The Financial Services and Markets Act 2000 (Controllers) Regulations 2009

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Financial Services and Markets Act 2000 (c.8) (“FSMA”) in order to give effect to Directive 2007/44/EC of the European Parliament and Council (O.J. L 247, 21.9.07, p.1.) (“the Acquisitions Directive”) and for related purposes. The Acquisitions Directive concerns the prudential assessment procedure and criteria to be applied where a decision has been taken to acquire a substantial holding in a financial services firm. The Acquisitions Directive amends EC Directives relating to credit institutions, investment firms, insurance and reinsurance firms and UCITS management companies.

The Regulations implement the Acquisition Directive by substituting new provisions for provisions in Part 12 of FSMA (control over authorised persons). They also substitute a new Chapter 1A of Part 18 of FSMA (control over recognised investment exchanges) and provisions in section 422 of FSMA (controller) so that these provisions are consistent with the new provisions in Part 12. The new provisions, set out in Schedules 1 to 3 to these Regulations and other consequential changes to FSMA, are incorporated into FSMA by virtue of regulations 3 to 7.

Regulation 8 provides for transitional arrangements so that any notice given under the FSMA before the date these Regulations come into force is to be considered under the provisions which were previously in force.

Regulation 9 repeals a provision in the Civil Partnership Act 2004 (c. 33) which amended section 442 of the Act and revokes provisions in the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007 (S.I. 2007/126) which introduced Chapter 1A of Part 18 into FSMA.

Schedule 1 contains the new provisions for Part 12 of FSMA. These are sections 178 to 191M. Any person who decides to acquire or increase control over a UK authorised person (i.e. a UK financial services firm) must notify the Financial Services Authority (“the Authority”) before making the acquisition. The new provisions include notice requirements and the procedure that the Authority must follow when considering the notice and determining whether to grant approval or to oppose. Any person who decides to reduce their holding in a UK authorised person, having previously held control must also notify the Authority, but in that case there is no requirement for approval.

Sections 191A to 191C provide for certain enforcement measures, including power for the Authority to object to a person’s control, power for the Authority to issue a restriction notice, restricting matters such as the exercise of voting power, and power for the court to order sale of shares or disposition of voting power.

Decisions of the Authority under the new provisions may be challenged by way of an application to the Financial Services and Markets Tribunal. Requirements are enforced by way of criminal offences.

Schedule 2 contains the new provisions for Chapter 1A of Part 18 of FSMA, similar to those in Part 12. Chapter 1A was inserted into FSMA pursuant to Directive 2004/39/EC of the European Parliament and Council of 21st April 2004 on markets in financial instruments (O.J. L 145, 30.4.2004, p.1.). It relates to control over investment exchanges

An impact assessment of the effect of this instrument on the costs of business may be obtained from the Financial Services Strategy Team, HM Treasury, 1 Horse Guards Road, London SW1A 2HQ and is available on the Treasury’s website (www.hm-treasury.gov.uk).