UK Regulatory Update Issue 5: the threshold — business plans and parent undertakings

Issue 5 of Taylor Wessing’s UK Regulatory Update considers the implications of two significant changes to the level and scope of regulation following legal cut-over: new powers over regulated parents and new statutory threshold conditions that include the requirement to have a formalised business model. Although these issues are seemingly distinct, regulatory liability and business plans are two of the main concerns for anyone considering the acquisition of an authorised firm or its parent and are therefore considered together in this issue.

The FSA has previously only exercised control over parent undertakings in the context of pre-approving the acquisition of a controlling interest in a regulated firm.  Once approved, the FSA was largely powerless to exercise direct control over the entity that often determined group strategy, organisation and risk management, and which in many instances had the primary capital and debt raising capability.  Therefore, and in line with international regulatory developments (such as recent Basel Committee Core Principles), the regulatory reforms will give the FCA and the PRA powers over unregulated parent undertakings of authorised firms and recognised UK investment exchanges (RIEs).  The Bank of England has been given similar powers in respect of parent undertakings of recognised UK clearing houses (RCHs)…

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