SUP 11.3 Requirements on controllers or proposed controllers under the Act

The notification requirements are set out in sections 178, 179, 191D and 191E of the Act and holdings which may be disregarded are set out in section 184 of the Act.10A summary of the notification requirements described in this section is given in SUP 11 Annex 1.4

12For the purposes of Part XII (Control over authorised persons) of the Act, and in particular, calculations relating to the holding of shares and/or voting power, the definitions of “shares” and “voting power” are set out in section 191G of the Act.

The FCA has issued non-Handbook guidance on the notification requirements for, and assessment of, controllers or proposed controllers under the Act. See www.fca.org.uk/publication/finalised-guidance/fg24-5.pdf. This includes guidance in relation to when one person’s holding of shares or voting power must be aggregated with that of another person for the purposes of determining whether an acquisition or increase of control will take place.16

Sections 178(1) and 191D(1)10 of the Act require a person (whether or not he is an authorised person) to notify the appropriate regulator17 in writing if he decides 10to acquire, increase or reduce10 control or to cease to have control10 over a UK domestic firm . Failure to notify is an offence under section 191F10 of the Act (Offences under this Part).46

The Treasury have made the following exemptions from the obligations under section 178 of the Act10:

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 2009 (SI 2009/77410));

   10
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 building society's 10 capital or the increase or reduction by a specified percentage of a holding of a building society's 10capital (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/77410.)). The "capital" of a building society 10 for these purposes consists of:

   1010
   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 that building society: 10

      103
3. (3)

   10potential controllers of non-directive firms (other than, in the case of an FCA-authorised person, firms with only a limited permission) 14("A") are exempt from the obligation to notify a change in control unless the change results in the potential controller holding:

   1. (a)

      20% or more of the shares in A or in a parent undertaking of A ("P");

   2. (b)

      20% or more of the voting power in A or P; or

   3. (c)

      shares or voting power in A or P as a result of which the controller is able to exercise significant influence over the management of A;

   or where the change in control over A would lead to the controller ceasing to fall into any of the cases (a), (b) or (c) above (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774)).

4. (4)

   (in the case of a change in control over an FCA-authorised person) potential controllers of firms with only a limited permission) ("A") are exempt from the obligation to notify a change in control, unless the change would result in the potential controller holding:14

   1. (a)

      33% or more of the shares in A or in a parent undertaking of A ("P"); or14

   2. (b)

      33% or more of the voting power in A or P; or14

   3. (c)

      shares or voting power in A or P as a result of which the controller is able to exercise significant influence over the management of A;14

   or where the change in control over A would lead to the controller ceasing to fall into any of the cases (a), (b) or (c) above (The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2009 (SI 2009/774)).14

If a person decides10 to acquire control or increase control over a UK domestic firm in a way described in SUP 11.4.2 Ror acquire control in a way described in SUP 11.4.2AR (1)4, he must obtain the appropriate regulator's17 approval before doing so. Making an acquisition before the appropriate regulator17 has approved of it10is an offence under section 191F of the Act (Offences under this Part).

The appropriate regulator's17 approval is not required before a controller reduces control or ceases to have control10 over a UK domestic firm.

6The appropriate regulator17 recognises that firms acting as investment managers may have difficulties in complying with the prior notification requirements in sections 178 and 191D 10of 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 appropriate regulator17 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.

6Where the appropriate regulator17 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 appropriate regulator17 when a change in control actually occurs; and

   17
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 appropriate regulator17 may seek from the controller further information.

The controllers forms approved by the appropriate regulator17 may be found at the appropriate regulator's17 website www.fca.org.uk/firms/change-control

The appropriate regulator17 will inform a section 178 notice giver as soon as reasonably practicable if it considers the section 178 notice to be incomplete.10651

86 The appropriate regulator17 has power, under section 179(3) 10of the Act (Requirements for section 178 notices1710), to vary or waive these 10requirements in relation to a section 178 notice in particular cases 10if it considers it appropriate to do so.8

Where a17 controller or proposed controller which is an authorised person is required to submit less information under SUP 11.3.7 D than other persons,17 the appropriate regulator17 may ask for confirmation of details already held by it17 or any additional information required under SUP 11.5.1R10.

6Notifications to the appropriate regulator17 by proposed controllers and controllers under Part XII of the Act may be made on a joint basis outlined in SUP 11.5.8 G to SUP 11.5.10 G.