Close links Reporting Regime - What the changes mean for you
We have made changes to the close links reporting regime and firms have six months to prepare for and apply the new rules.
We published a Policy Statement (PS09/17) in November 2009, which sets out these changes. The new rules will come into force on 1 June 2010.
Background
The close links provisions contained in Schedule 6(3) of the Financial Services and Markets Act 2000 (FSMA) stem from the Post BCCI Directive and subsequent directives. The BCCI Directive was implemented in July 1996 in the wake of the collapse of the Bank of Credit & Commerce International (BCCI) in 1991. It aims to ensure that firms are not used for financial crime and that the stability of the financial system is preserved by effectively countering crimes such as fraud and insider offences. These requirements are transposed into Schedule 6 of FSMA as part of the Threshold Conditions (TC3) and are set out in the threshold conditions in the FSA Handbook (COND).
Close links are defined in the Post BCCI Directive, and in the relevant single market directives, as two or more natural or legal persons linked by:
- participation, meaning ownership, direct or by way of control, of 20% or more of the voting rights or capital of an undertaking; or
- control, meaning the relationship between a parent undertaking and a subsidiary.
What does this mean for firms?
A firm must notify us if it has become or ceased to become closely linked with any person (see SUP 11.9.1R). The notification must be made by completing the Close Links Notification Form (see SUP 11.9.3A G) and must include the information set out in SUP 16.5.4R (4).
If a group includes more than one firm, a single close links notification can be made for the whole group completing the Close Links Notification Form. The responsibility to satisfy the requirement to notify remains with each firm in the group.
Timing of the submission of the close links notification
Firms or groups must notify us on the following basis (see SUP 11.9.4R):
- Event driven – as soon as reasonably practicable and no later than one month after a firm or group becomes aware that it has become or ceased to be closely linked with any person.
- Monthly - where a firm or group has elected to report on a monthly basis, within fifteen business days of the end of each month.
- Annual (applicable for event-driven reporters only) – within four months of the firm or group’s accounting reference date.
Requirement to submit an organisational chart
Your firm must submit an organisational chart with the Close Links Notification Form as follows:
- Event driven – with every notification.
- Monthly – every notification (unless no changes have occurred since the last reporting period).
- Annual – every notification (unless no changes have occurred since the last reporting period).
The organisational chart must show all of the firm’s or group’s close links.
How to notify us
The Close Links Notification Form referred to in SUP 11.9.1R and SUP 16.5.4R must be used by a firm or group when submitting its close links notification.
Once you’ve completed the form, email it to us.
If you have any queries, please get in touch with your normal supervisory contact in the first instance.