Issuance of regulations on investment services and activities

The Central Bank of the Republic of San Marino announces that it has issued today the " Regulation No. 2024-05 on investment services and activities ", which, in implementation of Law No. 165 of November 17, 2005 (so-called LISF), Delegated Decree No. 61 of March 29, 2019 and Delegated Decree No. 50 of March 26, 2019, introduces an organic discipline aimed mainly at:

• regulate the category of authorized entities known as "investment firms," which are financial institutions, other than banks, specializing in the provision of services outlined in letter D of Annex 1 of the LISF. This regulation will define the procedures for their authorization and qualification, establish requirements for corporate officers and ownership structure, and set standards for capital adequacy and organizational structure;
• regulate the provision of investment services and activities within the territory of San Marino by any authorized entity (banks, investment firms, management companies), with a specific focus on ensuring fairness and transparency towards clients. This will involve redefining the concept of "professional client" with a view to greater rigor;
• integrating the prudential supervisory framework for banks, in terms of capital adequacy, to account for the absorption of market risks related to financial lending (limited to the trading portfolio or, in any case, not fixed asset accounting) and settlement risks. This will include aligning the minimum solvency requirement (currently the "capital ratio") with the international standard of 8%;

all in transposition:

• for investment firms, of Regulation (EU) No. 2019/2033 (IFR);
• for all investment service providers currently operating in San Marino, of Directive No. 2014/65/EU (MiFID 2) and Regulation (EU) No. 600/2014 (MiFIR);
• for banks, of the part of the Basel III framework pertaining to market and settlement risks set forth in Regulation (EU) No. 575/2013 (CRR), albeit with the necessary customizations and simplifications arising from the accounting environment (which does not apply IFRS) and the lower level of complexity of the San Marino financial system.

The Regulations were prepared as a result of a public consultation process on its draft, which lasted from February 9 to August 9, 2024, a period during which a joint analysis was conducted with the parties to whom the new regulations are addressed, through special working groups, as well as carrying out, on a paper basis, the relevant impact analyses.

For investment service providers already operating in the territory, there is a phase-in period, graduated differently according to the different impact of each part of the measure; in a nutshell, all MiFID2-derived rules, pertaining to client relationships and their impacts at the level of contractual forms and operational systems, will have to be transposed during 2025, while CRR-derived rules, pertaining to the measurement and absorption of new typical risks (market and settlement) for the purpose of calculating the capital adequacy ratio, will take effect from July 1, 2026.

In the same regulatory context, due to similarity of subject matter, other measures were also aligned for the purposes of focusing, on the new regulation, the new definition of "professional clients," to regulate within the regulation on collective asset management the related List of Authorized Funds (EFA), as well as to extend certain structural supervisory provisions of the new regulation also to any new generation trust companies (specializing in only fiduciary business proper), in repeal of the residual transitional regime set forth in Circular No. 2008-06.

Regulation No. 2024-05 represents a significant step forward on the path of progressive adaptation of the regulatory supervisory framework to the principles and discipline of the European Union, having in mind the commitments arising from the current Monetary Convention and in view of the forthcoming signing of the Association Agreement.