worth families having a residence in Monaco” are eager to be able to use a local MFO, since they are having to make use of MFOs located elsewhere.
“It is a shame, because with Monaco becoming ever more ‘onshore’, we need to set [this] up,” Crovetto adds, noting that the principality has now signed a landmark automatic exchange of information agreement with the European Union, which is expected to cause at least some wealthy individuals to move their money out of the jurisdiction in order to avoid the risk of having to pay tax.
“You have to find an activity that could take over and MFOs seem the right candidate,” he says. “Plus, that would provide work to other financial and non-financial Monegasque activities.”
Further amendments to the draft law text are expected to be proposed by the council, and the government also could decide to withdraw the plan rather than seeing it into law.