Financial Conduct Authority (“FCA”) regulated firms are obligated to notify the FCA of proposed or actual changes in control (shareholding above a certain threshold) in their business. This notification must be sought prior to the change in control being taken place in order to seek the FCA’s prior approval.
Failure to make such a notification and obtain prior approval before acquiring or increasing control is a criminal offence under section 191F of the Financial Services and Markets Act 2000 (FSMA). It’s therefore very important that firms are aware of this requirement and comply with it.
The process of notifying the FCA of a change in control is known as a Section 178 notice or notification.
You should send the FCA a notification as soon as you have made a decision to acquire a control in an authorised firm or to increase your existing shareholding – provided that the acquisition or variation is sufficiently great as to trigger the requirement for the notification.
Not all changes in ownership or shareholders need to be notified to the FCA, for example if you are a limited permission credit broker you only need to submit a s.178 if any one new entity will hold 33% of the shares or more. Whereas a full authorisation credit broker will need to notify the FCA of all controllers or change if it is on or greater than 10%.
As the requirement for the Section 178 notification will differ between FCA permission scopes, it’s important to make sure you are aware of the rules that apply to your proposed acquisition or variation.
The process of making the notification also varies depending on how the control will be held, specifically whether you intend to hold the shareholding via a company, as an individual or by another means (i.e. a fund). Then, depending on the significance of the change, additional information is required in some notifications and not others, including a business plan.
Why do I need to notify the FCA?
The FCA treat this as another method to supervise firms to ensure that control is held by appropriate persons or entities. If your firm is not FCA authorised then this process will not apply.
Why would the FCA not approve the transaction?
The FCA wants the material decision makers and controllers to be suitable and appropriate. Each notification will be decided on a case-by-case basis and relevant matters that the FCA will consider include:
- The proposed controller’s ability to influence, object to or prevent the proposed acquisition/increase in control.
- Relevant changes in the authorised firm’s governance arrangements as a result of the transaction giving rise to the change in control.
- The source of funding for the transaction giving rise to the change in control
You can read more on the FCA’s webpage here.
What can Scott Robert Help you?
Scott Robert has helps numerous firms to notify the FCA and obtain approval. Our expert advisers can help guide you through the process from explaining what’s involved and providing you with the advice and guidance to understand the rules all the way through to creating the relevant documentation and notification forms and helping you during any communications with the FCA.
If you would like help or advice on any aspect of a change in control notification, speak to one of our experts today for confidential advice by calling 0161 413 2796 to find out more.