When is a change in control not a change in control?

Despite the Brexit doom and gloom, we continue to see mergers and acquisitions activity in the general insurance broking arena. Following a recent question from a client, I thought it useful to remind everybody of the FCA’s expectations.

If a regulated firm acquires another regulated firm that is also a limited company, then a Change In Control takes place - the buyer acquires the shares of the selling firm.

Before the deal is completed, permission must be sought and granted from the FCA for the deal to complete. In FCA terms, this is achieved by the submission of a S178 Notice - in practice the submission of one or more forms along with supporting evidence.

See the following link for more details - https://www.fca.org.uk/firms/change-control

However, not every acquisition needs a S178 Notice.

When buying a partnership, a sole trader or just a book of business there are no shares or separate legal entities to consider, so the process falls outside of the formal Change in Control requirements.

Even so, firms are encouraged to involve the FCA and must remember Principle Eleven: ‘being open and honest with the regulator’.

We would recommend that you tell the FCA via an email to the contact centre (if you are not a relationship managed firm) telling them what you propose to do, the target firm’s name and the anticipated date of the agreement. The FCA will treat the information with a high degree of confidentiality so it is prudent to notify them as soon as possible. You must also advise the FCA when the deal is complete.

But Do Not Forget……

Whether it is a full blown change of control or buying a small book, it is vital that you adopt robust risk management practices to satisfy yourself and The FCA that both the acquisition and the new asset is compliant. Failure to do so will expose you to the risk of an investigation and further consequences.

Expense in the short term, yes, but these are actions that ‘sure up’ your future .

If you are interested in acquisition please speak to one of RWA’s Mergers & Acquisitions specialists who can offer straightforward, practical advice. Alternatively, please speak to your RWA Business Manager.


About the author

Terence is the Compliance Director at RWA. He has over 35 years' experience in the Financial Services environment, covering general insurance, investments and mortgages. Before joining RWA, Terence worked for a large PLC insurance brokerage in Manchester, overseeing some 20 acquisitions. He was made a Director of RWA in 2011 and has worked with insurance broking firms of all sizes across the UK. He has a particular interest in Financial Crime and the protecting the insurance broker. Terence is also Executive Chairman of the Association of Professional Compliance Consultants (APCC), the professional body for the compliance consultancy sector.

Terence Clark

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