FSA promises tougher line on change of control breaches

In only the second prosecution of its kind, Semperian PPP Investment Partners Limited Partnership pleaded guilty to an offence under change of control rules in the Financial Services and Markets Act 2000 after it took over an authorised firm before receiving the approval of the Financial Services Authority (FSA).

Semperian notified the regulator about the proposed acquisition in mid-December 2008 but failed to wait for the FSA to approve the change of control before completing the deal three weeks later. The Deputy District Judge said Semperian had taken a calculated risk that the FSA would not prosecute.

Given the date of Semperian's offence, the maximum penalty the court could impose was £5,000. In deciding on a £1,000 fine, the judge took into account the prompt guilty plea and the fact that the offence had no adverse impact on consumers.

But the court now has power to impose an unlimited fine for change in control offences committed after 21st March 2009. An individual who takes a controlling interest in a firm despite receiving an objection from the FSA risks going to prison for up to two years.

Margaret Cole, director of the FSA's enforcement and financial crime division, said other firms could expect tougher penalties.

"This is an example of a controller putting its commercial interests before its regulatory responsibilities and the FSA is taking a much tougher line with those that seek to avoid or ride roughshod over the change in control regime," said Cole.

"This is a serious offence and the change in law means that future violations could result in an unlimited fine. Today’s result is a clear warning to other potential controllers that the FSA will prosecute change in control offences in appropriate cases," she said.