When ownership of an FCA-authorised payment institution or electronic money institution changes hands, through acquisition, investment, merger or corporate restructuring, the transaction is subject to the FCA's change in control regime. The regulatory framework requires that any person proposing to acquire or increase a qualifying holding in a regulated firm must notify the FCA and obtain approval before completing the transaction. This guide explains the change in control requirements for payment institutions and EMIs, the notification process, FCA assessment criteria and practical considerations for firms and investors.
What Triggers a Change in Control Notification?
A change in control notification is required when a person, including a company, proposes to acquire control of a payment institution or EMI for the first time, or to move into a higher control band. The FCA applies these bands to payment institutions and electronic money institutions:
| Control band | Shares or voting power | Approval needed before completion? |
|---|---|---|
| Acquiring control | 10% or more but less than 20% | Yes |
| Increasing control | 20% or more but less than 30% | Yes |
| Increasing control | 30% or more but less than 50% | Yes |
| Increasing control | 50% or more, or becoming a parent undertaking | Yes |
| Reducing control | Moving to a lower band or below 10% | Tell the FCA beforehand; no approval |
The rules come from Part 12 of the Financial Services and Markets Act 2000 (FSMA), applied to payment institutions, including small payment institutions, by Schedule 6 to the Payment Services Regulations 2017, and to EMIs by Schedule 3 to the Electronic Money Regulations 2011. Holdings are counted together with those of persons acting in concert and include indirect holdings through intermediate companies. This applies equally to authorised payment institutions and EMIs.
The Notification Process
The person proposing to acquire or increase control (the 'proposed acquirer') must submit a section 178 notice to the FCA through Connect before the acquisition is completed. The notification must include: identification of the proposed acquirer, including corporate structure and beneficial ownership; details of the proposed holding (percentage of shares/voting rights to be acquired); the proposed acquirer's strategic plans for the firm; financial information demonstrating the acquirer's financial soundness; evidence of the acquirer's reputation and integrity; and any other information the FCA requests to assess the notification.
Under section 189 of FSMA the FCA has 60 working days, starting on the day it acknowledges receipt of a complete notice, to approve the acquisition (with or without conditions) or give a warning notice that it proposes to object. Under section 190 the FCA may interrupt the period once, no later than the 50th working day, while it waits for further information. The interruption may not exceed 20 working days, or 30 working days where the acquirer is situated or regulated outside the UK or is not a regulated financial firm. During the assessment period the acquirer must not complete the transaction. If the FCA neither approves nor objects by the end of the period, it is treated as having approved the acquisition.
FCA Assessment Criteria
The FCA assesses change in control notices against the assessment criteria in section 186 of FSMA, as applied by Schedule 6 to the PSRs 2017 and Schedule 3 to the EMRs 2011. The assessment focuses on:
Reputation of the proposed acquirer. The FCA considers the integrity, competence and financial soundness of the acquirer. This includes checks on criminal records, regulatory history, civil proceedings, bankruptcy and any other matters that may call into question the acquirer's fitness to hold a qualifying holding in a regulated firm. For corporate acquirers, the assessment extends to directors, senior managers and beneficial owners.
Reputation and experience of proposed new directors or senior managers. If the acquisition will result in changes to the firm's board or senior management, the FCA assesses whether the proposed individuals are fit and proper.
Financial soundness of the proposed acquirer. The FCA must be satisfied that the acquirer has the financial resources to support the firm, will not put the firm under financial strain, and will be able to meet any capital injections required.
Impact on the firm's regulatory compliance. The FCA considers whether the acquisition will affect the firm's ability to continue meeting its regulatory requirements, including capital adequacy, safeguarding, governance and AML compliance.
Money laundering and terrorist financing risk. The FCA must assess whether there are reasonable grounds to suspect that the acquisition is connected to, or will facilitate, money laundering or terrorist financing.
Consequences of Non-Compliance
Acquiring or increasing control without notifying the FCA and waiting for approval is an offence under section 191F of FSMA, as applied to payment institutions and EMIs. As modified for these firms, the FCA must direct that the voting power concerned is not exercisable until further notice, and votes cast as a result of the acquisition are void. The FCA can also apply to court for an order that the shares be sold.
Beyond criminal sanctions, an unauthorised change in control can have severe consequences for the regulated firm itself. The FCA may impose requirements on the firm, increase supervisory intensity, or, in extreme cases, consider whether the firm continues to meet the threshold conditions for authorisation.
Practical Considerations for Firms and Investors
Change in control transactions involving regulated payment firms require careful planning and sequencing. Key practical considerations include: beginning the FCA notification process early, the 60 working day assessment period, plus any interruption of up to 20 or 30 working days, must be factored into transaction timelines; ensuring the proposed acquirer has gathered all necessary documentation before submission to avoid delays from information requests; considering the FCA's likely assessment of the acquirer's reputation and financial soundness before making public announcements; coordinating with legal advisers on the interaction between FCA notification requirements and other regulatory approvals (e.g., competition clearance); and preparing the regulated firm's existing management for the assessment process, as the FCA may request information from the firm as well as the acquirer.
Firms should also be aware that a controller moving into a lower control band, or reducing below 10%, should tell the FCA beforehand, though this does not require approval. Separately, the firm itself must keep the FCA informed of changes to its controllers under regulation 20 of the PSRs 2017 or regulation 17 of the EMRs 2011.
Regulatory Counsel advises on FCA change in control notifications, acquisition structuring and regulatory due diligence for payment institutions and EMIs. Contact us for a written proposal. See our licensing and authorisation services page for more.
Frequently asked questions
For change in control purposes, control starts at 10% of the shares or voting power in the firm or its parent, or a holding that gives significant influence over management. Further approval is needed at 20%, 30% and 50%.
60 working days from the day the FCA acknowledges receipt of a complete notice (FSMA section 189). The FCA may interrupt the period once for further information, for up to 20 working days, or 30 working days for acquirers outside the UK or not regulated (section 190).
It is an offence under FSMA section 191F. For payment institutions and EMIs, the FCA must direct that the voting power is not exercisable, and votes cast as a result of the acquisition are void.
No. A controller moving into a lower band, or below 10%, should tell the FCA beforehand, but no approval is needed.
Yes. Schedule 6 to the PSRs 2017 applies Part 12 of FSMA to small payment institutions as well as authorised payment institutions.
Yes, the parties can sign, but completion must wait for approval. Most share purchase agreements make FCA approval a condition to completion and allow for the 60 working day assessment plus any interruption.
Definitive guides on this topic
The permanent reference pages this article relates to.
UK Electronic Money Institution licence
FCA EMI requirements, EUR 350,000 capital, safeguarding, cost and timeline.
Electronic money institutions
Authorisation, safeguarding and ongoing compliance for e-money issuers.
Safeguarding and CASS 15
Safeguarding arrangements, reconciliations and the CASS 15 regime.