Introduction

On 1 November 2024, the Financial Conduct Authority (FCA) issued Finalised Guidance 24/5 ‘Prudential Assessment of Acquisitions and Increases in Control’ (FG24/5). On the same date the FCA and the Prudential Regulation Authority (PRA) issued a joint Policy Statement providing feedback to the responses received to Consultation Paper 25/23 on prudential assessment of acquisitions and increases in control. The Policy Statement also contains:

  • PRA Supervisory Statement 10/24 – Prudential assessment of acquisitions and increases in control (SS10/24) (Appendix 2).
  • FG24/5 (Appendix 3).
  • Updated PRA Statement of Policy – Interpretation of EU Guidelines and Recommendations: Bank of England and PRA approach after the UK’s withdrawal from the EU (Appendix 4).

Changes

The PRA and FCA have made changes to both SS10/24 and the FCA guidance following comments received at the consultation stage and minor changes to the language used in these documents to further enhance the clarity and readability of the documents. However, other than the differences between the two documents noted in the consultation, no material differences arise between the documents as a result of the consultation responses.

The PRA and FCA have:

  • Added new paragraphs on limited partnership structures to help with the identification of controllers within such structures and to address the responses received to the consultation around controller identification within limited partnerships that are typically used by private equity firms and hedge funds.
  • Clarified what constitutes ‘significant influence’ to make it clearer that, when determining if there is significant influence, it is not just a case of being on the board of an authorised firm or its parent, but the ability to direct or influence decisions made by the authorised firm’s board. That direction or influence could be through a shareholder board appointment (to the UK authorised person or its parent) or other arrangement.
  • Added a new paragraph in SS10/24 and FCA guidance explaining that as part of the PRA’s and FCA’s assessment/due diligence process they may contact relevant UK authorities and non-UK regulators to understand the timelines of their process and request any information relevant to the assessment against the section 186 Financial Services and Markets Act 2000 (FSMA) criteria.

Next steps

SS10/24 takes effect on 1 November 2024.

When considering a UK change in control transaction, FCA authorised firms, and those persons to whom Part XII of FSMA applies, should follow FG24/5 from 1 November 2024 instead of the EU guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector (known as the 3L3 Guidelines).