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SUP 11.3 Requirements on controllers or proposed controllers under the Act

SUP 11.3.1GRP

A summary of the notification requirements described in this section is given in SUP 11 Annex 1.4

Requirement to notify a proposed 6change in control

SUP 11.3.2GRP

Sections 178(1) and 190(1)of the Act require a person (whether or not he is an authorised person) to notify the FSA in writing if he proposesto take a step which would result in his acquiring control or increasing or reducing his control over a UK domestic firm in a way described in SUP 11.4.2 R (1) to SUP 11.4.2 R (4), or acquiring or reducing his control in a way described in SUP 11.4.2 R (1) and (2). Failure to notify is an offence under section 191(1) of the Act (Offences under this Part).46

SUP 11.3.2AGRP

The Treasury have made the following exemptions:

  1. (1)

    controllers and potential controllers of non-directive friendly societiesare exempt from the obligation to notify a change in control (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2001 (SI 2001/2638));

  2. (2)

    controllers and potential controllers of building societies are exempt from the obligation to notify a change in control unless the change involves the acquisition of a holding of a specified percentage of a society's capital or the increase or reduction by a specified percentage of a holding of a society's capital (The Financial Services and Markets Act 2000 (Controllers) (Exemption) (No.2) Order 2001 (SI 2001/3338.)). The "capital" of a society for these purposes consists of:

    1. (a)

      any shares of a class defined as deferred shares for the purposes of section 119 of the Building Societies Act 1986 which have been issued by the society (in practice, likely to be permanent interest bearing shares (PIBS)); and

    2. (b)

      the general reserves of thesociety.3

SUP 11.3.3G

6[deleted]

Approval required before acquiring or increasing control6

SUP 11.3.4GRP

If a person proposesto acquire control or increase hiscontrol over a UK domestic firm in a way described in SUP 11.4.2 R(1) to (4)or acquire control in a way described in SUP 11.4.2AR (1)4, he must obtain the FSA's approval before doing so. Failure to obtain approvalis an offence under section 191(3) of the Act (Offences under this Part). The FSA has up to three months to consider whether to approve such a change in control: see SUP 11.7 for guidance on the approval procedures.46

SUP 11.3.5GRP

The FSA's approval is not required before a controller reduces hiscontrol over a UK domestic firm.

Pre-notification and approval for fund managers6

SUP 11.3.5AGRP

6The FSA recognises that firms acting as investment managers may have difficulties in complying with the prior notification requirements in sections 178(1) and 190(1)of the Act as a result of acquiring or disposing of listed shares in the course of that fund management activity. To ameliorate these difficulties, the FSA may accept pre-notification of proposed changes in control, made in accordance with SUP D, and may grant approval of such changes for a period lasting up to a year.

SUP 11.3.5BDRP

6The FSA may treat as notice given in accordance with sections 178(1) and 190(1)of the Act a written notification from a firm which contains the following statements:

  1. (1)

    that the firm proposes to acquire and/or dispose of control, on one or more occasions, of any UK domestic firm whose shares or those of its ultimate parent undertaking are, at the time of the acquisition or disposal of control, listed or which are admitted to listing on a designated investment exchange;:

  2. (2)

    that any such acquisitions and/or disposals of control will occur only in the course of the firm's business as an investment manager; and

  3. (3)

    that the level of control the firm so acquires in the pre-approval period will at all times remain less than 20%.

SUP 11.3.5CGRP

6Where the FSA approves changes in control proposed in a notice given under SUP 11.3.5B D:

  1. (1)

    the controller remains subject to the requirement to notify the FSA when a change in control actually occurs; and

  2. (2)

    the notification of change in control should be made no later than five business days after the end of each month and set out all changes in the controller's control position for each UK domestic firm for the month in question.

At that stage, the FSA may seek from the controller further information, including that which would have been supplied under SUP 11.3.7 D (2).

Change in control without taking any step

SUP 11.3.6G

If a change in control occurs without the person himself having taken any step, he must notify the FSA within 14 days of becoming aware of the change (sections 178(2) and 190(2) of the Act). 6Failure to notify is an offence under section 191(2) of the Act.6

Custodians obtaining control6

SUP 11.3.6AG

6The FSA considers that a custodian or its wholly-owned subsidiary nominee company, acting only in that capacity, does not itself take any step for the purposes of sections 178(2) and 190(2) of the Act when it becomes the controller of a UK domestic firm, its control of a UK domestic firm changes or it ceases to be the controller of a UK domestic firm as a result of acquiring or disposing of custody assets in the form of shares in accordance with its client's instructions.

SUP 11.3.6BG

6For the purposes of sections 178(2) and 190(2) of the Act and where there has been more than one change in control for each UK domestic firm in a fortnightly period, a custodian or its wholly-owned subsidiary nominee company to which SUP 11.3.6A G applies need only notify the FSA of its final control position for each UK domestic firm for that fortnight, so long as it also supplies the highest control position for each UK domestic firm it obtained during that period.

SUP 11.3.6CG

6Reporting by a custodian or its wholly-owned subsidiary nominee company does not relieve any other person with an interest in any custody assets from its control notification responsibilities under Part XII of the Act.

