Issuance of the Regulation on Investment Services and Activities

The Central Bank of the Republic of San Marino announces the issuance of “Regulation No. 2024-05 on investment services and activities” today. This regulation, in implementation of Law No. 165 of November 17, 2005 (the so-called LISF), Decree No. 61 of March 29, 2019, and Decree No. 50 of March 26, 2019, introduces a comprehensive framework primarily aimed at:

• regulating the category of authorized entities known as “investment firms,” which refers to financial companies, other than banks, specialized in providing services listed in letter D of Annex 1 of the LISF. It defines their authorization procedures, requirements for company executives and ownership structures, as well as capital and organizational adequacy standards;
• regulating the provision of investment services and activities within the San Marino territory by any authorized entity (banks, investment firms, management companies), with particular attention to ensuring fairness and transparency towards clients. It also revises the definition of “professional client” in a more rigorous manner;
• integrating the prudential supervision framework for banks in terms of capital adequacy to include the absorption of market risks for financial investments (limited to trading portfolios or those not permanently immobilized on the balance sheet) and settlement risks, while aligning the minimum solvency level (now "capital adequacy ratio") to the international standard of 8%.

This regulation adopts the following:

• for investment firms, Regulation (EU) No. 2019/2033 (IFR);
• for all investment service providers currently operating in San Marino, Directive No. 2014/65/EU (MiFID 2) and Regulation (EU) No. 600/2014 (MiFIR);
• for banks, the part of the Basel III framework related to market and settlement risks as per Regulation (EU) No. 575/2013 (CRR), with necessary adjustments and simplifications due to the accounting context (which does not apply IFRS) and the relatively simpler financial system in San Marino.

The Regulation was developed following a public consultation on its draft, which took place from February 9 to August 9, 2024. During this period, joint analyses were conducted with the stakeholders affected by the new regulation through dedicated working groups, and impact analyses were carried out on paper.

For investment service providers already operating in the territory, a phase-in period is foreseen, with varying timelines depending on the impact of each section of the regulation. In summary, all MiFID2-related rules concerning client relationships and the corresponding impacts on contractual forms and operational systems must be implemented during 2025. Meanwhile, the CRR-related provisions regarding the measurement and absorption of new risks (market and settlement risks) for calculating capital adequacy ratios will take effect starting July 1, 2026.

In the same regulatory context, to ensure consistency, other provisions have been aligned to focus on the new regulation’s definition of “professional clients.” This includes regulating the Authorized Funds List (EFA) within the regulation on collective investment schemes and extending certain structural supervisory provisions of the new regulation to potential new-generation trust companies (specialized only in fiduciary services), thereby repealing the residual transitional regime of Circular No. 2008-06.

Regulation No. 2024-05 represents a significant step forward in the ongoing process of aligning the supervisory regulatory framework with the principles and regulations of the European Union, in accordance with the commitments derived from the existing Monetary Agreement and in anticipation of the upcoming signing of the Association Agreement.