Currently, Andorra is a growing financial market that attracts a wide range of investors and clients. However, to ensure the security and protection of clients, the provision of financial services is strictly regulated. In this newsletter, we will analyze this regulation and its limits.
What Are Financial Services and Who Can Offer Them?
Financial services encompass a broad range of activities aimed at managing, investing, exchanging, or protecting economic resources. These services include:
- Banking activities: Acceptance of deposits, granting of loans and credits, management of payment accounts, and other operations specific to banking institutions.
- Investment and financial management services: Portfolio management, financial advisory, asset exchange, and marketing of investment products.
- Payment and electronic money services: Transfers, payment processing, and issuance of electronic money.
- Insurance and reinsurance services: Intermediation and contracting of insurance products.
However, the provision of these services is not open to just anyone or any company. According to Andorran legislation, only entities duly authorized by the Andorran Financial Authority (AFA) can offer financial services on a regular or professional basis. This means that any individual or legal entity wishing to carry out banking, financial, payment, or electronic money activities must obtain explicit authorization and be registered accordingly.
Exceptions to the Authorization Requirement
Although Andorra’s legal system strictly regulates financial entities, there are exceptions in specific cases. The law establishes certain exemptions, one of the most relevant being when an entity does not provide services to third parties but limits its activity to the economic interests of its own shareholders.
This means that these entities cannot offer financial services to the general market but can only operate for the benefit of their owners or partners. This type of exception is particularly applicable to holding companies or wealth management firms that operate exclusively for their own account.
It is important to note that this exception cannot be used to offer financial services, directly or indirectly, to external clients, as its purpose is strictly internal and not market-oriented. This ensures a clear distinction between internal operations within business or wealth management groups and financial activities aimed at the general public.
Penalties for Offering Financial Services Without Authorization
Individuals or legal entities offering financial services without proper regulation may face severe penalties, including:
- Significant financial fines
- A prohibition from continuing financial activities.
- Civil or criminal liability in serious cases.
Furthermore, operating without regulation can pose a reputational risk for the individual or entity, both in the Andorran financial sector and internationally.
The Importance of Specialized Legal Advice
Given the strict regulations and potential penalties, it is essential for companies and professionals wishing to operate in the financial sector in Andorra to seek specialized legal advice to ensure regulatory compliance.
If you are unsure whether your activity requires authorization or want to ensure compliance with current regulations, our firm offers specialized advice on financial and regulatory law. Contact us for a personalized analysis and to avoid potential legal risks.