Form of notification when acquiring or increasing control

SUP 11.3.7DRP

A notification ("notice of control") given to the FSA by a person who is acquiring control or increasing his control over a UK domestic firm, in a way described in SUP 11.4.2 R (1) to (4), or acquiring control in a way described in SUP 11.4.2A R, must:46

  1. (1)

    where the controller or a proposed controller is not an authorised person, contain the information required in:6

    1. (a)

      Controllers Form A (SUP 11 Annex 4); and

    2. (b)

      one or more of Controllers Form B (SUP 11 Annex 5) in accordance with SUP 11.3.8 D; or

  2. (1A)

    where the controller is a custodian or a nominee company notifying under SUP 11.3.6A G, comply with that direction;6

  3. (2)

    where the controller or proposed controller is any other authorised person, contain the information required in those sections of Controllers Form A (SUP 11 Annex 4) which deal with details of the proposed change in control and the persons involved in the notification; and56

  4. (3)

    if a notification is not submitted on the relevant form specified in (1) or (2), provide reasons why that form was not used.5

SUP 11.3.8D

The information in Controllers Form B is required in relation to the following persons:

  1. (1)

    if the controller is an individual, that individual;

  2. (2)

    if the controller is a body corporate:

    1. (a)

      the individual who is its chief executive; and

    2. (b)

      one other individual who is a director of the body corporate;

  3. (3)

    if the controller is a partnership or is a controller because he is a partner in a partnership:

    1. (a)

      the individual who is a managing partner or equivalent in the partnership; and

    2. (b)

      one other individual who is a partner in the partnership.

SUP 11.3.9D

If a Controllers Form B, or an Application to perform controlled functions under the approved persons regime (Form A in SUP 10 Annex 4) in respect of a governing function, has already been submitted to the FSA in relation to a relevant individual, then the information in that form need not be submitted to the FSA as long as details of any changes in the information previously submitted, or confirmation that there are none, is submitted.2

SUP 11.3.10DRP
  1. (1)

    A person who has submitted a notificationunder SUP 11.3.7 D must notify the FSA immediately if he becomes aware, or has information that reasonably suggests, that he has or may have provided the FSA with information which was or may have been false, misleading, incomplete or inaccurate, or has or may have changed, in a material particular. The notification must include:

    1. (a)

      details of the information which is or may be false, misleading, incomplete or inaccurate, or has or may have changed;

    2. (b)

      an explanation why such information was or may have been provided; and

    3. (c)

      the correct information.

  2. (2)

    If the information in (1) (c) cannot be submitted with the notification(because it is not immediately available), it must instead be submitted as soon as possible afterwards.

  3. (3)

    The requirement in (1) ceases if the change in control occurs or will not take place.

SUP 11.3.11GRP

The FSA, for administrative reasons, expects notifications within SUP 11.3.7 D to be given on Controllers Form A or Controllers Form B, as appropriate. If notifications are not made on these forms the applicant must inform the FSA of the reasons for not using them.651

SUP 11.3.12GRP

If a controller or proposed controller considers that the requirements in SUP 11.3.7 D to SUP 11.3.9 D are not appropriate to his circumstances, :6

  1. (1)

    if the control is temporary; or 6

  2. (2)

    if Form B is required (under SUP 11.3.8 D) in relation to:6

    1. (a)

      an individual who is an approved person; or6

    2. (b)

      a partnership of which one or more of the partners are bodies corporate.6

he should consult the FSA. The FSA has power, under section 182(3) of the Act (Notification), to amend those requirements if it considers it appropriate to do so.

SUP 11.3.13GRP

The Act provides that the FSA may request any additional information or documentation from the controller or proposed controller that it reasonably requires in order to determine what action it is to take in response to the notification. A controller or proposed controller which is an authorised person is required to submit less information under SUP 11.3.7 D than other persons and consequently the FSA may ask for confirmation of details already held or any additional information which it consi3ders appropriate.

SUP 11.3.14GRP

The FSA is obliged to consult regulatory authorities in other EEA States before approving the change in control or giving a warning notice where6 the Financial and Services Markets Act 2000 (Consultation with Competent Authorities) Regulations 2001 (SI 2001/2509, as amended) apply. In summary, these regulations require the FSA to consult with the home state regulator of an ISD investment firm, a BCD credit institution, an EEA insurer, an EEAUCITS management company or the parent undertaking of any of these, where that firm has acquired or proposes to acquire control of certain UK domestic firms such that the acquiring firm would become the parent undertaking of the relevant UK domestic firm. These regulations also impose certain consultation obligations on the FSA in respect of financial conglomerates.7

67

Form of notification when reducing control

SUP 11.3.15G

A notification given to the FSA by a person who is reducing his control over a UK domestic firm, in a way described in SUP 11.4.2 R(1) to (4), or must, in accordance with section 190(4) of the Act (Notification):46

  1. (1)

    be in writing; and

  2. (2)

    provide details of the extent of control (if any) which the controller will have following the change in control.

Notification when change in control occurs

SUP 11.3.16G

A person who is under a duty to notify the FSA of a proposed change in control is also required to notify the FSA when the relevant change in control has occurred (sections 178(3) and 190(3) of the Act). 6

Joint and shared notifications 6

SUP 11.3.17GRP

6Notifications to the FSA by proposed controllers and controllers under Part XII of the Act may be made on a joint or shared basis outlined in SUP 11.5.8 G to SUP 11.5.10 G.